Economic output in Greece and Portugal plunged last year, according to figures released on Tuesday, challenging the prevailing European view that fiscal belt-tightening will foster growth.

Greek gross domestic product fell 7% in the fourth quarter from the year-earlier period, the country's statistics agency said, bringing the total GDP drop since the end of 2007 to more than 16%. Greece's statistics service hasn't issued quarter-to-quarter data for the past several quarters because of methodological problems adjusting for seasonal swings in activity.

Portugal's decline was milder last quarter—2.7% from a year earlier. But the downturn is accelerating. GDP fell 5.3% in the fourth quarter from the third, at an annualized rate, or 1.3% on a quarterly basis. Portugal's economy is expected by some economists to contract as much as 3.5% this year.

The steep contractions are fueling criticism of the strict austerity policies adopted across Europe's periphery in response to the debt crisis. A number of economists argue that continued government spending cuts will make it even harder for the most vulnerable countries to recover.

"The whole nonsensical doctrine of expansionary fiscal consolidation that [former European Central Bank President Jean-Claude Trichet] and the European Commission were talking about, that whole discussion is gone," said Jacob Funk Kirkegaard, an economist at the Peterson Institute for International Economics. The austerity debate isn't confined to the euro zone.