How Much Austerity Has Europe Actually Endured?

As euro zone leaders wait for details on Greece’s last-chance proposal for a new bailout deal, several have taken a hard line toward Syriza’s claim that austerity measures, as they stand, are unacceptable to the Greek people. Those feelings have been simmering for months. After all, people in Ireland, Portugal, Spain, and Italy have all dealt with harsh austerity measures implemented following debt crises. If these countries had to swallow the bitter pill of austerity, the argument goes, so should Greece.

But are the situations comparable? How much austerity have these countries endured, exactly? Budgetary austerity is roughly defined as any combination of spending cuts and tax increases, usually during an economic downturn. The broadest way to quantify such policies is to look at the change over time in a country’s structural deficit. While a government’s total deficit is simply the difference between its revenue and expenditures, it can change over time because of cyclical factors beyond its control. Imagine a country with a balanced budget that suddenly suffers an economic downturn due to some outside shock. Incomes will fall, which will depress the amount of taxes the government collects. This pushes the balanced budget into deficit, since the government is still spending as much as before. But the structural deficit is still zero, since the government hasn’t made any fundamental changes to its tax-and-spend policies.