Paul Krugman sends us to Martin Wolf:
The impact of fiscal austerity in the eurozone: I have defined the fiscal tightening as the percentage point change in the structural (or cyclically-adjusted) general government deficit from 2008, the year of the crisis, to the forecast for 2012. The assumption is that this change represents the results of policy, rather then cyclical effects. I have taken growth as being the proportional change in GDP from 2008 to 2012….
[T]he bigger the structural tightening, the larger the fall in GDP. The estimated fit is fairly good for this sort of calculation. Every percentage point of structural fiscal tightening is estimated to lower GDP by 1.5 per cent of its 2008 level….
In all, there is no evidence here that large fiscal contractions bring benefits to confidence and growth that offset the direct effects of the contractions. They bring exactly what one would expect: small contractions bring recessions and big contractions bring depressions. Moreover, the cumulative performance of eurozone economies between 2008 and 2012 is poor. Only six economies are forecast to grow at all: Austria; Belgium; France; Germany; Malta; and the Slovak Republic
Finally, since a large number of countries are expected to tighten their fiscal positions substantially in coming years, their economies are likely to contract. How long the political glue will hold in these circumstances is a really interesting question.