Recession means less tax revenues. Borrowing increases to meet debt obligations. Austerity weakens economies further. A downward cycle feeds on itself. Other countries may end up like Greece.
Economist Costas Lapavitsas' new book discusses "Crisis in the Eurozone." Greece is getting worse in real terms, he says. Continued cuts follow previous ones. Its huge debt as a percent of GDP gets harder to service.
More wage, pensions, and other benefit cuts are coming. By 2014, another 150,000 civil servants will be fired. Policies this severe are absurd. Instead of alleviating trouble, it's increasing.
Greece is in deep depression. It's the worst in its history. Its economy declined five straight years. National income contracted 20%. Unemployment approaches 25%. Youth unemployment is double that amount.
Leading business indicators are all bad. Meeting budget targets is suicidal. Ordinary Greeks have been devastated. Everything keeps heading south. On top of prior forced cuts, additional ones are mandated.
Two years ago, then Greek Finance Minister George Papaconstantinou said Greece won't need more painful cuts. Recession will be deepest in 2010, he claimed. Thereafter, expect gradual recovery. "I remain optimistic and believe we will recover fast."
Instead, unemployment rose another 10%. GDP fell by the same amount. Greece's debt burden keeps rising. Policies failed dismally. Crisis conditions are worse than ever heading south and spreading across peripheral and core Europe.
Lapavitsas calls Greece's condition "nonsense economics. It's absurd. It's absolutely absurd".This is the economics of the madhouse. What is happening now is that everything is going to get even worse."
To service debt, Greece is being dismantled and destroyed. It's on a collision course with reality. Major parties said they'd renegotiate better terms. Instead they surrendered to German and French demands.
They'll have to answer to people they betrayed. They're suffering. They're struggling to survive. Essentials they rely on are disappearing. Their futures are grim. How long they'll take this, who knows. At some point they'll rebel.
They better or watch conditions deteriorate not only beyond what's tolerable but what's harsh enough to spark revolution.
Lapavitsas calls current conditions "scorched earth," "an absolute disaster," an economy that's "prostrate," unprecedented and getting worse. Discussions are ongoing about how to rise from the ashes.
The moment of truth draws closer. Other troubled Eurozone economies face their own days of reckoning. So does Germany. It's on the hook for endless billions in euro aid.
Good money is going down a black hole. Failure to supply it means forced public sector creditor haircuts. They're unavailable sooner or later.
Troubled Spain also keeps worsening. Revised data contracted more than previously reported. Sovereign debt approaches unmanageable levels. Portugal looks worse.
Five years after crisis conditions erupted, all levels of society across most industrialized countries are worse off than earlier. Debt gets more unmanageable. Servicing costs keep rising.