Troika bailouts forecast recovery but economies contracted further

Evidence

In May 2010, Greece received a 110-billion-euro loan in exchange for a 20 percent cut in public-sector pay, a 10 percent pension cut, and tax increases,. The lenders, the so-called troika of the ECB, the European Commission, and the IMF, forecast growth returning by 2012. Instead, unemployment in Greece reached 21 percent in late 2011, and the economy continued to contract. In November 2010, Ireland needed a bailout and received 675 billion euros for a 26 percent cut in public spending. In March 2011, it was Portugal’s turn, and it received 78 billion euros in exchange for a similar packet of reforms. However, given the contraction in all these economies and the fear of contagion, yields on Portuguese ten-year debt reached 17 percent in early 2012, and their ten-year bonds were downgraded to BBB−, otherwise known as junk. — Mark Blyth, Austerity, 200

Categorization

• XREF: Directly supports Mattei’s account of IMF conditionality and the mismatch between forecasts and outcomes. — connects to: Government bailouts prevent capitalist crises from restoring profitability — Nick Couldry & Ulises A. Mejias, The Costs of Connection: How Data Is…, 801
• SEED: The forecast-vs-outcome gap (growth by 2012 predicted, 21% unemployment delivered) is a sharp empirical hook for a piece on why austerity models keep failing.

Broader Connections

• Government bailouts prevent capitalist crises from restoring profitability #corroborates (0.72) — Nick Couldry & Ulises A. Mejias, The Costs of Connection, 801