The reason for all those austerity policies in Europe, here in the US and now in Egypt is usually given as the fervently hoped-for return of the confidence fairy. But as Paul Krugman has stated:
Consider how things were supposed to be working at this point. When Europe began its infatuation with austerity, top officials dismissed concerns that slashing spending and raising taxes in depressed economies might deepen their depressions. On the contrary, they insisted, such policies would actually boost economies by inspiring confidence.
But the confidence fairy was a no-show. Nations imposing harsh austerity suffered deep economic downturns; the harsher the austerity, the deeper the downturn. Indeed, this relationship has been so strong that the International Monetary Fund, in a striking mea culpa, admitted that it had underestimated the damage austerity would inflict.
Never mind about that. Something so painful must be good for us! I think that belief, especially when only applied to the masses, is what is so very appealing about the era of austerity.
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For some links to the underlying theories about the confidence fairy who likes austerity policies, see my post here.