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Feb 17, 2012

Greece Debt/GDP: Austerity Versus Economic Growth

This chart from Der Spiegel shows in a great way how austerity can make the Debt/GDP ratio bigger(!). When more austerity in the future makes the economy of Greece contract even more, the debt ratio as a percentage gdp (given the debt remains the same) increases, while austerity is implemented to make the debt ratio decrease. This is why it is important the Troika (Europe+IMF) - which currently is about ruling the Greek government - needs to look at the trade-off between austerity and economic growth every time it evaluates the Greek economy.

Der Spiegel


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