The European authorities administering Greece’s bailout insisted upon the new job cuts before they would release the next $9.2 billion in rescue funds. As a result, 15,000 jobs will be eliminated, and another 10,000 will not have their contracts renewed when they expire later this year. The job cuts mean thousands more without disposable income in a country already three years deep in a vicious economic cycle driven by austerity.
The Greek economy has been so bad for so long that it was recently downgraded by one investment firm from a “developed” country to an ’emerging market,’ a move that is without precedent. Cuts to public services have not spared the health care sector, leading to a surge in the rate of stillbirths. While the International Monetary Fund has acknowledged it was far too optimistic when it predicted the cuts would spark economic growth, the country’s creditors have not eased the bailout requirements.
The Greek experience should be a cautionary tale for American policymakers, though not in the ways deficit hawks claim. The initial U.S. response to the economic crisis – central government spending to buoy the economy – has given way to the same sort of cut-and-grow thinking that has been so harmful for Greece. Recently, the IMF criticized the ongoing American spending cuts as “excessively rapid,” and warned that continuing with sequestration will hurt U.S. growth in both the short and long terms.