Oh, you mean that when you're too far in debt you have to accept the fact that your economy will contract when you take the adjustments?

Europe’s economy will shrink in 2012, with Italy and Spain facing sudden crunches as they battle to escape the debt crisis, the European Commission said.

The 17-nation euro economy will contract 0.3 percent, the commission said, abandoning a November forecast of 0.5 percent growth. The downgrade was mainly due to projected contractions of 1.3 percent in Italy and 1 percent in Spain.

“The euro area has entered into a mild recession,”European Union Economic and Monetary Commissioner Olli Rehn told reporters in Brussels today after releasing the forecasts.“Prospects have worsened and risks to the growth outlook do remain, but there are signs of stabilization.”

Uh huh.  The problem with this last sentence is that the deficit spending has not stopped, and until it does there is no way to know exactly where "stabilization" is.

Governments are starting to see the light on the indefinite "spend more than we make" idiocy, but by no means have they accepted that this must end -- permanently and forever -- at this point.

But that must, in fact, happen -- or every one of these nations will wind up as Greece has.

Incidentally, the United States is not exempt from this process, but we have had zero recognition of this fact within this country -- not in the mainstream media, not anywhere -- except here on the Ticker.

If you're wondering how bad this will (or can) get, simply look at the deficit spending in dollars and subtract it off GDP.  That's the minimum immediate impact, although getting the government out of the way is likely to lead to intermediate-term gains in productivity (since government activity is usually ridiculously inefficient.)  Nonetheless the short term pain of such an adjustment is always and will always be quite material, and it cannot be avoided.