Will less austerity rescue the euro-zone?

Hopes that euro-zone policymakers are set to sanction a reduction in the pace of fiscal tightening across the region rose further last week after EC President Jose Manuel Barroso suggested that the austerity-driven policy response to the region’s crisis has “reached its limits”. But while policymakers are right to be questioning the blanket imposition of onerous austerity and recognising the importance of economic growth, we will have to see firm evidence of talk turning into substantial changes in policy before concluding that the outlook for the region’s economy has materially improved.