I guess I’m not familiar enough with Spain and Greece. debt as % of GDP
2006, 2008, 2010 for Spain - 40%, 40%, 69%
2006, 2008, 2010 for Greece - 106%, 113%, 171%
So I’m not seeing the similarities at least in these cases. The peripherial countries suffer from a lack of productivity vs. northern members - particularly Germany. They can’t devalue their currency so they need to drop wages. Except dropping wages wont see a drop in costs because the way trade works in the EU for Spain
So if they cut government spending there isn’t any private sector spending to pick up the slack since their would seem to be no competitive advantage in locating in Spain vs. Germany. You’d have to make Germany more expensive. Or export outside of Europe but even then you’re competing with Geman/French products using the same currency.
It really looks to my eyes like the austerity push effectively punishes these countries while offering no hope of success.
Perhaps you should start a thread about why the Tea Party groups are protesting onerous taxes at a time when individual income tax rates are as low as they’ve been in decades.
Can you please be more specific - what high-level budget line are you referring to? Or, even better, can you identify group that “want the other guy to pay the lions share to get us out of any problems”? Military? 1%? Dude on food stamps? Or, dude who was paying into SS for decades and now wants something back?
I doubt Greece has a food stamps or social security deductions in the same form as the US. It’s far more likely that they have a dole/benefits system paid out of gneral taxation instead.
If I were faced with massive cuts in all government services (possibly barring the police and military) and a tightening up of the tax system solely to prevent the bondholders suffering much loss at all I’d get pretty angry to. Especially after losing my home and missing a couple of meals. That’s what ‘austerity’ amounts to in blunt terms.
And the debt level for Italy is 121%. However I was referring to a system of clientism (famously there are seventeen times more forest-workers (26,000) on sparsely forested Sicily than there is in British Columbia in Canada (1,500) which has about 35 times the amount of forest; and there are four times more public employees on Sicily than there is in Lombardy which has twice the population), endemic corruption (leading to unbelievable waste and incompetence, and the landscape littered with unfinished constructions funded by Rome and the EU), self-serving politicians (with half a million euro a year the 54 politicians of the local assembly of Sicily earns more than national politicians in Rome – more than the US president too in fact), etc..
They have to clean up their corrupt system. Nobody can do it for them, and outside money will just enable it to carry on a few more years before it comes to a head again.
Hold on. We’re discussing Spain/Greece but your examples are Italian. My objection up thread was to the inclusion of Greece in this discussion when it has historically behaved in a reckless economic manner compared to Spain. It isn’t even close to Italy either when you compare overall GDP and economical profiles. From the CIA factbook
Italy has a GDP of 2.2 Trillion compared to Greece’s 0.3 Trillion
Italy has 2% of it labour force in agriculture compared to Greece’s 12%
Italy has 24% of it GDP in manufacturing compared to Greece’s 17%
While it also says the Italian shadow economy may reach 17% of GDP, the Greek one appears to be over 20/25% (careful with that one since I can’t find decent cites for that) it seems obvious to me that the Italian economy is structurally stronger than the Greek one and so is better able to deal with high levels of debt /GDP.
Greece isn’t broke. It has people who want to work, and people who’d like to buy the stuff the unemployed aren’t producing. It’s not broke - it’s the victim of mismanagement by the ECB. It’s the victim of economic theories and policies that have been proven not work, but which people mindlessly pursue anyway. It’s the policies that are broke, not the people.
To blame it all on the ECB is just factually wrong. Greece has long had sky-high corruption, extremely restrictive business and labor law, and high rates of government spending. All of these things discourage businesses from investing in new production facilities in Greece. It’s one of the last places in Europe that any sane company would want to go. Before the people who want to work can actually work, there needs to be serious trimming of government, bureaucracy, and regulation. Yet as far as I know, no one is seriously proposing a major rethinking of the role government plays in the Greek economy.
The same is true, to a lesser extent, in Italy, Spain, and Portugal. And in other European countries.
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Can you please be more specific - what high-level budget line are you referring to? Or, even better, can you identify group that “want the other guy to pay the lions share to get us out of any problems”? Military? 1%? Dude on food stamps? Or, dude who was paying into SS for decades and now wants something back?
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Doesn’t seem all that complicated to me. In broad strokes, if you are a Democrat/Liberal you probably want to protect Social Security and many of the social programs and entitlements from budget cuts, while being perfectly willing to cut, say, the military budget and increase taxes on The Rich™. If you are a Republican/Conservative, you probably want to cut Social Security and many of the entitlements budgets, do the patented Clean Up The Govenment(tm…arr), and you are opposed to tax increases for anyone, especially The Rich™.
Seems pretty obvious to me, again broadly speaking and using generalities which is what I was doing. The thread isn’t really about the US though, so not sure why this is relevant. While we certainly have a lot of issues in the US, including the looming Fiscal Cliff(aar), we are light years ahead of the cluster fuck that is Greece…which is why you see the protests there while you don’t really see that so much here. Well, one of the reasons.
Hope this isn’t too much of a hijack, but does anyone know if the recent financial troubles in Greece, Italy, Portugal & Spain (the last two of which I have spent a fair amount of time visiting) mean that prices for vacationers (i.e. hotel room rates, bar & restaurant tabs, cabs, etc.) have gone way up or have they actually gone down?
Assuming public safety is not an issue, is now a good time for budget-conscious Americans to head over to Athens, Madrid or Lisbon?
I dislike the suggestion that Greece’s problems are somehow due to Greeks being congenital tax dodgers. The truth is that people will avoid tax in any country, if they can get away with it. The problem in Greece is that is has weak public institutions, it being still quite new to the whole democracy thing (well OK, the ancient Greeks may have come up with the idea, but there was this big gap of a few thousand years). This is a country that was ruled by military junta only a generation or so ago.
You can’t go from that situation to having everybody dutifully submitting Greek IRS tax returns, within a couple of generations. If you’re running a shop in Greece, and your competitor is dodging taxes, you have to dodge taxes too, however honest you may be. The alternative is to go out of business. It would be the same in the US or Germany or anywhere, except that in those countries the honest person might reasonably expect the cheater to get caught.
I don’t think Greece should have been admitted to the EC, as it was then, let alone the euro. It was not politically mature enough. I think there was an idea among Euro statesmen that welcoming such countries into the fold would speed their stabilisation and development but, not for the only time, it turned out to be a case of the EU putting the cart before the horse.
It is unhelpful to generalise about the PIGS - especially extending the moralistic narrative of thrift, which no doubt applies in good measure to Greece and Italy’s real history of profligacy, to all the Eurozone countries suffering from a sovereign debt crisis.
Structural reform beyond the dictates of the business cycle is obviously warranted in many cases, but it is a category error to blame a debt crisis which resulted from socialising private debt accumulated through systemic risk on structural factors which have absolutely nothing to do with said debt. Ireland and Spain, for example, are a poor fit for this narrative.
Ireland was a poster-child for nascent reform and a booming industry in pharmaceuticals and IT. It was not profligate and it’s current indebtedness is nothing to do with uncompetitive structure - if anything its banking system was too exposed. Similarly, Spain was running a surplus prior to the liquidity crisis.
Certainly it’s wrong to blame the ECB entirely, but it’s equally true that insistence on hard money and inflation-aversion coming from the moralistic German centric view is no solution at all to the issue.
These are complex issues, and I think they show a monetary union is unworkable without a fiscal union. However, given these constraints it’s possible to imagine a better solution, as unpalatable as it may be to Germany. That is, internal devaluation via Germany running slightly higher inflation.
Politicians who fly to Brussels first class on Monday, first class back on Thursday, because they’re too important to fly tourist.
Politicians who get paid per diems three times for the same meeting.
Banks whose boards are retirement pastures for the aforementioned politicians, whose retirement pay after serving for only 4 years is 20 times the living wage.
Banks which were NOT in trouble, but which have gotten neatly packaged up and given to another bank, and people are still wondering which politicians got what out of that. (See Banca cívica and La Caixa).
Regions which sold debt despite having pretty much no power to make their own economic decisions.
Regions which are not in trouble but which are having to cut education and healthcare budgets because Madrid says do (apparently keeping their previous levels was insolidary with those that are so far in the red they’re maroon).
Regions which are in big trouble blaming those which are not.
The problem is, what can you do, other than protest?
ETA: prices are staying quite stable or, in some cases (many hotels), going down; the raise in VAT has hit many domestic budgets pretty hard, though (not only has it gotten higher, but articles which used to be at reduced VAT now get the “normal” %). The motto for the last few years is “can’t raise prices/salaries until the crisis passes”. Houses have gone bust, the rental market has reappeared (it used to be almost impossible to find decent rentals, now there’s rentals at decent prices all over).
I selected France and Germany to be displayed with the others. I don’t see that the line graphs really say much, as France"s and Germany’s debts as percentage of GDP are both higher than Spain’s, as is total debt in Euros.
Sorry if someone else mentioned this, I just started reading the thread, willl now catch up.
My point was to show that Spain was not engaged in a reckless disregard for debt consumption compared to Greece and, I suppose, that Debt as % of GDP is a poor metric unless you take a look at the underlying economic strengths of a country. Japan has run Debt to GDP levels over 150% of GDP since 2002 without being turned into a blasted wasteland. Spain is constrained in the economic tools it can use and so is fighting the recession with one hand tied behind its back. So far integration into the EU is seen as more beneficial than leaving, devaluing its currency and ramping up exports.
Let’s remember that Spain, like a lot of countries, were managing debt perfectly well until the banks destroyed the world economy and tax revenues collapsed while calls on social programs expanded while they were having to be destroyed to bail out the bankers.
And now we’re in an Austerity Death Spiral of Cuts Begetting Contraction Begetting More Cuts.
I’m surprised people aren’t even more pissed off than they are.
Or why people are angry at being made to suffer and pay for the crimes of those who not only remain unpunished but continue to make out like the bandits they are.
Yea. That’s a real stumper.
Greece is in a terrible state and I would not be even slightly surprised to see a military coup as things fall apart. Or a Golden Dawn Fascist takeover.
