DUBLIN — To keep its debt crisis from mushrooming out of control, the European Union is imposing harsh cutbacks on millions of ordinary people in debt- plagued countries such as Greece, Ireland and Portugal.
But some economists think cutbacks right now are a mistake that might tip Europe into a dreaded double-dip recession.
How, skeptics ask, will Europe’s barely-there recovery withstand the loss of stimulus from sudden, steep austerity measures demanded by the EU? So far, the pain includes cutbacks and freezes in teachers’ and nurses’ salaries, higher retirement ages and heavier taxes on everything from incomes to cigarettes and fuel.
Europe is barely expanding, with 0.1 percent growth in the fourth quarter in the 16 countries that use the euro, leaving a renewed slide into recession impossible to rule out.
“This premature fiscal tightening is the route to the Second Great Depression” — or at the very least, a long period of economic stagnation, warned Simon Johnson, a professor at MIT’s Sloan School of Management and a former chief economist at the International Monetary Fund.
Fears of a possible downgrade of Greek debt by ratings agencies sent European stocks lower Thursday and pushed the euro down 0.4 percent to $1.3484, not far off its nine-month low of $1.3444 hit earlier this month.
