>Turns out that cutting in a depressed economy makes the depression worse Sure, if you are insolvent but you can still get a hold on some borrowed money your s

>Turns out that cutting in a depressed economy makes the depression worse Sure, if you are insolvent but you can still get a hold on some borrowed money your situation is obviously going to get better in the short run. But you are just killing the goose that laid the golden egg, since your economy is dependent on borrowing money. It's not black or white. On the one hand you have the economist that say that Greece must stop running a public deficit since it may risk a default if creditors believe that the Greek Government will never be able to repay the debt. On the other hand, you have the (neo)keynesian economists that believe that cutting spending during a crisis is a suicide, and therefore paying off the debt is not a priority. Which ones are right? Well, only time will tell. > As a result, Greece now has enormous unemployment, a vastly shrunken economy, and a debt-to-GDP ratio that is only going up despite the huge spending cuts. It's not clear how much of these is caused by the austerity measures. If you remember, at the beginning of the crisis most European governments launched public spending programs in order to reactivate the economy. It only made things worse: it did not create long lasting jobs and it only increased public deficit, which in turned also increased their debt obligations. >This is clearly an unsustainable course, something now recognized by the Greek voters. Actually, the only "clear" unsustainable course is to keep the economy afloat by increasing their debt. If this is the new normal, they will not be able to keep borrowing forever. >Unfortunately, there appears zero chance that EC and German politicians are going to acknowledge that austerity doesn't work. You have to understand that they are choosing the lesser evil. Even if austerity did not work, it still might be better than increasing their debt.