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By HaleStewart January 26, 2015 8:03 am
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The Failure of Austerity, Greek Edition

          The recent victory in Greece of the Syriza party marks the first time an anti-austerity party has achieved a meaningful electoral win in an EU country.  A few simple charts explain the reasons for their victory.

          As with many countries who were bailed out after the recession, Greece was forced to cut government spending.  As shown in the chart above, overall government expenditures dropped between 2010 and 2014.  While there has been a spike recently, we’ve seen the same development over the last few years, indicating this is probably a seasonal development.

          But the cut in government spending has not done anything to the debt/GDP ratio.  In fact, largley as a result of austerity, this metric has increased.

          This drop in government spending has been accompanied by a sharp drop in overall GDP which has dropped by approximately 30% over the last five years.  And it has done so consistently.

          Overall unemployment stands at over 25%.  This is likely the real, underlying reason for Syriza’s victory: the large number of unemployed have clearly had enough of the current policy mix.

          And youth unemployment is over 50%.

          Looking at these simple numbers, the real question that should be asked is why did this take so long to happen?

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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