02-03-2015, 11:59 PM
Austerity – the policy of saving your way out of a demand shortfall – simply does not work. In a shrinking economy, a country’s debt-to-GDP ratio rises rather than falls, and Europe’s recession-ridden crisis countries have now saved themselves into a depression, resulting in mass unemployment, alarming levels of poverty and scant hope.
Mr Mody says EMU shock therapy has failed to put monetary union on a viable course. The deficits of the EMU crisis states may have fallen but the mix of perma-slump and “lowflation” - now deflation of minus 0.6pc – have by caused the debt stock to spiral upwards. This is a mathematical effect. The interest costs have been rising faster than nominal GDP.
Europe's creditors play with 'political fire' in pushing Greece to the brink - Telegraph
According to the budget, Greece will achieve a primary budget surplus—before taking into account debt payments—of €3.3 billion ($4.1 billion), equal to 3% of gross domestic product, next year, which is in line with the country’s bailout program. Overall, the government will record only a minor budget deficit of €338 million—equivalent to just 0.2% of gross domestic product—next year, in effect marking the first balanced budget Greece has produced in four decades.