Greece and Austerity

Greece finally is out from under its EU/IMF bailout yoke, and now it wants give its citizens relief from the austerity measures it implemented during its years-long crisis.

[Prime Minister Alexis Tsipras]…announced ambitions to cut taxes as well as increase spending to boost employment and on welfare programs.

Reducing taxes is consistent with reducing austerity—provided the government also tightens its tax collection regime.

Increasing spending, though, increases austerity: it crowds out private businesses as government, which doesn’t have to worry about the cost of money, outcompetes businesses, both for sales and for the resources needed for production. That increased spending also drives up the cost of money for those private enterprises.

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