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Greece Austerity Diet Risks 1930s-Style Depression

Greece is spiraling into the kind of decline the U.S. and Germany endured during the Great Depression, showing the scale of the challenge involved in attempting to regain competitiveness through austerity.

The economy will have shrunk 18.4 percent in five years by the end of 2012, according to the International Monetary Fund, which forecasts it will contract another 4 percent in 2013 as Greece struggles to reduce debt in exchange for its $300 billion rescue programs. That’s the biggest cumulative loss of output of a developed-country economy in at least three decades, coming within spitting distance of the 27 percent drop in the U.S. economy between 1929 and 1933, according to the Bureau of Economic Analysis in Washington.