Austerity measures in Europe have been the topic of a heated and mostly confused debate in the economic world. During the May summit of the leading industrial nations at Camp David, German chancellor Angela Merkel and other European leaders pushed for continued European austerity. Keynesian critics argue that these policies destroy economic growth.

AEI's John Makin examines the consequences of German deflationary policies and Greece's probable exit from the eurozone in the latest Economic Outlook.

Sir, Lawrence Summers is certainly correct in asserting that the right focus of the European countries must be on restoring economic growth if they are to restore fiscal sustainability (“Growth not austerity is the best...

The economic recessions in Greece, Ireland, and Portugal will become deeper if the IMF and the EU don't recognize that the countries in the periphery suffer from solvency rather than liquidity problems--which are not amenable to correction by fiscal retrenchment alone in a fixed exchange rate system.

An escalation of the European debt crisis would pose a real threat to the U.S. economic recovery.

Markets have begun to ask questions about Ireland's solvency, but European policymakers appear to be in the same sort of denial as were their Greek counterparts.

Greece's economic and political unraveling could not be coming at a worse moment for President Obama. The crisis has the potential to send shock waves not simply through Europe but also through global financial markets on the very eve of the U.S. presidential election.

Attempts at austerity and deleveraging in Europe have converted an economic problem into a political dilemma, with leftist governments rising against Germany's austerity-laced rescue packages. Germany now faces a tough economic decision that will involve choosing between a breakup of the current euro system and a movement toward a common fiscal policy in Europe.