Austerity does not work. The IMF has finally admitted its models have been used on a one size fits all basis. Assumptions have been used on a static basis and this has wrecked havoc with the Greek economy. The IMF's admissions which can be accessed online, go to: www.scribd.com/doc/118886444/wp1301 , a hefty read , will offer little consolation to millions suffering as the result of austerity. When Trade Liberalisation programs failed all across Africa, and Structural Adjustment caused economic contractions in South America, plus Asia, the blame was placed on poor implementation of policy initiatives. With Greece, the blame has been placed on an under-estimation of the fiscal multipier. With circumstances changing, the multiplier has been infleunced by changes in other variables.
Economic models have a lot of well publicised limitations, how they are still used without much common sense remains a mystery. The same applies to financial models which failed to predict the financial crisis and put Greece in this situation in the first place.
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