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Globally, the advanced countries are facing the problems of high unemployment and developing nations are also slowing down. Austerity measures tend to reduce government spending and increase taxes which can be counterproductive to employment generation and also tend to decrease GDP. So deficit spending is the need of the hour. Economist Paul Krugman also proposed that the government should spend more in the times of increasing unemployment and lower growth. The austerity measures should be taken during the boom periods and when the world economy and the countries really recover from current situation. The European countries should not go for austerity measures now but only after a real recovery is seen. The world today is still on a weak growth recovery and the austerity measures should be slow and not hasty.
The M.S. University of Baroda
(This entry is part of our FE MASTERMIND contest. The views expressed in this article are personal and not that of the newspaper.)