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February 26, 2012

Austerity Is Not the Cause of the Greek Debt Crisis

Increase in Government Spending year over year Versus Economic Growth

Over the past couple of weeks, I've heard some economists accuse austerity of being the reason that Greece is in an economic depression versus government spending. The chart tells a different story. Greek government spending surged when the country entered a recession in 2009. It's clear from the chart that the 'Keynesian surge' in government spending didn't have the impact it intended. In fact, it perpetuated one of the worst debt crisis in the history of the continent.

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