How effective is austerity policy? The examples of Greece and Argentina

Greece has pursued an austerity policy since the subprime crisis (2008-2009): public spending cuts, move to a primary fiscal surplus. The level of GDP in early 2024 is still 9% lower than in early 2008. Today, long-term interest rates are low (150 basis points above German rates ) and growth has returned, but there is cause for concern about the quality of this growth, which is essentially generated by tourism . This concern is heightened by the decline in public spending. Argentina, under Javier Milei, introduced a similar austerity policy: public spending was cut, including spending on education and public investment, and a primary fiscal surplus was achieved. In addition, the Milei government decided to massively devalue the peso against the dollar (by 54% in one go, then by 2% per month). In the short term, this policy is causing a sharp contraction in activity (loss of household purchasing power, fall in public spending). Investment can be boosted by the fall in interest rates, which are markedly negative in real terms. The question is twofold: how long will it take to return to the 2022 GDP level? What will be the structural effects of the public spending cuts (education, infrastructure, etc.) on Argentina’s economy?