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It's about time: austerity is the new fashion in Europe

From the Washington Post: "Britain announced a far-reaching deficit-reduction plan Tuesday aimed at saving billions of dollars over the next five years, becoming the latest European nation to slash spending amid increased worries about rising public-sector debt."

It's not perfect news, though, since about one-fourth of the deficit reduction will supposedly be achieved by increased taxes, but it's a good start. The spending cuts are impressive in that they target spending programs directly, and the same thing is happening in Germany and France. "Britain's decision to cut rather than spend follows a wave of austerity packages recently unveiled across Europe, including almost $100 billion worth of cuts in Germany and public-sector pension reforms in France."

Obama, of course, cautioned the Europeans to avoid premature austerity measures since they might harm economies. The market, however, reacted to the news by boosting the value of the pound (up 13% in the past month); plus, German stocks are up about 10% in the past month, and UK stocks are up 5%. If too much spending causes huge deficits and raises fears of huge tax increases (a bad thing in the eyes of investors), then cutting back on excessive spending can only be a good thing.

This U.S. needs to join this party, and the sooner the better.

UPDATE: This party is spreading around the world to Australia: "Julia Gillard became Australia's first female prime minister after Kevin Rudd stepped aside as leader of the governing Labor Party, paving the way for the government to drop a controversial new 40% levy on mining profits that has damaged its standing in voter polls."

Not to mention the many municipalities and states that are now being forced to look at trimming out-of-control pension obligations.

UPDATE: The WSJ has a great op-ed which summarizes the failure of Keynesian stimulus efforts around the world, and how the political tides are turning against them.

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