I wouldn't say it never works: containing spending is good policy. It worked, for example, in Spain. But Spain had going for it that the economy (although badly

I wouldn't say it never works: containing spending is good policy. It worked, for example, in Spain. But Spain had going for it that the economy (although badly performing) was doing much better than Greece at the start of the crisis, and specially that the markets had somebody else to bet against, namely Greece. The Spanish bond risk premium (compared to German bonds) was widening rapidly, but the Greece one was humongous. So, the market pressure was a huge problem for Greece. While the market was betting against Greece (and making handsome profits with big interests and, as we now know, zero risk), Spain was quietly improving. I am sure that, if Greece had been brought to its knees by the market, the next to fall would have been Spain (well, the next in line was probably Portugal). In that situation, austerity measures are actually counter-productive. This is what we have in Greece. Europe needs to face the markets here. And the problem is that, once Greece defaults in the following weeks (if Europe decides to let it fall, that is), Portugal will be the next to feel the pressure. Spain is probably out of the woods by now - by luck, so to speak.