30 de abril de 2012

Dêem à austeridade uma chance: vá lá! (2º Post: Itália)

The chart for Italy is much more interesting and may also may make it less clear that austerity is such a bad thing.

Italy started the 21st century with a high debt load.  They took that debt load down over a period of years.  Initially it dragged GDP down, but then it seems like it supported a fairly stable economy.  It didn’t grow at a great rate, and they did seem to try and take spending and debt down during period of above 2% growth.  2008 was a disaster for Italy, as in most other countries.  Debt to GDP skyrocketed.  It wasn’t because of “austerity” it was to spark growth and stop the slowdown.  It kind of worked, as Italy managed to bounce back to decent growth (along with the rest of the world), but the debt level had shot up to incredibly high levels.  The slowdown in Italian growth began in 2010 and there was not a word about Italian austerity in 2010.  In fact, there wasn’t a word about austerity that had any actions associated with it until Berlusconi left office.  But by then Italian growth was anemic. Is the dip into recession all the fault of austerity, or did Italy spend too much and not take enough constructive measures in 2008 and 2009?  It looks like they spent far too much on “growth” in that period and are now paying the price.
Maybe Italy needs to look back at what created that period of stability from 2002 until 2007, and determine that a lower debt to GDP ratio is preferable, because the alternative is unsustainable.  Once again, after a few years of aggressive spending to get as much growth as possible, that has since failed to achieve sustainability, the politicians should be careful about assuming the current slowdown is all about austerity and not about past “growth” decisions gone horribly wrong.

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