Collective Conscious

NYT (via):

In Ire­land, which is expect­ing its third con­sec­u­tive year of eco­nomic con­trac­tion this year, the gov­ern­ment says it will need an addi­tional 15 bil­lion euros in bud­get cuts to reduce its deficit from 32 per­cent of gross domes­tic prod­uct to 3 per­cent by 2014.

And in Por­tu­gal, the gov­ern­ment is strug­gling to meet its deficit tar­get of 9 per­cent of out­put as the econ­omy con­tin­ues to weaken.

Spain also faces a dif­fi­cult task in slic­ing its deficit to 6 per­cent next year, from 11 per­cent last year, in the face of a slump­ing economy.

So far, Greece has made solid progress in its aus­ter­ity pro­gram, cut­ting expen­di­tures by 11 per­cent through Sep­tem­ber from the com­pa­ra­ble period last year. But rev­enue, always dif­fi­cult to spur in an econ­omy with a poor record of tax col­lec­tion, has been hurt by this year’s 4 per­cent eco­nomic con­trac­tion and is up just 3 percent.

All these coun­tries have been extremely suc­cess­ful at cut­ting their nom­i­nal deficits. But aus­ter­ity is a mov­ing tar­get. If you need to main­tain a deficit at a cer­tain pro­por­tion of GDP, you find that as GDP falls, the amount of real cuts you have to make increases, which in turn dri­ves down GDP far­ther, which requires more cuts.…

(Photo: Eusebius@Commons)