Thursday, June 6, 2013

Austerity failed in Greece

Yep, that does not sound like news. It is well known and the graph below, from a report by the Center for American Progress, just confirms it.

From the report (p. 19):
"Over the past several years, Greece repeatedly imposed ever-more dramatic austerity measures. They have raised their retirement age, cut public pensions, cut pay and benefits for public-sector workers, closed schools, cut funding for public health and for defense, reduced subsidies to local services, and laid off thousands of government workers.50 The end result is that in 2012, real government spending per person in Greece had fallen by more than 22 percent since 2009. And yet government spending measured as a share of gross domestic product was actually higher in 2012 than it was in 2009.
How could that be? How does a country cut real spending per capita by about 22 percent in four years and still end up with higher spending as a share of the total economy? It can happen if all those spending cuts send the economy into a tailspin. And that is precisely the trap that Greece finds itself in today. From 2009 to 2012 Greek GDP declined by more than 17 percent, in real terms."
Yes they finally get that is better to move the denominator up, rather than reduce the numerator. More importantly, it's interesting that the CAP is now asking to reverse the sequestration cuts in the US and move back to a more expansionist fiscal stance. It's good to see Dems, and their think tanks becoming more Keynesian.

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On Argentine debt restructuring proposal (in Spanish)

Short interview for an Argentinean radio show, in Spanish.