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The nub of the issue was how much Germany could pay without an allied military occupation. In his 1919 polemic The Economic Consequences of the Peace, Keynes said that if Germany restricted its consumption, it could probably run an annual trade surplus of $250 million, or 2 percemt of its national income, which over 30 years would add up to $7.5 billion.In fact, Germany wasn't prepared to repay the realistic debt, either, and only did so following fresh loans.In 2009, the country's budget deficit shot up to 15 percent of GDP, national debt exceeded 100 percent of GDP, and 10-year Greek bond yields soared above 35 percent.By August that year, Greece had capitulated to its creditors, enacting the necessary austerity measures in exchange for a new 85 billion euro loan.Greece's debt-to-GDP ratio rose from 100 percent to 170 percent, and the creditors' cartel will continue to control the country's economic policy until the debt is repaid.
Has austerity been vindicated?
The fall of the economists’ empire
The debate on austerity, budget deficits, growth
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