It is now clear that what began as the Great Credit Crunch of 2007 has developed into a contraction of wider scope and great tenacity, centred in the main oecd countries. Governments acted to avert collapse, but in doing so themselves became a target. Bail-out measures adopted during the early phase of the crisis between 2007–09 saw the us, uk and eurozone authorities increase public indebtedness by 20–40 per cent of gdp, with large current-account deficits. The transfer of debt from private to public hands was carried out in the name of averting systemic failure, but in some ways it aggravated the debt problem since bank failure, however disruptive, is actually less devastating than state failure. Before long, the bond markets were demanding plans to cut these deficits by slashing public spending and shrinking social protection. The centre left and the centre right were already persuaded that the welfare state was too expensive and bureaucratic, and needed to be downsized and handed over to private suppliers. Public services and institutions were leveraged by means of commercial debt, at the expense of future revenues and the intelligibility of the public accounts. Determined not to waste a good crisis, neoliberal policymakers and commentators seized on the disarray to further advance such schemes. Japan, the us and the uk are heavily waterlogged, but their control over their own currency allows them to print money and to devalue. Such expedients have been denied the eurozone states so far. However, the more fortunately placed countries are still highly vulnerable to euroland’s miseries because they are invested in its assets and count on it as a trading partner.
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