(…) As usual, the International Monetary Fund, the European commission and the European Central Bank will come up with forecasts showing that the latest set of austerity measures will boost confidence, promote investment, stimulate growth and lead to lower unemployment. As usual, they will be wrong. The recession will deepen and the crisis will return.
Back in 2010 when it first got involved, the IMF assumed that the Greek economy would have a painful but relatively short recession. There would be a 6% peak to trough contraction in the economy, which would bottom out in 2011.
Things did not go according to plan. By the time the fund announced its second programme for Greece in March 2012, the economy was in freefall. The IMF assumed the decline would end that year, with a period of flatlining followed by the resumption of growth.
In the end, the Greek economy shrank by 25%, a slump equivalent in its severity to that suffered by the US between 1929 and 1932. Recovery coincided with the arrival of Franklin Roosevelt in the White House.
One of the insights gleaned during the Great Depression was that it does not make a lot of sense for governments to try to balance budgets during a severe downturn, because tax increases and spending cuts reduce demand. That deepens the slump, leaving an even bigger hole in the public finances.
In Greece, though, it as if the clock has been turned back to the pre-FDR days when Herbert Hoover was US president. (…)
Explica-lhes Aníbal. Na Europa “não há excepções”.