STRUGGLING eurozone economies like Greece, Portugal, Spain and Italy cannot cut their way back to growth.
Demanding rigid austerity from them as the price of European support has lengthened and deepened their recessions.
It has made their debts harder, not easier, to pay off. This is not an issue of philosophical debate. The numbers are in.
As The New York Times’ Landon Thomas Jr reported, Portugal has met every demand from the European Union and the International Monetary Fund. It has cut wages and pensions, slashed public spending and raised taxes.
Those steps have deepened its recession, making it even less able to repay its debts. When it received a bailout last May, Portugal’s ratio of debt to gross domestic product was 107 percent. By next year, it is expected to rise to 118 percent.
That ratio will continue to rise so long as the economy shrinks. That is, indeed, the very definition of a vicious circle.
Meanwhile, shrinking demand and fears of a contagious collapse keep pushing more European countries toward the danger zone of unsustainable debt.
Why are Europe’s leaders so determined to deny reality? Chancellor Angela Merkel of Germany and President Nicolas Sarkozy of France, in particular, seem unable to admit that they got this wrong. They are still captivated by the illogical but seductive notion that every country can emulate Germany’s exportdriven model without the decades of public investment and artificially low exchange rates that are crucial to Germany’s success.