In response to the economic crisis of 2008, Europe's policy makers decreed that taxpayers must bail out the banks that caused the economic crisis, and at the same time see their social safety nets severely cut by "austerity" programs. Europeans were told there was no alternative. Spending cuts would make markets more "confident", thus offsetting the effects of the spending cuts.
Some economists including Paul Krugman and Brad Delong said there's no such thing as a "confidence fairy", but austerity was music to new British PM David Cameron's ears--a banker-friendly rationale for punishing the poor and further enriching the wealthy with the proceeds. US Republicans and the European Central Bank took up the same tune.
What's happened has confirmed the Krugman view. Austerity is driving the UK and Greece deeper into their economic holes. Bailing out bankers while punishing the voters paying for the bailout doesn't grow prosperity and hasn't restored market confidence. The people of Spain and Italy and Ireland are victims too as their governments reduce themselves to the status of third-world countries having to borrow in someone else’s currency. Austerity has failed everywhere it's been tried.
And there's a demonstration of what works better. Iceland was deeper in economic poop than anybody, but it let the banks go bust, told international banks to get stuffed, and expanded its social safety net. What's the result? Iceland's social safety net is mostly intact, and its economy is recovering.
Even if Angela Merkel, the ECB, David Cameron and the US Republicans once actually believed in the confidence fairy, the results are in, and they can't believe in it now without slipping into delusion.
What's driving austerity then? One thing is continuing belief by the rich that the poor deserve their lot. How convenient it is that such policies make the rich richer and the poor poorer.
Austerity is what we get when rightwing ideologues hijack a crisis in the service of their political agendas.