By mid 2012, the verdict was in on the German-led recipe for restoring states overwhelmed by public- or private-sector debt: Austerity is counter-productive in reducing government deficits. On June 6, 2012, the media reported: “Prolonged austerity is making it harder, not easier, for governments like Greece to become self-reliant again.”[1] Salaries and pensions in the private and the public sectors in the state had been cut by up to 50 percent, leaving Greece 495 million euros short of its revenue targets in the four months ending the previous April, according to the Greek Finance Ministry.[2] With less cash, consumers had to reduce spending, leading thousands of taxpaying businesses to fail. Income expected from a higher, 23 percent value-added tax required by the bailout agreement fell short by around 800 million euros in the first four months of 2012. That is partly because cash-short businesses that were once law-abiding started hiding money to stay afloat, tax officials said.
The complete essay is at Essays on Two Federal Empires.
1. Liz Alderman, “Greece Warns of Going Broke as Tax Proceeds Dry Up,” The New York Times, June 6, 2012.
2. Ibid.
