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By HaleStewart May 12, 2014 9:10 am
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The Failure of Austerity: Greece

     I want to finish out this series on the failure of austerity by looking at the poster child of failed austerity policies: Greece. 

     Like the other countries, Greece has cut government spending:

This massive cut in spending has caused a huge and consistent drop in the annual rate of GDP growth:

As the chart above shows, the average annual GDP growth rate for Greece has been negative for the last 5 years.

This has led to a huge drop in nominal GDP:

The annual total GDP figures listed above show a drop on 27% in nominal GDP. 

And the drop is not just in the nominal rate:


And the problem austerity was supposed to cure -- an increasing debt/gdp ratio -- has actually gotten worse:

And just like the other countries that have implemented this policy, unemployment has skyrocketed:

So, the cut in government spending led to a massive drop in overall GDP growth, worsening the problem austerity was supposed to cure -- a spike in the government debt/GDP ratio.  Put more bluntly, the cure is far worse than the disease.

Hale Stewart is a former bond broker who has been writing about economics and financial markets since 2006 on the Bonddad Blog.  He is also a tax attorney with a domestic and international practice while also forming and managing captive insurance companies for US companies.   You can follow him on twitter at:@captivelawyer

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