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The era of austerity began on February 5, 2010. That was when the finance ministers and central bankers of the seven major industrialized powers flew to the remote Arctic village of Iqaluit, Canada. That meeting of the Group of Seven came at a time when the extraordinary financial rescues and fiscal and monetary stimulus of the crisis seemed to have done their job and the world economy was on the mend.

Sovereign debt crises had emerged in Greece and Dubai, and to the men and women in that summit in the Arctic, held amid weather that was a balmy zero degrees Fahrenheit, there was growing conviction that it was time to look toward the exits, to begin bringing deficits down and think seriously about how to unwind the expansive monetary interventions that had been taken. Also, there was dogsledding.

The leading world finance ministers and central bankers met this month in Washington. Is the pivot away from austerity underway? (IMF Photo)

The leading world finance ministers and central bankers met this month in Washington. Is the pivot away from austerity underway? (IMF Photo)

Three years later, it is clear that they were wildly premature. But something remarkable has happened in the last few weeks. It looks like world financial leaders are coming to that conclusion themselves, and reversing course. In my new book, I describe Iqaluit 2010 as the moment of the pivot toward austerity; some future book may well pinpoint Washington, 2013—that is, the IMF and World Bank spring meetings that ended a week ago—as a similar turning point in global economics.

Continue reading:  http://www.washingtonpost.com/blogs/wonkblog/wp/2013/04/29/the-era-of-austerity-is-over-for-now/

Related story:  The economic whodunit

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