The basic idea behind austerity is that deflation via government cuts will rein in budget deficits and sovereign debt. However, austerity in practice, as Mark Blyth writes at Foreign Affairs, hasn't quite delivered.
In Spain, unemployment is at a record 27.2%. Great Britain could still enter the world’s first triple-dip recession. In the last quarter of 2012, the Eurozone as a whole contracted, which has never happened before. And yet, the ideals of austerity are still lauded by deficit and debt hawks in the US and abroad.
Portugal’s debt-to-GDP ratio increased from 62 percent in 2006 to 108 percent in 2012. Ireland’s more than quadrupled, from 24.8 percent in 2007 to 106.4 percent in 2012. Greece’s debt-to-GDP ratio climbed from 106 percent in 2007 to 170 percent in 2012. And Latvia’s debt rose from 10.7 percent of GDP in 2007 to 42 percent in 2012. None of these statistics even begin to factor in the social costs of austerity, which include unemployment levels not seen since the 1930s in the countries that now make up the Eurozone.