Wouldn't you know? The Greeks decided that 3 months was not enough time for a Hail Mary Pass and admitted they will not meet the deficit target for this year. Without even batting and eyelash they also promised a new-new-new austerity plan for next year. This time, they really-really believe they will be able to implement the Houdini-model to achieve high growth while imposing draconian austerity.
The Greeks, among other things, are responsible for inventing politics. Whether or not they invented that unique political ability to deny reality with a straight face in front of thousands of people we do not know. In any even, the same politicians, not only Greek, who told us two years ago that the way out of the crisis was to increase government spending are now telling Greece the opposite. They are also telling the rest of us to stay calm because it will work.
The simple fact is that the government does not operate under the same rules as the private sector. An individual or a company can save without hurting their revenue. In general, when the government tries to save aggressively, the economy slows down, when the economy slows down, tax collections go down. Thus, depending on the sensitivity of all this variables, trying to reduce the deficit may paradoxically increase it instead.
Guess what, that is what happened to Argentina. That is what seems to be happening to Greece, and, even though we do not hear about it everyday, is what is happening to the other countries (you know who they are).
The reason we are subject to this nonsense is that the politicians do not want to acknowledge that the level of debt is too high. It was already too high in 2005 when nobody cared. The money has already been spent and and lost. No amount of financial engineering can modify reality.
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