Austerity Analysis

The question of whether austerity is a dangerous idea has been a hotly contested argument for decades now. With some seeing it as potentially detrimental to country’s economic structure, while others regard it as a necessary policy needed to bring the government out of financial disaster in drastic times where no other options are available other than the measures mentioned during austerity such as cutting expenditure, raising taxes, and bailing out banks. Austerity process is the actions normally pursued if there is a risk that a government can’t hold up its debt obligations. This might arise when a government has borrowed in currencies from foreign nations (Economist 2015). Austerity policies can also be attractive to the more affluent group

In 2010, a vast recession resulted in the country being incapable of paying back its government debt without third-party backing. Therefore, in order to avert an insolvency crisis, Portugal requested applications for bail-out plans and took out €79 billion as a result. During late 2010, the Portuguese Government declared a new austerity deal following suit after other Eurozone countries, via a sequence of tax increases and salary reductions for public servants. As well, in 2010, the country attained its highest unemployment rate for over two decades of almost 11% and up to 15% during 2012, whereas the number of public servants continued to remain at a very high quantity (Peláez 2013). Following the announcement of the bailout, the Portuguese government Led by Pablo Coelho, succeeded in instigating actions to mend the State's financial situation and the nation began to see forthcoming improvements. After a period of increased poverty, low wages, pension cuts, and homelessness, Portugal began to strive once again, due to a surplus in 2016, Portugal wasn’t constrained by the excessive deficit procedure that had been employed in the economic crisis beforehand. The banking system was becoming increasingly stable, though there were withstanding non-performing loans and commercial debt. During 2016 Portuguese GDP reached $204 billion, up by about 2.7% from 2015, while

Michael Schiavone, in his book ‘Austerity and the Labor Movement’ notes “The poster child for austerity and the damage it causes is Greece. Before it ran into trouble, Greece’s economy was not performing that badly. From 1996 to 2004 the Greek economy grew largely because of increased public spending, investment from the European Union, and lower costs in the capital markets” (Schiavone 2016, 28). It’s clear to see that before the global banking crisis, and the effects of austerity, Greece was a prosperous nation. It is widely regarded that Greece was one of the most countries that suffered the most. The crisis began in late 2009, prompted by the chaos of the Great Recession, organisational weaknesses in the Greek economy, and admissions that preceding data on government debt levels and deficits had been underestimated by the government (Higgins & Klitgaard 2016). It is mentioned in the book ‘Against the Troika, Crisis and Austerity in the Eurozone’, that “The implications of the crisis and of the policies deployed by the troika as well as the awful predicament in which peripheral countries currently find themselves, are apparent in Greece, which has been affected more deeply than any other country in the Eurozone. The social impact of these developments has been simply