Greece Falls Into 'Death Spiral': Rising Debt, No Growth

Image by rad(ish)labs via FlickrDrowning in red ink, Greece has nowhere to turn to revive the economic growth that might put its debt on a sustainable trajectory, reassure angry foreign creditors and offer hope to its recession-weary citizens.

Instead, the country finds itself in a vicious circle—a death spiral, some would say—in which it is borrowing ever more to keep up on its existing debts, crushing growth in the process and thereby worsening its all-important ratio of debt-to-gross domestic product.

Springing the debt trap would not be a miracle cure either: a manageable level of borrowing is a necessary but not a sufficient condition for Greece to start restoring competitiveness and resume growth after three years of economic contraction. More...