Greece Defaults. What now?

[generic-user-1]

MikeRox said:

generic-user-1 said:

Lafiel said:

Due to it's specific challenges I think that Greece is very hard to rescue with austerity (imo it does work well for several other countries), so I welcome this vote as it will facilitate their return to an independent monetary policy with their own currency.

where did austerity work?

Ireland is the most prominent example I can think of. However most countries have never even tried Austerity.

http://www.forbes.com/sites/jeffreydorfman/2013/08/01/austerity-in-europe-it-will-work-if-its-ever-tried/

Many countries in Europe have supposedly tried austerity programs to aid the recovery from the recent recession. Austerity as promoted by conservatives and the IMF and as decried and derided by Keynesians (led by Paul Krugman) is generally defined as cuts in government spending and/or reductions in government deficits. We constantly read how Greece, for example, is being forced to cut government spending as a condition of international aid.

Using data from Eurostat (the official statistics agency of the European Union), I calculated the change in government spending from 2008 to 2012. In fact, the data tell us that only eight out of the thirty countries in Europe that are listed have reduced government spending over that period. Of those eight countries, only Iceland and Ireland have been prominent austerity examples in the news. (The others are Bulgaria, Ireland, Latvia, Lithuania, Hungary, Poland, and Romania.)

The countries that have purportedly tried austerity and failed are not on the above list. Greece, Spain, Italy, and Portugal have all increased government spending, not reduced it. In fact, according to the Eurostat data, Italy is the only one of those four countries whose government spending increase is below the EU average over the 2008 to 2012 period. Greece (8.3% increase over the four years), Spain (13.3%), and Portugal (5.8%) have not only avoided austerity, but actually have been more profligate than the average European government which increased spending by 4.9% in the same timeframe. Italy has been only slightly better behaved, with a spending increase of 4.1% from 2008 to 2012.

So a first look at the data suggests that most European countries have not practiced austerity as so many Keynesians have claimed. 

austerity will allways lead to more government spending, because the social system has to grow alot if the economy is going down...

and ireland had a different problem then the southern states.