Paul Krugman: The Greek Stand-By Arrangement

For tomorrow’s column I went back to the original, May 2010 stand-by arrangement for Greece, to see what the troika was demanding and predicting at the beginning of the austerity push, and how it compares with what actually happened.
http://www.imf.org/external/pubs/ft/scr/2010/cr10110.pdf

First of all, I quite often encounter people who claim that Greece never really did austerity. I guess this is based on national stereotypes, or something, because the numbers are actually awesome. Here’s non-interest spending as projected in the original agreement versus actual spending since 2010. Because the troika kept increasing its demands, Greek spending has ended up far lower – austerity has been far more intense – than anything envisaged at the beginning.

So how can Greece still be in debt trouble? The original agreement assumed a brief, fairly shallow recession followed by recovery – nothing like the reality of depression and deflation. Here’s nominal GDP as predicted versus actual outcome. Naturally, the collapse of GDP reduced revenue and raised the debt/GDP ratio.




(snip)
The thing is, we now have essentially the same people who so totally misjudged the impacts of austerity lecturing the Greeks on the need to be realistic.

http://krugman.blogs.nytimes.com/2015/01/25/the-greek-stand-by-arrangement/?smid=tw-NytimesKrugman&seid=auto&_r=0