Austerity and Financialization: Is There Another Way? The Pasinetti Suggestion

Since the 1990s, economic policies in Europe and elsewhere, have been based on the theoretical and practical ideas embedded in the Maastricht Treaty: public debt and deficit must be reduced, even if this implies severe austerity. The main goal of this policy, growth with a decrease in public debt, did not work. Although the Maastricht Treaty framework received a wide consensus in the academic world as well in European politics, a few brave scholars stood up since the beginning to show its fallacies. In this article, we will discuss the critiques that Pasinetti made to the set-up of the EU economic policy, then we will connect the fate of public and private debt and finally we will explain why continuing with austerity will condemn Europe to anemic growth and political irrelevance.