Portugal has announced a major austerity package, hoping for the same effect.

Fiscal stimulus is turning into fiscal austerity and a drag on growth.

The trouble is that the eurozone has an austerity strategy but no growth strategy.

Last week, Portugal joined Greece and Ireland in seeking an official bailout to avoid a default that would undermine Europe s banking system.

They are then forced to implement austerity programs that lead to deep recessions and, ultimately, to banking crises.

But the IMF imposed strict austerity on these countries, pushing them into a prolonged depression.

It believes that what America s infirm economy needs is another good bleeding in the form of more rigorous austerity.

Even as the risk of recession looms, the country has been forced to implement a drastic austerity program.

In the meantime, Greek society will suffer from budgetary austerity, cuts in social expenditure, and an overall economic downturn.

Such a program would cause Greek GDP to fall far more than Ireland s sharp decline to date.

The creditors imposition of strict austerity on the periphery is perpetuating the eurozone s division between center and periphery.

In either case, new austerity measures are needed, and Ireland will require substantial bridge financing.

But when there is spare capacity in the economy, the resources freed up by public sector retrenchment may simply be wasted.

Ours does not have to be an age of austerity governments, even in the poorest countries, have options to foster a socially responsive economic recovery.

Of course, the EU countries could leave Greece to the mercy of the International Monetary Fund, which is willing and able to help conditional on the government s implementation of a strict austerity program.

The full extent of the political damage that Germany s bailout policy for the eurozone, with its austerity, mass unemployment, and economic depression, has caused in southern Europe remains to be seen.

In response to the global recession of 2008, the United Kingdom embarked on an austerity program while the United States enacted an 800 billion fiscal stimulus.

The fundamental problem that much of the world faces today is that investors are overreacting to debt to GDP ratios, fearful of some magic threshold, and demanding fiscal austerity programs too soon.

They should almost thank the French for their inability to impose effective austerity measures and thereby still run a small current account deficit, which has prevented the eurozone surplus from becoming even larger.

In Spain, for example, voters understood the implications of supporting the ruling Popular Party, making it one of the only southern states where the government had some kind of mandate to implement tough austerity.

While governments were subsequently able to begin reinvesting in social programming to varying degrees, the rising costs of social programs continued to put fiscal pressure on provinces and territories despite the austerity measures implemented over the past decade.

For decades, developed country shareholders at the International Monetary Fund and the World Bank used loan conditionality to spur economic reforms often including contentious fiscal austerity measures in the so called Third World.

The mistrust and fear that this elicits in the bond markets can lead to liquidity crises that, creating a self fulfilling prophecy, drive countries closer to default. They are then forced to implement austerity programs that lead to deep recessions and, ultimately, to banking crises.

Others, however, have noted that Estonia pursued strict austerity in the wake of the crisis, avoided a financial crisis, and is now growing again vigorously, whereas Greece, which delayed its fiscal adjustment for too long, experienced a deep crisis and remains mired in recession.

It is, rather, an austerity bomb that hits an economy in which unemployment remains high, the employment to population ratio remains horrifyingly low, and there are only feeble signs that the large gap between current and potential output is closing.

The higher rates made it more costly for Greece to refinance its debt, creating a fiscal crisis that has forced the government to impose severe austerity measures, leading to public unrest and an economic collapse that has fueled even greater investor skepticism about Greece s ability to service its debt.

The bailout fund created last year by the International Monetary Fund and the European Central Bank to enable Greece and other distressed sovereigns, like Ireland and now Portugal, does exactly that, but on the condition that they implement austerity programs to eliminate their deficits over a short period of time.

One can only pity the Southern European countries. They should almost thank the French for their inability to impose effective austerity measures and thereby still run a small current account deficit, which has prevented the eurozone surplus from becoming even larger.

In his teens, Otto once complained to his father of the austere lifestyle that his family was suffering from, by mentioning he had never tasted real butter in his life, because of the depression that plagued Austria after its defeat in World War I.