By the time the euro arrived, democracy plus fifty years of the welfare state as a shock absorber had become even more of a constraint on such policies. Yet the euro demands deflation and austerity today, as it remains the Eurozone’s primary mechanism of adjustment. There may be no convertibility into gold under the euro, but the credibility of the claim to be able to pay back government debt performs the same function, providing an external constraint to policy as gold did eighty years ago. Indeed, the euro arguably provides even more of a constraint than the gold standard in one respect. Whereas states on gold can always “get off gold”—there is no need to print a new currency when doing so—the “once and for all bargain” that was the euro made states dump their old currency for good. There is nothing to go back to, which adds an extra layer of bondage to what is effectively a gold standard without gold.

Mark Blyth, Austerity, loc. 496