Why Europe Keeps Failing........ merged with "EU Seizes Cypriot Bank Accounts"

[Haletown]

Soner or later, economic reality always trumps any progressive transnational plans.

"For much of the previous decade, Spain was one of the most stable economies in Europe.  On the surface it experienced stable growth and managed to keep the national debt below that of its neighbors; in some years, Spain experienced budget surpluses, allowing the country to pay down some of its debt.  However, underneath this veneer, other factors were in play. 

In 1999 and 2000, when Spain adopted the euro as its currency, interest rates fell to historic lows as the European Central Bank (similar to the U.S. Federal Reserve) made money easily available.  So Spain's banks, its property developers, and the everyday home-buyers (with prodding from the government) embarked on a frenzy of commercial and residential building and buying.  From 1996 to 2007, Spanish property values tripled.
Spain has a massive social safety net which accounts for a vast a majority of its government spending -- spending that absorbs nearly 46% of the country's annual economic output or GDP.  Further, the nation's unfunded long-term social commitments account for more than 15 times its yearly GDP.  Despite this, the Spanish government embarked on one of the most ambitious green energy programs in Europe, pouring untold billions of euros into solar and wind energy.

In the meantime, because of rigid labor laws, union influence, and government regulations which prevent wage reductions and mandate ever-increasing benefits, the Spanish unit labor cost has risen by 40% (as compared to Germany), making Spanish industry uncompetitive.  Many have, by necessity, moved their operations overseas.  Nonetheless, large-scale immigration, much of it illegal, continued unabated through 2008, further exacerbating the cost of government."


Read more: http://www.americanthinker.com/2012/09/how_the_financial_collapse_would_happen_in_an_obama_second_term.html#ixzz26G6zJvnS

 

[Brad Sallows]

Canada, notwithstanding its regional cultural differences, is by comparison to Europe a paragon of homogeneity.  Nevertheless, I am curious to see how much money can be transferred away from Germans before they rebel.

 

[FoverF]

Europe keeps failing because they honestly believe that spending more money than you have is a fundamental human right. Every new entitlement ever created becomes an inalienable obligation, and any cut in any spending is an injustice.

Europe will eventually fail in a grander sense, because Germany will run out of Nazi-guilt, and stop paying for everyone else's excess.

I think it really is that simple.


Greece is drowning in government debt. It has become the world's foremost example of profligate and uncontrolled government spending, and the Greek people are rioting in the streets AGAINST budget cuts. They openly advocate defaulting on their debts, and demand a continuation of deficit spending.

Let me re-iterate that: They want to renege on their debts, and then continue borrowing more money. Actual grown-ups, with jobs, will tell you that this is what they think the government should do. I'd say it's the majority opinion in the PIIGS states. Burn the people who lent you money, and then ask for more money.

Forget about parallels to the Merovingian kings, or the collapse of the Lithuanian empire. The dominant political force in Europe is stupid people who are demanding that their elected representatives do stupid things, because they want to get stuff without paying for it.

 

[Kirkhill]

FoverF:

I agree with your point.  I would add though that the society has grown up from roots where the world was divided between those that had money and those that didn't.  A couple of centuries of revolutionary politics and those that didn't have money now have the means to force those that do have it to hand it over.  They still don't Grok the fact that money only is a means of expressing effort. If you want new money then you must put in new effort.  Beyond that all you are doing is stealing from those that put in the effort.

Sometimes the money is stolen by rich people.  Sometimes the money is stolen by poor people.  Either way, a society where money is stolen from those exerting themselves will eventually cause those people to quit trying or move.  Lots of Europeans have moved over that revolutionary period. The rest have quit trying.

 

[bridges]

Let me re-iterate that: They want to renege on their debts, and then continue borrowing more money. Actual grown-ups, with jobs, will tell you that this is what they think the government should do. I'd say it's the majority opinion in the PIIGS states. Burn the people who lent you money, and then ask for more money.

Forget about parallels to the Merovingian kings, or the collapse of the Lithuanian empire. The dominant political force in Europe is stupid people who are demanding that their elected representatives do stupid things, because they want to get stuff without paying for it.

Or... maybe they are of the impression that there's some waste that should be cut first, before cutting the salaries and pensions of the working poor.  In the few TV & newspaper pieces I've seen of people being interviewed on the street, it seems to run more along those lines, frankly. 

While we're certainly entitled to our outsiders' perspective, it would be interesting to know what Greek commentators and analysts are saying on the matter as well.

 

[Brad Sallows]

Progressives keep ridiculing the notion that there is any "fraud and waste" in significant amounts from which to find savings.  Take them at their word; go straight for the programs in their entirety.

 

[FoverF]

Or... maybe they are of the impression that there's some waste that should be cut first, before cutting the salaries and pensions of the working poor.  In the few TV & newspaper pieces I've seen of people being interviewed on the street, it seems to run more along those lines, frankly. 

While we're certainly entitled to our outsiders' perspective, it would be interesting to know what Greek commentators and analysts are saying on the matter as well.

None of this changes the facts that:
1) They do not want to repay their government debt
2) They want to continue running a deficit

If they felt that there were opportune places to cut spending first, they ought to have voted for a party espousing that principle in one of the several elections they've had since their economic situation became untenable. Instead, none of the parties elected into the governing coalition in Greece have proposed a balanced budget for any point in the foreseeable future.

And while it's an outsider's perspective on Greece, I have recently visited Greece, and I have been living in a PIIGS state for the last 4 years.

There ARE massive amounts of waste in every department of these governments. But the bureaucrats are too incompetent to implement rational cuts on their own, and the elected officials have no stomach to make them, because the electorate that voted them in are too self-righteously entitled to consider any reduction in what they receive. And so cuts are dispensed in politically convenient, but ill-considered and ineffective ways.

I'll give you some examples from Ireland, where I live.

Senior doctors are the one profession without whom the healthcare system absolutely could not function, and their availability is the biggest single factor in how long it takes someone to get in and out the door. Any reduction in their numbers results in a reduction of service to the public, and they account for less than 4% of the health care budget. But nobody is going to cry over the lost wages of that greedy elite, right? So their pay has been cut by 30-50%, huge numbers of them left, with the net result of reducing the healthcare budget by about 1%. Last year less than 50% of med school graduates stayed in the country. But it's been massively publicly popular. The next proposal on the healthcare budget is to make further reductions in  their pay as its' main priority. This is pretty much the definition of politically convenient, ill-considered, and ineffective.

There have been massive funding cuts to the police. A recent scandal involved a woman who called the police to report that her home was broken into, only to have the police officer say that he could only come out to investigate if the woman came and picked him up, because the station did not currently have a car assigned and he had ridden his bicycle to work. A recently-murdered IRA big wig had a public funeral in the middle of Dublin the other day. Masked gunmen were in procession behind his casket, and fired a volley of shots during the funeral, in the middle of the city, in broad daylight, in front of news cameras, and all with complete impunity from the police. These are wanted murderers walking around in public with firearms in the middle of the capital city, and the police don't dare do a thing about it. And their budget is going down from here.

Meanwhile the government signed a binding labour-relations agreement that ring-fenced all public employee positions, pay, and benefits. Meaning no cuts of any significant can be made to payroll in the civil service. The amount that was ring-fenced by this agreement was larger than all government revenues. Meaning that the government could cut every single non-payroll related budget item down to zero, and would still run a significant deficit. Welfare payments have not been decreased. I can't rent a shoebox in Dublin for less than 1000 euro per month, because that's the basic housing allowance for someone on social support. Meaning that nobody will ever ask less than 1000 euro because they know that even single moms on welfare can afford that. In Ireland you can be paid as a full-time job to be a 'carer' for somebody in your family with a disability. Now that sounds like a fantastic idea in principle to me, it keeps people out of institutions that don't need to be there. But the flip side is that every 3rd or 4th person you meet is a 'full time carer' for someone, being paid a full time wage by the state to do something that they should be doing anyway. And the person for whom they are caring is also getting full state benefits as well. And half the time they just use granny's savings/welfare/pension to put her in private nursing home anyways, and pocket the rest of the cash. There has been absolutely ZERO talk by anyone of any political party towards ending (or even reducing) any of these entitlements. No major political party has ever even suggested balancing the budget.

This is the reality of living in Europe today.

Europe's solution to these problems are things like the European Stability Mechanism. Markets won't lend money to the Irish government any more, and so the European Central Bank created a fund (borrowed from Germany and Finland) that could be lent to indebted countries. This is literally and seriously discussed by commentators and analysts as if it is the viable solution to the Eurozone crisis. Because the problem, apparently, was that European nations couldn't borrow enough money. At least in America when they increase the debt cap, people realize that it is only making things worse and is not a long-term solution. Europe as a whole is still convinced that this is just a temporary problem of liquidity, not solvency.

 

[bridges]

Fascinating insights, FoverF - thank you for sharing them.  I will raise a question with the part I've put in yellow here:

But the flip side is that every 3rd or 4th person you meet is a 'full time carer' for someone, being paid a full time wage by the state to do something that they should be doing anyway.

Maybe I've misunderstood - are you suggesting that people who hold full-time jobs outside the home should also be full-time caregivers to their disabled relatives?  Out of a sense of familial responsibility?  If not, who is it that you believe should be caring for these folks, and how would that care be paid for?

No major political party has ever even suggested balancing the budget.

:nod:  Obviously unsustainable.  How long before this is realized, and at what cost...

 

[Edward Campbell]

Fascinating insights, FoverF - thank you for sharing them.  I will raise a question with the part I've put in yellow here:

Maybe I've misunderstood - are you suggesting that people who hold full-time jobs outside the home should also be full-time caregivers to their disabled relatives?  Out of a sense of familial responsibility?  If not, who is it that you believe should be caring for these folks, and how would that care be paid for?

:nod:  Obviously unsustainable.  How long before this is realized, and at what cost...

That, the bit highlighted in yellow is the Confucian ideal and is at the root of one of the political debates in China, today. The new left, led by Hu Jintao, has introduced some, very limited social welfare supports - not many and very carefully means tested - and they are too much for the right wing of the Chinese Communist Party, the faction formerly led by Jiang Zemin. Part of the reason for the downfall of Bo Xilai appears to have been that he favoured even more social services and the opposition to that - from all factions - was not economic, it was philosophical: it flew in the face of the Confucian ideals which animate much, maybe evn most of Chinese society.

 

[vonGarvin]

...Germany atop the heap, just a little bit more equal than the others?

Nazism aside, I'm wondering aloud what the European Economy was like from ~1940 - 1944....

 

[Edward Campbell]

Nazism aside, I'm wondering aloud what the European Economy was like from ~1940 - 1944....

On its knees, literally. Britain and Germany were both broke ~ even with what it had looted from the rest of Europe the Germans could only fight by denying their people almost everything, even adequate food. It was only a matter of time before starvation became a reality - as it almost did in the winter of 1945/46 even with massive allied food aid. Britain had much better credit but that is what it was using to feed itself. By the end of the war Britain's national debt stood at 200% of GDP, a figure not seen since the end of Napoleonic Wars, which Britain both fought and financed. Britain's war loans to the USA were not paid off until 2006! Germany had no national debt because it had no credit since 1931 ~ there were debts on some books but they were, as a matter of practical necessity, all forgiven, including potential reparations (some Greeks claim they are "owed" $75 - 100 Billion by Germany for World War II reparations). Most of the rest of Europe had been looted by Germany and most if it started the winter of 1945/46 with no debts but no money, either.

 

[vonGarvin]

Britain and Germany I understand were on their knees, especially Germany at the end of the war, with its economy and infrastructure shattered (literally and figuratively).

But, again, just for the sake of argument, if Alien Space Bats* had intervened and the war ended on 21 June 1941 (a day prior to the invasion of the USSR by Germany), what would a "unified" Europe looked like, say by 1951, after ten years of economic policy directed from Berlin?  (Yes, the UK is still the UK, and I'm talking "Europe" to include Norway, Denmark, the low countries, France, Italy (which included Albania), Greece, Romania, Bulgaria, Hungary, Slovakia (the "Czech" part was amalgamated into the German Empire, along with Austria) and half of Poland up to the Bug river.)

(*Alien Space Bats is an internet-ism to establish a fantasy world in which, for the sake of argument, one wishes to make a point)

I'm not trying to make a point, i'm trying to understand.

 

[Edward Campbell]

Relieved of the costs of war and "owning" a slave empire Germany would have appeared to be on "easy street," but its ability to exploit its industrial base, very much undamaged, and its well educated population would have required something which, it seems to me, the NAZIs would not be inclined to allow: social and economic freedom.

The German "rulers" would have freed the German industrialists to make and sell whatever they could but they, the industrialists, would face HUGE difficulties in finding markets beyond the continent.

America would be a formidable and fierce competitor and, since I'm assuming that the same aliens stay Japan's hand, it, with Britain, would have control of the global sea lines of communications. Hitler's Europe, circa 1942 would look a lot like Napoleon's Europe circa 1812: big, populous, industrious but unable to prosper, in fact falling deeper and deeper into decline, because it could not trade beyond its borders. Napoleon was beaten, by about 1805, by a British naval blockade that strangled his economy ~ his continental system could not sustain itself. Hitler would have been beaten by an equally effective blockade caused by America and Britain having monopolized all the major markets.

 

[vonGarvin]

Relieved of the costs of war and "owning" a slave empire Germany would have appeared to be on "easy street," but its ability to exploit its industrial base, very much undamaged, and its well educated population would have required something which, it seems to me, the NAZIs would not be inclined to allow: social and economic freedom.

The German "rulers" would have freed the German industrialists to make and sell whatever they could but they, the industrialists, would face HUGE difficulties in finding markets beyond the continent.

America would be a formidable and fierce competitor and, since I'm assuming that the same aliens stay Japan's hand, it, with Britain, would have control of the global sea lines of communications. Hitler's Europe, circa 1942 would look a lot like Napoleon's Europe circa 1812: big, populous, industrious but unable to prosper, in fact falling deeper and deeper into decline, because it could not trade beyond its borders. Napoleon was beaten, by about 1805, by a British naval blockade that strangled his economy ~ his continental system could not sustain itself. Hitler would have been beaten by an equally effective blockade caused by America and Britain having monopolized all the major markets.

Thank you! 

(As you can tell, I know very little about economics, but I *do* know what a Panzer Division was all about.....something about priorities) 

 

[Kirkhill]

I'm going to try for the trifecta and suggest that the third datum point on the European trend line is the Sun King Louis IV and his effort to establish a Parisian hegemony.  He too broke the bank and the only way he could finance operations was by continually expanding by offering his subjects more opportunities to loot the neighbours and then taking ever increasing portions of that loot from his subjects.  Repeat ad nauseam.

The Europeans don't have a problem with central planning.  They have a problem with thick heads.  Apparently brickwalls don't inflict enough pain on them.


:brickwall:  ???

 

[a_majoor]

Just reviewing the various suggested ways to slice and dice Europe post EU; it seems to me that there is far too much emphasis on how the continent would be sliced economically and less on how cultural and even military priorities would factor in.

Consider:

1. England will continue to operate on the periphery of Europe (as always) but could now reach out with more confidence to the Commonwealth, the developing world and especially the BRIC's using the leverage of the City's global banking infrastructure and ability to operate as an oceanic power.

2. Northern Europe, centered on Germany and backed by Protestant cultural values. They no longer wish to pay the freight for others (and indeed find it immoral), so are either the core or the residue of the EUzone (depending on how you look at it)

3. Southern Europe, centered on France. Less cohesive than Northern Europe and falling behind after the aftermath of the debt crisis, but still attached to Europe through trade (especially tourism). One recurring theme in Southern European politics in this future will be unassimilated populations of mainly Islamic migrants who are seen as being a drain on already depleted treasuries.

4. Eastern Europe, centered on Poland. These former Warsaw Pact nations are wary of both Northern Europe and Russia, seeking to retain freedom of action and not to become an economic colony of the Europeans or the Russians.

"Others". Europe is divided among many lines, and there will be nations like Ireland, which is literally an outlier, Belgium and Austria, which straddles the North/South divide, Switzerland, which will wish to retain its age old neutrality and the former Balkan nations which are culturally split between the Catholic, Orthodox and Islamic spheres that will not fall neatly into any of the blocks, and may become "prizes" for the blocks to extend influence and markets, or places to avoid, as going in there will get you burned. Depending on how far you want to reach, the Ukraine is culturally split along the Dnieper River between the Catholic "west" and Orthodox "east", marking the possible Eastern border of "Europe"

The future of Europe will not be nice and neat.

 

[bridges]

I'd say all of the Scandinavian countries could be considered outliers too, not just the obvious one of Iceland.  It's not a given that they would align themselves with Germany & Benelux.     

The more things change... 

 

[Edward Campbell]

And, according to this article in Bloomberg, "Argentina is on track to be the first country ever censured by the International Monetary Fund for not sharing accurate data about inflation and the economy ... The IMF’s board of directors, meeting yesterday in Washington, gave the country until Dec. 17 to respond to concerns about the quality of its official data, it said today in an e-mailed statement. If the deadline is missed, the board can issue a declaration of censure, a warning that has never been used and which means sanctions may be applied if the concerns aren’t addressed."

So, Argentina will become an honourary European state.

 

[Edward Campbell]

The Wall Street Journal reports that a "Fight Looms Over Greece Bailout Plan."

A confrontation is brewing among Greece's international creditors over who will provide the financing needed to keep the country afloat.

A report by international inspectors, due in October, will state how big the funding shortfall is in Greece's €173 billion ($226 billion) bailout program, but European officials say it is far too big for Greece to close on its own.

That means either the International Monetary Fund, the European Central Bank, or euro-zone governments such as Germany will have to make painful concessions to ease Greece's debt-service burden, in order to avoid a Greek bankruptcy ...

 

[Edward Campbell]

And more bad news, this time it's Italy and Moody's says:

Italy Forecasts a Bigger Budget Deficit

By Tomas Holinka in Prague

September 21, 2012

The Italian government boosted its budget deficit forecast to 2.6% of GDP for this year, from the 1.7% expected in April, amid a deepening recession. Italy’s GDP will likely contract 2.2% in 2012, twice the April government forecast ...