Greece Is on Pace for the Worst Recession in Modern History

If only the country's deeper crisis ended there

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The Greek economy shrank nearly 7% in 2011, the fifth straight year the country has been in a recession. GDP has shriveled by a sixth since 2006, and unemployment has tripled over that period to 20%. With new rounds of austerity just announced, and a default yet to come, the nightmare isn't even close to being over. Will Greece be the deepest recession of the last 30 years?

It's getting there. Argentina's output plummeted 20 percent peak-to-trough when it defaulted in 2001, and Latvia's economy has shrunk by a fifth since 2008. Uri Dadush, an economist with the Carnegie Endowment in Washington, told Reuters that "on the current path, which is not sustainable in my view, we may very well see Greek GDP go down 25-30 percent, which would be historically unprecedented. It's a disastrous crisis for them." (Russia's GDP fell a spectacular 44% in the 1990s, but the dissolution of the Soviet Union is categorically different from a recession within a single country, so some analysts exclude it.)

Like Argentina, Greece suffered a classic sovereign debt crisis. Put simply, investors lost faith in the government's ability to pay back its loans. As Athens' borrowing costs sky-rocketed, that had the self-fulfilling effect of making it harder for the government to pay back its investors. Even with a whopping 34% decline in government spending, Athens has all but lost the faith of international markets. Relying instead on loans from euro zone members, it's struck a series of deals that required tighter and tighter controls on government spending.

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It's bad enough that Greece -- whose economy is still shrinking nearly as fast as the worst quarter of our Great Recession -- already compares unfavorably to the deepest recessions of the last 20 years. But look at the numbers within the numbers. Overall unemployment in Greece has climbed into the 20s. But youth unemployment is kissing 50 percent. Along with Spain, Greece has the worst unemployment rate for under-25-year-olds of any developed country.

Youth unemployment isn't any more tragic than overall unemployment. But it has a different meaning for the economy. When millions of older workers lose their jobs, their retirement earnings suffer, they cut back spending, and the economy shrinks. But when young people on the verge of beginning their careers lose their jobs, the economy takes a hit today, with lost production and unrest, and tomorrow, with atrophied skills among the generation that's meant to be leading the economy. To suffer the greatest recession in the last 30 years is one thing. To suffer the greatest recession in the last 30 years with half of your twentysomethings on streets (or on couches) and not in an office portends a very long road out of a very deep hole.