In 2008 the world economy was saved from...

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In 2008 the world economy was saved from depression by a bold and co-ordinated plan to shore up banks and counter the slump with fiscal and monetary stimulus. Today there is no boldness (the euro-zone crisis is the epitome of politicians doing too little too late). There is no co-ordination. And, to the extent that policies have a common theme, it is the wrong one: politicians across the rich world are taking too short-term a view of fiscal austerity—a bout of budget-cutting which will only increase the risk of another recession.

It does not have to be this way … adjusting fiscal policy does not mean simply doling out more stimulus. The trick is to put in place more reforms now that will improve the public finances over time without slamming too hard on the brakes today.

America …has done virtually nothing to deal with its medium-term deficit, but on current policy will see the biggest short-term tightening of the big rich economies next year.
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How to Avoid a Double Dip

The Economist, August 27th