Matt O’Brien points out that Europe really is doing worse than it did in the Great Depression. Meanwhile, Francois Hollande — whose spinelessness and willingness to buy into austerity doomed his presidency and quite possibly the European project — is finally, tentatively, suggesting that maybe further austerity isn’t the answer.
Simon Wren-Lewis thinks that the European embrace of austerity was a historical contingency; basically, the Greek crisis strengthened the hand of the austerians at a critical moment. I don’t think it’s that easy to explain; my sense was that there was powerful anti-Keynesian sentiment in Europe even before the Greek crisis, that macroeconomics as Anglo-Saxon economists understand it never had a real constituency in Europe’s corridors of power.
Whatever the explanation, we are now, as O’Brien says, looking at one of the great catastrophes of economic history.