What future for EU now in austerity?

[Infinite Chaos]

Q & A on Austerity in Europe

Francois Hollande has made it clear he wishes to renegotiate the last European treaty (which the UK was demonised for not joining or agreeing) and he will not sign it until it includes measures for economic growth.

In the Netherlands, austerity packages have been agreed by the 5 party caretaker govt - however opposition to the austerity packages seemed to have brought down Mark Rutte's minority government at the start of the week.

I'm not arguing that budget deficits should not be controlled - the important thing is that the battle to win over the public and to explain why some of the harsh measures and results have to be carried through; the important thing is also for those in power to also be seen to be actively exploring avenues for economic growth.

This last has been a constant thorn in the UK Govt side - particularly George Osborne's failure to show that he is committed to exploring growth and supporting business. There have been pointers to the fact that new and small businesses have to be fostered and supported (I'm not calling for financial packages) in the UK but it is hard to see real signs. Business Link and some of the other regional bodies have been scaled back or had their role severly cut back in the time I have been starting up my business and the complex tax system is certainly not helping.

Back on the subject of austerity though - one last note from the BBC article "the growing popularity of eurosceptic, anti-immigration populist parties makes it harder for mainstream parties to stick to pan-European agreements about austerity and budget discipline."

We certainly have to learn from the past, the last time such widespread crisis threatened the world it was WW2 that ended the great depression in many parts of the world.

 

[Red_Dave]

Q & A on Austerity in Europe

Francois Hollande has made it clear he wishes to renegotiate the last European treaty (which the UK was demonised for not joining or agreeing) and he will not sign it until it includes measures for economic growth.

Merkel has already come out and told him he can't, so the coming months should be interesting.

I'm not arguing that budget deficits should not be controlled - the important thing is that the battle to win over the public and to explain why some of the harsh measures and results have to be carried through; the important thing is also for those in power to also be seen to be actively exploring avenues for economic growth.

Well you can start by convincing me. From what I can using spending cuts in response to a banking crisis is entirely ideological (especially given the amount of money that has been given to the banks) whats needed is an increase in spending to stimulate the economy. Laying tens of thousands of people off is hardly going to do that.

 

[Grant]

Back on the subject of austerity though - one last note from the BBC article "the growing popularity of eurosceptic, anti-immigration populist parties makes it harder for mainstream parties to stick to pan-European agreements about austerity and budget discipline."

Then that strongly suggests that the old "mainstream parties" are no longer mainstream.

 

[alexa]

Then that strongly suggests that the old "mainstream parties" are no longer mainstream.

You may be right there. Certainly in Scotland they have lost resonance. The SNP have filled the gap there. Scotland being more traditionally social democrat.

 

[Camlon]

Q & A on Austerity in Europe

Francois Hollande has made it clear he wishes to renegotiate the last European treaty (which the UK was demonised for not joining or agreeing) and he will not sign it until it includes measures for economic growth.

In the Netherlands, austerity packages have been agreed by the 5 party caretaker govt - however opposition to the austerity packages seemed to have brought down Mark Rutte's minority government at the start of the week.

I'm not arguing that budget deficits should not be controlled - the important thing is that the battle to win over the public and to explain why some of the harsh measures and results have to be carried through; the important thing is also for those in power to also be seen to be actively exploring avenues for economic growth.

This last has been a constant thorn in the UK Govt side - particularly George Osborne's failure to show that he is committed to exploring growth and supporting business. There have been pointers to the fact that new and small businesses have to be fostered and supported (I'm not calling for financial packages) in the UK but it is hard to see real signs. Business Link and some of the other regional bodies have been scaled back or had their role severly cut back in the time I have been starting up my business and the complex tax system is certainly not helping.

Back on the subject of austerity though - one last note from the BBC article "the growing popularity of eurosceptic, anti-immigration populist parties makes it harder for mainstream parties to stick to pan-European agreements about austerity and budget discipline."

We certainly have to learn from the past, the last time such widespread crisis threatened the world it was WW2 that ended the great depression in many parts of the world.

The biggest problem in Europe is not austerity, but democracy. Or rather, the lack of proper democracy. What country has had a referendum on how they are going to tackle the crisis. What about a premature election? The people were never asked. If countries got to choose austerity, then it would have a lot more popular backing. I think people are going to vote to do something anyway.

Another problem in Europe is politics. Politicians who keeps lying, keeps giving wrong predictions, will have no respect. I haven't seen one correct prediction about Europe, from any mainstream institution in the last 5 years.

BTW: Not doing austerity, doesn't work very well either. Take a look at this article about Greece in 2009 Greece defies Europe as EMU crisis turns deadly serious - Telegraph
Austerity is needed, because the budget deficit needs to get in control. If there is no confidence that the government will get the debt under control, then few are willing to lend. The way to do it, is to make meaningful cuts to government waste or increase taxes, but also include some good stimulus.

 

[PeteEU]

Q & A on Austerity in Europe

Francois Hollande has made it clear he wishes to renegotiate the last European treaty (which the UK was demonised for not joining or agreeing) and he will not sign it until it includes measures for economic growth.

He is correct on the economic growth aspect. The lack of any plan for economic growth in pretty much any European country and the insistent on austerity is killing the patient so to say. Government austerity would be much easier and less painful if there was economic growth, that is a fact.

In the Netherlands, austerity packages have been agreed by the 5 party caretaker govt - however opposition to the austerity packages seemed to have brought down Mark Rutte's minority government at the start of the week.

Politics.. nothing new there. It is no different than the GOP refusing to do anything to help the US economy.

I'm not arguing that budget deficits should not be controlled - the important thing is that the battle to win over the public and to explain why some of the harsh measures and results have to be carried through; the important thing is also for those in power to also be seen to be actively exploring avenues for economic growth.

This last has been a constant thorn in the UK Govt side - particularly George Osborne's failure to show that he is committed to exploring growth and supporting business. There have been pointers to the fact that new and small businesses have to be fostered and supported (I'm not calling for financial packages) in the UK but it is hard to see real signs. Business Link and some of the other regional bodies have been scaled back or had their role severly cut back in the time I have been starting up my business and the complex tax system is certainly not helping.

It is because of politics. If you look at what Osborne and Cameron have targeted... then you clearly see the age old conservative boggiemen being targeted. Cameron stated the NHS was not to be touched... well..And then there are things like school tuition, and public sector workers in general. Sure he is also cutting from the more traditional conservative pet projects, but is he really when it comes to it? Trident is still around costing billions a year.. useless piece of tech.

And the result is clear... for the UK, the deficit has not fallen much if at all, since the time of austerity by Cameron was announced.. 2 years ago.

Back on the subject of austerity though - one last note from the BBC article "the growing popularity of eurosceptic, anti-immigration populist parties makes it harder for mainstream parties to stick to pan-European agreements about austerity and budget discipline."

We certainly have to learn from the past, the last time such widespread crisis threatened the world it was WW2 that ended the great depression in many parts of the world.

Well if anything the traditionalistic right in many countries are sealing their own fate by sticking with debunked economic theories of austerity ahead of economic growth. The rise of fascist and racist parties is the symptom of trying to find someone to blame. In before WW2 it was common place to blame Jews.. not only in Germany btw. Now days it is immigrants, especially those of certain religions and that "look different". At some point Jews will most likely be blamed again.. it would not surprise me. It is the politics of ignorance and fear, politics that the far right thrive on.

Take the rise of the far right in Denmark can be directly linked to the first oil crisis, and their popularity has only gone up in times of economic crisis and when they could use the blame game. This time around though they did not manage to get the blame game going so they lost votes and were forgotten during the campaign and because relatively the Danish economy is doing okay. Cant blame unemployment on immigrants when it is at 4%..

What it does mean in the short term, is that the major economies will switch to the left after decades of right wing rule... which is freaking out markets and bankers.. but to be frank.. you asked for it, with your hair brain debunked economic theories and out right criminal activity.

One thing is for sure, we need plans for jobs and growth before we need more austerity .. problem is the markets wont give most countries the time needed..

We need to think outside the box if you ask me.

 

[notquiteright]

I don't think there is much difference between the financial crisis around the globe. Your EU is in a transitional phase that has the nation states standing on two separate rocks at the same time. National and Union. Each nation has a different economic situation but are loosely tied together. Greece is tied to Germany but has it's own way of doing,(or NOT doing) things.

One thing we ranchers say is you can't starve a profit into a herd. Austerity during a financial crisis seems to always target those vulnerable and rarely those who profited in creating the hot mess. Yes certain social services need to be overhauled....AFTER the crisis, but just as surely nations like Greece need to get real about collecting taxes, and duties due. Smaller city nations who have their dark side as wealth hiders need to find new work. Secret accounts need to go the way of nobles wearing swords in public, though apparently they can flash plastic guns at photographers...

Yes Germany can grumble it pays into the system far more than Greece but then again so does California vs West Virginia. The task of government isn't to create a free fire zone for unrestrained wealth attainment but rather a stable zone where another Hitler can't arise.

I was a bit amused at the premature cackles over the falling of the 'weed state', but the EU isn't falling apart, more like on a shake down cruise where both ships of states and their captains will be tested. Some will want to abandon ship ahead of the passengers at the first sign of trouble. Some never set sail.

But the EU is now a global powerhouse and will survive this probably better long term than the USofA.

Yeah I know, a VERY low bar...

 

[Camlon]

One thing we ranchers say is you can't starve a profit into a herd. Austerity during a financial crisis seems to always target those vulnerable and rarely those who profited in creating the hot mess. Yes certain social services need to be overhauled....AFTER the crisis, but just as surely nations like Greece need to get real about collecting taxes, and duties due. Smaller city nations who have their dark side as wealth hiders need to find new work. Secret accounts need to go the way of nobles wearing swords in public, though apparently they can flash plastic guns at photographers...

Do you really think people are willing to take deep cuts during good times? Japan tried to do all the reforms after the crisis, and that just meant they did no reforms at all. Secondly, its not always possible. If no one is going to lend you money, then you are forced to do austerity, and less people are going to lend you money if there is no confidence that you will do any reform.

To choose to wait with all reforms after the crisis, will not work. Also, the reason they don't target the rich, is because they or their money are very mobile.

Yes Germany can grumble it pays into the system far more than Greece but then again so does California vs West Virginia. The task of government isn't to create a free fire zone for unrestrained wealth attainment but rather a stable zone where another Hitler can't arise.

Why do we need an European government at all, if a wrong type of government causes more conflict? Why can't European countries have their national sovereignty? Why do you want to force a fiscal union, when Europeans don't want a fiscal union?

But the EU is now a global powerhouse and will survive this probably better long term than the USofA.

:lol:

America has higher GDP per capita growth, a much higher population growth. The only population growth Europe has is due to Muslim immigrants who mostly end up on the dole. Who do you think are going to remain a global powerhouse under those conditions?

Also, the unemployment in America is falling. In Europe is is still increasing. In America a collapse of California is unproblematic. In Europe, a collapse of France will destroy the whole union. Also, it seems like Europe is slowly going back to the old days because of incapable unelected leaders. Socialist economic policies combined with fascist social policies.

 

[mbig]

Mods and others please excuse this lengthy excerpt. It's a 'by subscripton' website and most won't be able to see it otherwise.
It's, as you can see, heavily edited in any case.
But the article can be conjured in full by searching phrases/sentences within it.
You will get the article, and see it once, but in the future/second use the link will only let you see the brief beginning.

Austerity isn't working indeed.
But.. who will lend more money to those unviably Broke, to let them slowly/ostensibly work their way out?
The EU dilemna.

How Europe is "Unfixing" Its Problems
By Carl B Weinberg
4/28/12 - Barrons
How Europe is "Unfixing" Its Problems - Barrons.com
The troubled economies on the periphery of Europe are getting into deeper trouble. Growth has slowed, unemployment has risen, indebtedness has gone up, and borrowing costs have climbed sharply.

This article was prepared by the Eurocrisis Discussion Group at the Department of Economics, New York University, a group of economists that has meetings throughout the spring. Individual participants are named at the end of the article.

We found that almost all the indicators had deteriorated since the start of the crisis in 2010. In fact, they are predicted to worsen even more this year, despite remediation programs imposed by EMU governments and the IMF. Almost without exception, national debt across each of the periphery countries is higher now as a share of the economy than before the crisis broke...
[.......]
Unemployment rates are at or near record highs and rising, particularly for the young. GDP growth has slowed, stopped, or even reversed into a decline. In absolute levels, the countries' economies have not yet recovered from the 2008-09 global downturn and financial crisis. They are contracting again.
[.......]
Compare these observations with the experience of the U.S., where prompt remediation of the crisis in the banking sector -- temporary recapitalization using public funds -- catalyzed a quick bounce-back from catastrophic financial failure. Two years after the fall of Lehman Brothers, the U.S. economy had already resumed economic growth. While the recovery is still tentative, fragile, and too slow, unemployment is falling consistently, and even home sales and auto sales are advancing..
[.......]
Two years later, how is the euro zone faring? Banks are still undercapitalized relative to the risks they face on their loan portfolios and on their sovereign-bond holdings. The banks will need to raise an additional 115 billion euros ($152 billion) to meet new capital-adequacy ratios of 9% by June.....
[.......]
Meanwhile, banks are reported to be facing capital flight. Massive ECB liquidity provisioning since December now ensures that no bank in the euro zone will fail for a lack of cash. This has temporarily calmed markets. However, liquidity doesn't make a bank more solvent.
[.......]
How can the problems be fixed?

First, focus on economic growth, the obvious remedy for all of Europe's problems. Stronger growth would lower fiscal deficits and debt burdens by boosting tax revenue, by reducing public spending on income maintenance and job creation, and by raising the denominator of the debt ratio. Deficit and debt reduction over time is essential, of course. The challenge is to balance the urgency for fiscal reform against the cost of austerity on economic growth.

Then, take a page from the U.S. playbook. Recapitalize banks as quickly as possible using public funds to buy newly issued equity shares. Force all banks to participate..
[.......]
Finally, learn a lesson from the Latin American and Greek experiences -- that restructuring is inevitable to restore a troubled borrower. It must be done sooner rather than later if big haircuts are to be avoided. Had all of Greece's debt been restructured as long-term bonds in March 2010, Greece's financing burden would instantly have become manageable, without any haircut on private-sector creditors. Spain has €74.3 billion in bonds maturing between now and April 30, 2013. If they were restructured today into 30-year self-amortizing bonds, principal payments would average less than €2.5 billion a year....
[.......]
EMU governments, however, aren't taking this advice. Banks remain undercapitalized, and they are cutting lending to regain capital adequacy. Worse, EMU governments insist on lending more money to already overindebted nations -- a bad idea. Salvation is seen in self-abusive policies, like fiscal austerity, at a time when economies are shrinking.

European governments and international agencies have devised "stabilization funds" or "firewalls" they say will "ring-fence" possible contagion of the global financial system from all current and any conceivable fiscal or economic crisis. The EFSF and ESM are authorized to wield financial "firepower" of more than €1 trillion, but these facilities are almost entirely unfunded: They are armed with promises, and not with pools of hard cash
[.......]Equally, the $430 billion of new funding for the IMF, obtained last week at the Spring meetings of the Fund, are also just promises to lend bank reserves to the IMF.
[.......]
As investors as well as economists, we worry about systemic failures in banking systems throughout the euro zone's periphery. We worry about breakdowns in the social and political fabric that not only unites euro-zone economies but also binds together individual nations. The May 6 elections in Greece may demonstrate how fringe parties can gain control of nations in times of severe economic hardship -- hardship that, in the eyes of the local populace, has been induced by foreign-imposed austerity. -- If voters see that the only consequence of the austerity from Brussels is to bind economies to further hardship, European politics will reject centrist solutions.
[.......]
THIS ALL MAY SEEM REMOTE TO READERS in the U.S., but it is not. [.......]
U.S. government money is not going to be a part of the solution. The Obama administration cannot contemplate using U.S. cash to help woebegone Europeans out, and it refused to participate in the IMF's latest request for new resources. Europe's troubles will not be a big issue for the U.S. election, as long as the Treasury does not add cash to the euro zone's "firepower" or to the IMF's resources. Americans will vote on their own bellies, not on the woes of foreigners....
[.......][List of contributors]

And to my EU friends, Barrons, like the WSJ, is a Dow Jones/News Corp/Murdoch company, but let's please refrain for dismissing it as a tabloid.

Of course the above suggestions depend on the ECB/etc, er, Germany, paying or backing these efforts paying with their money or diluting their wealth.
That's is the main difference of course between the two systems.
America is a single country/banking/tax system.
Parts of the EU, already Greece at least, just aren't viable entities without change that just may not be tolerable to a majority of it's constituents.
Leaving wouldn't be an option for them either as no one is going to pay for/lend to them even if they go it alone.
Reality will kick in/Math Rules.

 

[Ben K.]

Bang on.

I hear people on both the left and right advocating a No vote in Ireland to the treaty arguing we'll be doomed to perpetual austerity. How exactly would voting No prevent the de facto condemnation to perpetual austerity? Now we have Hollande with no hard ideas to promote economic growth trying to endorse a No vote. From my perspective, the only positive is forcing the troika to sweeten our deal before the vote.

I'm sorry, there's no public expenditure quick fix this time around. It applies to most of the western world to some degree, but to Ireland in particular, expecting instant fixes to what we engaged in is a bit entitled.

 

[Grant]

Bang on.

I hear people on both the left and right advocating a No vote in Ireland to the treaty arguing we'll be doomed to perpetual austerity. How exactly would voting No prevent the de facto condemnation to perpetual austerity? Now we have Hollande with no hard ideas to promote economic growth trying to endorse a No vote. From my perspective, the only positive is forcing the troika to sweeten our deal before the vote.

I'm sorry, there's no public expenditure quick fix this time around. It applies to most of the western world to some degree, but to Ireland in particular, expecting instant fixes to what we engaged in is a bit entitled.

It seems the Eurosceptics (aka "realists") were right all along.

 

[mbig]

Bang on.

I hear people on both the left and right advocating a No vote in Ireland to the treaty arguing we'll be doomed to perpetual austerity. How exactly would voting No prevent the de facto condemnation to perpetual austerity? Now we have Hollande with no hard ideas to promote economic growth trying to endorse a No vote. From my perspective, the only positive is forcing the troika to sweeten our deal before the vote.

I'm sorry, there's no public expenditure quick fix this time around. It applies to most of the western world to some degree, but to Ireland in particular, expecting instant fixes to what we engaged in is a bit entitled.

The only thing good about No votes, or the threat thereof, is it might induce creditors or the Troika to give the feeble better terms.

One of the things the Barrons' article above thinks is part of the fix is quickly, rather than last minute, doing restructuring to make debts possible to pay. Spain example is given as an example; €74 billion due in the next 12 months. That's hard cash, not 'optical backstop'. That means they have to sell alot of debt there may be no demand for. And they're not alone.

Thinking out loud.....

'Pro-Growth' policies are suggested by many as well. But that means tolerating higher debt in the short/medium term. But lenders, and Germany, simply won't tolerate that tune.
Austerity isn't working either as that's going to undercut the basis on which debt is supposedly going to be paid back.
So what's left?
HUGE Haircuts now? Maybe 25%-50% in some/Many cases.
I Don't think anyone is ready for that.
Big losses for creditors including the EU's banks. This would mean almost untenable amounts have to be pumped into these banks. But if it's done, then at least you have a sustainable situation for indebted Sovereigns.
As Kyle Bass says, 'once you have sailed into the zone of insolvency' there's no way out, except Restructuring/take the loss.
Can/will creditors take the loss at this point?
I don't think so. Not yet anyway even if it's wiser now, it's not digestible until faced with larger losses.
The other choice..
Can we hunker down into the great pain of austerity long enough, say 5-10 years, to maybe emerge out the other end solvent if. It doesn't look like it.
The money isn't there to pay for waiting either.
Though it would be reversing/mirroring the irresponsibility that produced the situation.

It seems clear it's going to take some/many more haircuts at least in rates/terms, and probably face amount as well, by bondholders to make this work. Of course bondholders who are in large part EU banks have to be supported.

 

[MSgt]

Well if anything the traditionalistic right in many countries are sealing their own fate by sticking with debunked economic theories of austerity ahead of economic growth. The rise of fascist and racist parties is the symptom of trying to find someone to blame. In before WW2 it was common place to blame Jews.. not only in Germany btw. Now days it is immigrants, especially those of certain religions and that "look different". At some point Jews will most likely be blamed again.. it would not surprise me. It is the politics of ignorance and fear, politics that the far right thrive on.

Blaming a few leaders for their "far right wing" only allows you to dimiss that they have merely tapped into the minds of entire European populations. And Stalin and Hitler were of Socialist Left Parties.

We need to think outside the box if you ask me.

End the EU before the European continent causes a global melt down again. It is far easier for individual nations to fix their economies than an organization meant to cover the cracks between tribes. And the cracks are becoming wider.

 

[Infinite Chaos]

Merkel has already come out and told him he can't, so the coming months should be interesting.

According to Newsnight last night Merkel had already started talking about some kind of stimulus however Bloomberg today reports that Merkel will tomorrow reject the idea of stimulus. The important thing is that Germany and France together are the drivers of much of the current european ideology and falling out is not a great option for either of them.

-- Well you can start by convincing me--

I'm not entirely clear what you're saying. I strongly believed the budget deficit had to be cut - which was why I voted Conservative at the last election. I'd vote again for cutting the deficit as I believe we had to adjust. What I was unhappy with was that there were no real plans for how to get the economy moving again. Banks have failed to lend to small businesses and are instead sitting on large reserves because they feel the debt they own is worthless.

-- And the result is clear... for the UK, the deficit has not fallen much if at all, since the time of austerity by Cameron was announced.. 2 years ago.

On the contrary we are apparently on target. On this page - you'll get a graph going back to the 1940's. Both Guardian articles are from April 2012.

However - I didn't want this to be yet another "British Govt blah blah, deflect from the economy" / "British Govt created the ECHR" thread as the austerity plans run across all of Europe.

-One thing is for sure, we need plans for jobs and growth before we need more austerity .. problem is the markets wont give most countries the time needed..

We need to think outside the box if you ask me.

On that, I can agree. I absolutely would like to see a range of measures (in the UK) to ease lending, to make taxes clearer and simpler and to encourage growth / expansion; to reward the enterprise culture. On last night's Newsnight, the former editor of the Economist talked of how financial stimulus could be fostered by richer Northern European countries spending but to me that goes back to the problem of spending other people's money. The thing that worries me about Hollande's plans are that hand-in-hand with his policy are ideas like the 75% top-rate tax which, although popular on the socialist side are actually a deterrent on those people who could work harder to generate real wealth for France.

I'm offering no solutions, I'd be a venture capitalist if I had answers but I do want to see Europe (as much of it) become prosperous again.

 

[PeteEU]

On that, I can agree. I absolutely would like to see a range of measures (in the UK) to ease lending, to make taxes clearer and simpler and to encourage growth / expansion; to reward the enterprise culture. On last night's Newsnight, the former editor of the Economist talked of how financial stimulus could be fostered by richer Northern European countries spending but to me that goes back to the problem of spending other people's money. The thing that worries me about Hollande's plans are that hand-in-hand with his policy are ideas like the 75% top-rate tax which, although popular on the socialist side are actually a deterrent on those people who could work harder to generate real wealth for France.

I'm offering no solutions, I'd be a venture capitalist if I had answers but I do want to see Europe (as much of it) become prosperous again.

I dont like his 75% tax rate, but I do understand why he is doing it. It is not a policy he supports.. or anyone on the left really supports, but it is one of the only ways as it stands now, to punish those responsible for the crisis.. and that is what we are talking about.

People want justice.. they want accountability. Average people are accountable for their bad choices, but they see that bankers are not.. they get huge bonuses for bad calls.... and that pisses most people off.. Look at the cluster**** the proposed 6.8% EU budget increase has caused.. it is being marketed as a done deal by the far right, and yet it has not been voted on at ministerial level.. where it wont pass. But the people are pissed that why should the EU increase their budget when other countries are forced to cut big time.. by the EU!.. I understand them fully.

Iceland went and put their Prime Minister on trial and the bankers who caused their problems. People got/are getting justice. Spending is up, there is growth, and Iceland is slowly getting out of the hole.

But in Spain, UK, Ireland, Germany, France, US, that day of reckoning has never happened. And this is what the far right and far left are trying to exploit. Now the far right want to punish their usual suspects.. the Muslims, dark people, immigrants, Jews, Romani and so on..The left want to punish the rich, because that is where the bankers are.

Fear is a very good incentive, and the fear of people who dont look or act like you is a huge vote giver.. especially if you throw in "they are taking our women and jobs" argument.

Now more taxes on the rich is popular on the left, but it is for the same reasons.. fear and punishment.

As for solutions....

We need growth, that will only happen when people feel better and spend, and that wont happen as long as we get a daily feed of doom and gloom, and the fact that the banks still are not lending to businesses... granted that would not matter since, people are not buying because they fear the future, because their media outlets are telling them so with the help of... the very bankers and financial industry that caused the problem in the first place!

The idea that every country can become a manufacturing export nation like Germany is idiotic. It would mean that the standard of living would have to be cut considerably for 99% of the population because our wages are too high.. we cant compete with slave labour countries like China. And Germany has a big plus, that most nations do not.. German products are seen as quality, hence can take a higher price. That simply does not work for the rest of the EU or world. So it the alternative is to compete with the lower end products.. and that means drastic gutting of the standard of living to get wages down... wont happen.

So we need to think outside the box or wait for China's and India's wages to reach our heights... This all takes years and decades.. but in the short term, we need to get rid of the doom and gloom talk that often comes from people with nationalities that are in direct competitive conflict with the EU.

 

[alexa]

Iceland went and put their Prime Minister on trial and the bankers who caused their problems. People got/are getting justice. Spending is up, there is growth, and Iceland is slowly getting out of the hole.

Yes, they seem to have made good choices.

and that means drastic gutting of the standard of living to get wages down... wont happen.

How do you know this is not going to happen? What is going to stop this happening? I hear people now talking of ten years recession....no reason that will not gradually go on to twenty and then longer as we are 'groomed' to it. I heard the right of the Conservatives saying we need much more cuts in public services and give everything to the private sector because that is what makes money and I think...what?

If those with money cannot be taxed, and most British multi millionaires do not pay income tax and people can move their money to wherever is the best killing day by day, then maybe Europe's time is over and the standard of living will fall and fall. What makes you so sure this will not happen?

 

[Ben K.]

I dont like his 75% tax rate, but I do understand why he is doing it. It is not a policy he supports.. or anyone on the left really supports, but it is one of the only ways as it stands now, to punish those responsible for the crisis.. and that is what we are talking about.

People want justice.. they want accountability. Average people are accountable for their bad choices, but they see that bankers are not.. they get huge bonuses for bad calls.... and that pisses most people off.. Look at the cluster**** the proposed 6.8% EU budget increase has caused.. it is being marketed as a done deal by the far right, and yet it has not been voted on at ministerial level.. where it wont pass. But the people are pissed that why should the EU increase their budget when other countries are forced to cut big time.. by the EU!.. I understand them fully.

You want to target bankers but you're targetting everyone in that income bracket. Isn't that the collective punishment you were bemoaning in the wake of the London riots?

Yes, it seems like the market wasn't allowed to punish those responsible due to government intervention, but this scatteshot approach to punishment in the name of "justice" has no real benefit to anyone of any means.

 

[Ben K.]

It seems the Eurosceptics (aka "realists") were right all along.

The lack of fiscal responsibility is pretty much a malaise for anyone in the west, regardless of your locality or affiliation. The strengths that the EU lacks to apply quick fixes in things like Eurobonds just belates the problem that others will face if they ignore the canary.

 

[Camlon]

I dont like his 75% tax rate, but I do understand why he is doing it. It is not a policy he supports.. or anyone on the left really supports, but it is one of the only ways as it stands now, to punish those responsible for the crisis.. and that is what we are talking about.

If you want to punish bankers, then punish the ones who break the law like Iceland did. The 75% tax rate punish only the French people, because they will lose tax revenue.

We need growth, that will only happen when people feel better and spend, and that wont happen as long as we get a daily feed of doom and gloom, and the fact that the banks still are not lending to businesses... granted that would not matter since, people are not buying because they fear the future, because their media outlets are telling them so with the help of... the very bankers and financial industry that caused the problem in the first place!

So what do you plan to do, media censorship? Also, people are spending. The savings rate is still low, and the inflation rate is pretty high. That makes no sense if too much savings is the problem. The big problem is, people are not investing. No one is creating jobs. Trying to tax rich people out of the country is not going to help.

That is also why we need more hard landings. After a hard landing, the economy can recover, because people are confident the economy hit the bottom. Politicians who keeps lying and postponing the inevitable has caused the recent crisis. .

The idea that every country can become a manufacturing export nation like Germany is idiotic. It would mean that the standard of living would have to be cut considerably for 99% of the population because our wages are too high.. we cant compete with slave labour countries like China. And Germany has a big plus, that most nations do not.. German products are seen as quality, hence can take a higher price. That simply does not work for the rest of the EU or world. So it the alternative is to compete with the lower end products.. and that means drastic gutting of the standard of living to get wages down... wont happen.

So we need to think outside the box or wait for China's and India's wages to reach our heights... This all takes years and decades.. but in the short term, we need to get rid of the doom and gloom talk that often comes from people with nationalities that are in direct competitive conflict with the EU.

Look, the only way you can get people to stop criticizing the EU is by censorship. So how is that a solution? Do you think people like me are going to stop criticizing EU if they start censoring opinions they don't like.

Also, thinking out of the box doesn't work. Why should it? What Europe needs to do is to abolish the euro. That will solve most of the problems in the EU. The problem is, wages in Europe are often determined by labor unions or the government. When they increase wages, then private sector needs to keep up. Before the Euro, if a country choose to increase wages massively, then they would just develop inflation and their currency would drop. But now, they just become more uncompetitive. To become competitive again, then wages have to drop massively, but that is nearly impossible. No one is going to accept dropping wages, and they will riot. Hence, EU should drop the Euro, because government or unions are not able to determine the perfect wage level.

It is a misunderstanding that EU needs to drastically reduce living standards to compete with the Chinese. What EU and America needs to do is not to reduce living standards, but to reduce nominal wages. That just means imports are more expensive. It does not mean drastically lower living standards, and it is happening already. Average yearly wage in China in 2000 was 1300 euros per year. Now it is 5000 euros per year.

 

[alexa]

It is a misunderstanding that EU needs to drastically reduce living standards to compete with the Chinese. What EU and America needs to do is not to reduce living standards, but to reduce nominal wages. That just means imports are more expensive. It does not mean drastically lower living standards, and it is happening already. Average yearly wage in China in 2000 was 1300 euros per year. Now it is 5000 euros per year.

I agree that although people receive smaller incomes in China they go a heck of a lot further than the same income would in the UK or USA but if the UK wishes to make anything nowadays, it relies on imports from every part of the world in order to do so. China does not. Now those with capital will continue to invest where they get the biggest quick profit. That will be where there is the cheapest labour. I see how people live in those countries. Little better than slaves often. What makes you think this is not the future for EU countries. Unless something is done concerning banking and those who earn a lot pay decent taxes I see no reason the EU countries will not be a future 'third world' area.

 

[PeteEU]

You want to target bankers but you're targetting everyone in that income bracket. Isn't that the collective punishment you were bemoaning in the wake of the London riots?

I dont, as I stated.. I am against it, but I understand it. Is it collective punishment? Of course, any scape-goating is collective punishment. The whole far right wing is driven on collective punishment.

Yes, it seems like the market wasn't allowed to punish those responsible due to government intervention, but this scatteshot approach to punishment in the name of "justice" has no real benefit to anyone of any means.

I agree... but there is no difference between targeting immigrants, muslims, arabs, jews, or rich bankers.. it is all scape goating to make people feel better.... and that is ultimately the goal... Is it the right way of doing things.. well that is highly debatable.

 

[PeteEU]

How do you know this is not going to happen?

I dont, but I suspect that it wont. The legal system is stacked against the idea, the evidence is either destroyed or top secret and the people involved are so influential in society that it would be like going after a mob boss in a corrupt legal system.

I mean could you see Rupert Murdoch being put on trial in the UK? The conservative party would never allow this. I am not saying that Rupert Murdoch had anything directly to do with the crisis, but we have a situation where his company knowingly hid the fact that they were breaking the law for years and there is plenty of evidence... what exactly has NewsCorp been punished with so far? Where is the accountability for that company? No where, because it is being protected by mostly the Conservative Party. And you expect that any sort of accountability across Europe should be done against major banks and financial institutions who all are very friendly with both sides of the political sphere? It would require near revolution like situation for it to happen and with the exception of Greece, then we are no where there... and even in Greece those responsible will go scot free..

What is going to stop this happening? I hear people now talking of ten years recession....no reason that will not gradually go on to twenty and then longer as we are 'groomed' to it. I heard the right of the Conservatives saying we need much more cuts in public services and give everything to the private sector because that is what makes money and I think...what?

I agree, but I still dont think there will be accountability by the banks and financial institutions. Its been 4+ years and next to no investigations or anything against the industry or people responsible. And those that were started where often settled out of court for minor fines.

If those with money cannot be taxed, and most British multi millionaires do not pay income tax and people can move their money to wherever is the best killing day by day, then maybe Europe's time is over and the standard of living will fall and fall. What makes you so sure this will not happen?

It is not only Europe's time but the western industrialised world. Income inequality is rising, and that is bad in any society. When there is social injustice then there are revolutions.. now I doubt that there will be a revolution in the traditional sense.. aka storming the bastile type, but a political revolution both with-in political parties and in politics overall are happening. As it stands now, the traditional conservative parties are taking hits after hits and are under serious threat. This process is only starting in some countries, where as it is nearing the end in others. In Denmark the Conservative Party is all but dead and risking not making the threshold. This was the party that saved Denmark from a Greek like situation 30 years ago (along with the Liberal Party).

The Tea Party in the US is a symptom, the Front National is a symptom, BNP/UKIP in the UK are a symptom, the far right neo Nazi party in Greece is a symptom and so on. Some countries have been dealing with these symptoms for decades, others are just realizing it.

What is needed is a main-stream party on the right to take the bull by the horns and become pragmatic. Denmark had the Liberal Party (aka the farmers party), but most countries dont have a secondary mainstream right wing party... and that will be a problem.. since the only real alternative is the far right racist xenophobic parties and in no way will they target bankers when there are Muslims, Jews and homosexuals running around.

 

[PeteEU]

If you want to punish bankers, then punish the ones who break the law like Iceland did. The 75% tax rate punish only the French people, because they will lose tax revenue.

I agree, no need to be aggressive. All I am saying is I understand why they want to do this..

So what do you plan to do, media censorship?

Nope, and I dont know.

Also, people are spending.

Consumer spending is down.

The savings rate is still low, and the inflation rate is pretty high.

Eh? What planet are you on?

Savings rates are at record highs in many countries. And inflation is not high lol.. it is what 2.3% in the Eurozone?

That makes no sense if too much savings is the problem.

Look at Japan. Savings rates there is huge.. people dont spend. The more saving the less consuming, the less growth.. It is economics 101.

The big problem is, people are not investing. No one is creating jobs. Trying to tax rich people out of the country is not going to help.

People are not investing because they are afraid because of the doom and gloom. Hence they save up instead.

This means less jobs.. yep

As for taxing the rich.. it has nothing to do with job creation. High tax rates on rich does not effect investment or job creation.. history proves that. In fact you could argue the lower the tax rate the less investments and less job creation there is.

The point of taxing the rich, is to make them pay the taxes that they are suppose too. Now you can do this by cutting off loopholes that are exploited (my preferred method) or raising the tax rate.. or both. Raising taxes on the rich is popular, like or not.

That is also why we need more hard landings. After a hard landing, the economy can recover, because people are confident the economy hit the bottom. Politicians who keeps lying and postponing the inevitable has caused the recent crisis. .


Look, the only way you can get people to stop criticizing the EU is by censorship. So how is that a solution? Do you think people like me are going to stop criticizing EU if they start censoring opinions they don't like.

Also, thinking out of the box doesn't work. Why should it? What Europe needs to do is to abolish the euro. That will solve most of the problems in the EU. The problem is, wages in Europe are often determined by labor unions or the government. When they increase wages, then private sector needs to keep up. Before the Euro, if a country choose to increase wages massively, then they would just develop inflation and their currency would drop. But now, they just become more uncompetitive. To become competitive again, then wages have to drop massively, but that is nearly impossible. No one is going to accept dropping wages, and they will riot. Hence, EU should drop the Euro, because government or unions are not able to determine the perfect wage level.

It is a misunderstanding that EU needs to drastically reduce living standards to compete with the Chinese. What EU and America needs to do is not to reduce living standards, but to reduce nominal wages. That just means imports are more expensive. It does not mean drastically lower living standards, and it is happening already. Average yearly wage in China in 2000 was 1300 euros per year. Now it is 5000 euros per year.

 

[Camlon]

Consumer spending is down.

No, you need to look at savings rate, not consumer spending. People can't spend money they don't have.

Savings rates are at record highs in many countries. And inflation is not high lol.. it is what 2.3% in the Eurozone?

Savings rates are not high at all, take a look at the data. They are a little bit higher than before the crisis, but much lower than in the past. Inflation right now is 2.5 - 3%. Inflation target in Europe is 2%. Higher inflation than normal does not indicate lack of demand.

Look at Japan. Savings rates there is huge.. people dont spend. The more saving the less consuming, the less growth.. It is economics 101.

Just because you heard something somewhere does not mean it is true. Japans savings rate is not high anymore. But yes it was high in the past. http://www.howprofit.com/wp-content/uploads/2011/02/USA-and-Japan-Saving-Rate.gif

However, unlike Europe, Japan has also had a problem with deflation. Indicating lack of demand.

People are not investing because they are afraid because of the doom and gloom. Hence they save up instead.

This means less jobs.. yep

Its not just doom and gloom. The market are detoriating, people are becoming poorer so they will spend less, there are not much opportunities and governments want to hike taxes and regulations. These are real problems, hence they are not investing.

Would you invest in this climate?

As for taxing the rich.. it has nothing to do with job creation. High tax rates on rich does not effect investment or job creation.. history proves that. In fact you could argue the lower the tax rate the less investments and less job creation there is.

How can history prove anything like that? Just because some country had high taxes on the rich and high growth does not mean it is not a problem. Correlation does not mean causation. There are heaps of factors.

If you are thinking about America, then you are neglecting that the effective tax rate was under 50%, the lack of mobility, the lack of competition, and the post-war boom.

If you want to prove that taxes never cause problems, then you need to use arguments, not rely on correlations from history.

 

[PeteEU]

No, you need to look at savings rate, not consumer spending. People can't spend money they don't have.

Savings rates are not high at all, take a look at the data.

Household saving rates - forecasts - Economics: Key Tables from OECD - OECD iLibrary

Savings rates in most countries are relatively high.. in fact the US has not seen savings rates like this for decades.

They are a little bit higher than before the crisis, but much lower than in the past. Inflation right now is 2.5 - 3%. Inflation target in Europe is 2%. Higher inflation than normal does not indicate lack of demand.

Err yea and you said that it was very high? It is not and much of that inflation there is in the Eurozone comes from commodity prices.

Just because you heard something somewhere does not mean it is true. Japans savings rate is not high anymore. But yes it was high in the past. http://www.howprofit.com/wp-content/uploads/2011/02/USA-and-Japan-Saving-Rate.gif

However, unlike Europe, Japan has also had a problem with deflation. Indicating lack of demand.

No but it was high and that money is still saved up. Japan has massive amounts of money laying around. Remember the Tsunami? Economists actually feared a massive slow down because of the amount of money Japan has to pull back from abroad to pay for rebuilding.. did not happen really.. at least so far.

Its not just doom and gloom. The market are detoriating, people are becoming poorer so they will spend less, there are not much opportunities and governments want to hike taxes and regulations. These are real problems, hence they are not investing.

Never said it was not just doom and gloom, just saying it has a major factor. And yes people are becoming poorer, and it does not exactly help you argument when the only ones that are not.. are the uber rich.

In many ways, it is the classic spiral problem or snowball effect. Negative news brings more negative news and mood, which brings more and so on and so on.

Would you invest in this climate?

Invest during low prices on many investment things? Sure why not? Why do you think the rich have gotten richer? The markets in the US are near all time highs lol!

How can history prove anything like that? Just because some country had high taxes on the rich and high growth does not mean it is not a problem. Correlation does not mean causation. There are heaps of factors.

Some country? It is pretty much every freaking industrialised country lol!

If you are thinking about America, then you are neglecting that the effective tax rate was under 50%, the lack of mobility, the lack of competition, and the post-war boom.

Not saying there are other factors, but claiming that cutting taxes for the rich will solve everyone's problems is horse**** and there is empirical evidence of this. Denying this evidence is equally idiotic. There was far more growth under Reagan/Bush and Clinton with higher taxes than under Bush/Obama with lower taxes. Now the situations are not the same, but you can not deny the fact that growth was better from 1945 to 2000 with higher taxes than 2001 to 2012 with the lowest taxes in recent US history.

If you want to prove that taxes never cause problems, then you need to use arguments, not rely on correlations from history.

WHAT? Come on! Are you serious? You are more for text book theories based on ideology than actual empirical factual evidence? That is the problem with the economists these days.. they are sticking so much to their theories, and refuse to look at the reality of the situation... face it, most economic theories went out the window with this crisis.

Listen I know you dont like taxes and left wingers, and you dont like left wingers that propose taxes on your rich buddies, but the fact is that we need taxes to run society.. without it there is no society and only anarchy. And taxes are never fair and to make society work, we need those who can afford it the most to pay the largest share of the taxes. When they dont, then the majority gets pissed... which is what is happening now.

And also, there is always a diminishing returns when it comes to taxes. Too high and people dont want to work extra, too low and you dont get enough income and there is no way to influence growth by giving tax cuts. Hence if you have low taxes as in the US, you have problems paying your bills and the only way to deal with that is either raise taxes across the board or cut back so much that there is no point in having a society in the first place.

Taxes are never easy, but they are necessity for a modern society.