Another Boring Euro Debt Crisis Thread

[Jon Miller]

Cutting the tax rate seems to have also done a very good job of of boosting revenue and therefore boosting overall taxes.

Republicans

JM

[Dinner]

Not really. It took four years for Federal revenues to get back to what they were prior to the Bush tax cuts (after Bush got his tax cuts passed) and it's real hard to figure out how much of that recovery was due to natural economic growth and how much was due to the tax cuts. Last I heard, and I'm trying to remember back to 2006 or so, the tax cuts added about 0.1% to the over all growth rate but the debt increased so much faster it literally ate up all of that extra 0.1%. There are no free lunches in economics no matter how often Republicans lie and pretend there are.

[Ben Kenobi]

There are no free lunches in economics no matter how often Republicans lie and pretend there are.

Which is why Obama repealed the Bush tax cuts. Oh wait....

Obama's proposal was to make $3 in cuts for every $1 in tax increases

Obama's 'promise', which is worthless, because he's never kept a promise, is to cut 3 dollars in 10 years for tax increases now. I wonder why? Could it be that he has no intention of cutting spending on his watch?

[BeBMan]

Obama killed Bin Laden

italy's and spain's importance is their size. if the 3rd and 4th largest eurozone economies get into serious trouble, what happens then? does northern europe try to bail them out, using the same failed methods we have seen, only on a much bigger scale or do we finally admit failure and allow nature to take its course.

I don't think a bailout for Spain or Italy is going to happen, but then you never know in these times...

[DanS]

The European position on this is very muddled. Eventually, it looks like the Germanys of the EU will have to take the debt of the Greeces of the EU on their own books in some fashion.

The private sector rightly is running as swiftly as possible away from these bonds.

[C0ckney]

I don't think a bailout for Spain or Italy is going to happen, but then you never know in these times...

maybe, maybe not. but if the situation gets as bad as it did in greece, portugal or ireland, what happens then?

[DinoDoc]

Democrats weren't the retards who raised spending enormously in the early 00s while cutting taxes...

JM

Aren't they the retards though who decided to make Bush look fiscally prudent by raising spending to nosebleed heights while not raising taxes to pay for their spending?

[BeBMan]

maybe, maybe not. but if the situation gets as bad as it did in greece, portugal or ireland, what happens then?

No idea. I don't think many politicians dealing with the current crisis have either...

[Tuga]

Privatize government and run the country like a corporation...

[OneFootInTheGrave]

Iceland ... but they really only had to drop the banks and they are OK... Ireland is similar as they really have the banking crisis for which they are disproportionately punished...

Greece on the other hand is structurally ****ed... too much on the state dole, with benefits such as retirement at 61 with Germans for example at 67... and many other ways of government waste... it's not that other governments do not waste a lot elsewhere, but Greeks do a lot more in proportion to their resources. Greek default would hurt them a lot more than it would Iceland, Ireland or that it did Argentina.

Portugal, I think is somewhat in Greek direction, but not nearly as bad... with Spain - more weight to finance exposure, and Italy more structurally exposed... all in an interesting situation. This was brewing for a while, and it is up to the solvent states to sort out the best way to get it under control.

This crisis will either bring Eurozone a lot close together or split it up... my bet is on "bringing it closer together"... I presume the lawmakers were also waiting for a natural cause of events to "force the hand" which under normal circumstances would not fly.

[Riesstiu IV]

Is this a bad time to visit Greece?

[OneFootInTheGrave]

Not a bad time to visit... I am sure nothing will happen to you, but if they ever default with dropping the Euro - than it will be a very good time to visit as it will be very cheap for a long time, with excellent levels of service... so if it ever happens for tourists it will be "the place to go"...

[C0ckney]

This crisis will either bring Eurozone a lot close together or split it up... my bet is on "bringing it closer together"... I presume the lawmakers were also waiting for a natural cause of events to "force the hand" which under normal circumstances would not fly.

as bebro hinted european policy makers don't seem to know what they're doing and seem to be making it up as they go along. so it's a case of "we don't have a solution, but if you give us more power we can...errr...save the euro and the banks...how? well errr...."

[OneFootInTheGrave]

the how is - create more "European" controls, taking over the national ones, and starting to treat Eurozone like one country fiscally... in this particular case, twisting Germans in particular, and others who are on the "top" to pay for everyone at the bottom as much as required to start with ... but also enabling them to "crush" the local states at the bottom like Greece, etc... that would create other problems I am sure, but is probably the end game for many EU politicians... I am also sure that even those who were hoping for such eventual EU federalism, that the call would not have to be done so early in EU existence but some 20-30 years down the road when new generations would be a lot more ready to abandon the old European nationalist identities, and even more ready to move around.

That can work technically, but will it happen and how - it remains to be seen, as for obvious reasons that is a monumental task ahead.

One theoretical example would be that the EU bailout fund is not just a bailout fund but is transformed into and organization more like an "emergency" EU ministry of finance and internal affairs, which would go to Greece and change Greek laws to comply with EU directions, cut the workforce from Brussels, and make the spend in Greece what Greece can afford... IMF style or worse. So Greeks would not be rioting anymore for state pension age going from 61 to 63, but from 61 to 69 ... the age that Germans are having on the table... and similar actions needed to bring Greek spending into balance. On the other hand they would have to be twisting the advanced economies to pay for the bottom directly as if it was it's own. Something German federal government did to west Germans for the east German part after unification.

For sure in the short term that would cause havoc to Greek economy, and disdain to the advanced economies, but it is the eventual way out... and in the interim this may create (and should be creating already), an exodus out of Greece, Portugal, Spain to northern countries where employment is available..etc... but such a strong central hand could force the "equalizing" events...

Not saying that is the best... and especially for Ireland who really only has a banking crisis... that would be particularly bad... but for Greece - even if they default and step out of the Euro - they are ****ed for years and maybe even decades, as they need to change the way of government, which is extremely hard... even harder if it needs to come from within.

Ireland on the other hand, if EU would want to force their hand like that over them, has a lot better case to drop the Euro, and I am sure after default they would face a similar situation like Iceland, or even better.

[C0ckney]

yes a german occupation of greece, i can see that going down well...

i don't think people will ever abandon their national identities. because of how they're formed they only change very slowly. people don't forget who or what they are.

the problem with the solution you propose is that it is fundamentally undemocratic. one of the biggest problems with the EU is its lack of real democratic accountability. giving more powers to the EU to control a country's finances will only make that worse. leaving this massive problem aside for one moment, i don't think it would work in any case. the EU (together with the ECB and IMF) have been responsible for the 'rescue' programs for greece, ireland and portugal. this program has not only failed to solve the problems of these countries, it has in fact made them worse. in terms of economic growth, bond yields, or any other measure you care to name. its success has been that the euro is still intact and that the banks haven't failed. however, if the situation gets much worse in spain and italy, this will merely be a very expensive stay of execution.

the best case scenario under the current plan is that no other countries run into trouble and the banks stay afloat. then in 2013, when the rules on default change, greece will default and stay in euro. meanwhile our banks will continue to hide and nurse their enormous losses on government bonds, and will lumber on much like the japanese banks in the 1990s. roll on the european 'lost decade'! (this may be inaccurate as the japanese 'lost decade' has been going on for about 30 years)