... while demand is going to be sucked out of the Greek economy through a three-year pay and pension freeze, together with a big jump in VAT, there is unlikely to be a pick-up in exports to compensate. Instead, the slump will deepen. Greece, without the benefit of stronger growth, will be unable to meet its ambitious targets for reducing the deficit, which in turn will lead to demands for even deeper budgetary cuts, which will weaken demand still further.Aye well, I'll not disagree too strongly. But the only alternative seems to me to be abandoning the euro and defaulting on the debt. And the consequences of such action are probably just as difficult - and not just for Greece.
That is not a recovery plan. It is an economic death spiral.
05 May 2010
Quote of the day
Back to the Greeks. This is Larry Elliott, a writer whom I usually admire, in The Guardian: