Too much austerity led to Nazism: Austria central bank head

AFP , Wednesday 20 Jun 2012

Bank says a concentration on austerity similar to that of 1930s could spark mass unemployment and the meltdown of democracy which led to Nazism

Austria's central bank head has issued an unusually stark warning about too much austerity, amid the eurozone's debt crisis, saying such an approach contributed to the rise of Nazism in the 1930s.

"The single-minded concentration on austerity policy (in the 1920s and 30s) led to mass unemployment, a breakdown of democratic systems and, at the end, to the catastrophe of Nazism," Wald Nowotny said in comments confirmed by his office on Wednesday.

The remarks were initially made at an event on Monday in Vienna.

Germany in particular has championed painful spending cuts to balance budgets and reduce debts as the principle way of restoring investor confidence in eurozone members' solvency and ending the bloc's sovereign debt crisis.

But as evidenced in recent elections in Greece, too much emphasis on cutting spending is hugely unpopular, and new French President Francois Hollande wants to water down Berlin's austerity drive with more focus on generating growth.

British historian Niall Ferguson and US economist Nouriel Roubini drew a similar historical parallel to Nowotny in the Financial Times on June 8, attacking Germany's "wait and see" approach to the eurozone crisis.

German policy, they wrote in a joint opinion piece, "risks a repeat of precisely the crisis of the mid-20th century that European integration was designed to avoid."

The said: "We find it extraordinary that it should be Germany, of all countries, that is failing to learn from history."

They also said: "Fixated on the non-threat of inflation, today's Germans appear to attach more importance to 1923 (the year of hyperinflation) than to 1933 (the year democracy died)."

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