EU leaders set to admit austerity is not enough

"Even countries with relatively strong public finances such as Germany — the country's budget deficit fell to just 1 per cent of GDP in 2011 — are tightening fiscal policy," Simon Tilford, the chief economist for the CER in London, wrote recently. "In so doing, European governments are standing conventional macroeconomic thinking on its head. Governments are withdrawing demand from their economies at a time of pronounced private sector weakness." Output in both the euro zone and the European Union is still around 2 percent lower than before the crisis. The Spanish and British economies are still almost 4 percent short of their pre-crisis peaks, the Italian one nearly 5 percent, and the Greek and Irish economies 10 percent to 15 percent, Mr Tilford added.