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BBC, S&P och Angela Merkels tro

Perhaps the most interesting reason for the downgrade was Standard and Poor's judgement (read it here) that austerity alone might be self-defeating. 

Det skriver Gavin Hewitt, BBC  Europe editor, 16 January 2012

The "cult of austerity" has always been controversial. The doubts are increasing. There are those who say that Greece is now trapped in a spiral of decline. 

The Washington Post last week asked whether austerity was "killing the Greek economy".

The fear extends to Italy, Portugal and Spain.

Austerity is squeezing demand just as countries are heading into recession. Unemployment is already rising, leading to greater spending on benefits and a decline in revenue from taxation. That forces the countries to borrow more, so forcing up accumulated debt.

The German chancellor remains a believer.

This weekend she said that Greece could rebuild its economy despite austerity.

She accepts that spending cuts alone won't work, but she believes that structural reforms have to be forcefully implemented although they take time.

Full text of Gavin Hewitt, BBC  Europe editor



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