*For the purposes of this blog that is… the world is pretty interesting. Probably too interesting. My almost-total absence from this blog in the last 6 months is entirely because I’m very close to finishing a milestone in a little pet research project (ed. note: freaking gigantic more like it… When are you going to start posting again with semi-regularity, you fucking douchebag? Don’t you know that the internet misses you?). I’ll start again in a month or two.
However, for the subjects that have become my forte and are frequently the topics on which I can bang out a post with little thought or preparation (ed. note: what a set up. this is almost too easy…), nothing has happened in the last 6 months that’s been remotely surprising.
So, read on if you dare… I have nothing new to say.
The Germans have finally decided that stimulus is needed. While I haven’t yet formulated my view on whether simple stimulus will work or not, here’s the key passage laying out why Europe hasn’t dug itself out in the last 3 years:
Berlin is making an about-face, even though it aims to stick to its current austerity policy. The German government has stressed budget consolidation and structural reform since 2010, when Greece was on the verge of bankruptcy.
Did you catch it? The Germans first took away all the PIGS’ money. Then:
The government’s change of heart isn’t just a sign of selflessness and compassion. More than ever, the chancellor and the finance minister are worried that Berlin’s tightfisted, heartless, austerity-obsessed image could solidify throughout Europe and do irreparable political damage. An exporting nation that sells two-thirds of its exports to other European countries cannot be unconcerned about its image abroad, they reason…
Now they realize its a political problem in the PIGS and the PIGS can’t afford their cars. How and when did they come to this realization?
The government headquarters had asked the ministries to take stock of the EU growth pact that was approved in June 2012 to support the austerity programs. The results were, in fact, supposed to demonstrate how well the German bailout strategy was working. But the officials’ conclusions shocked even calculated optimists. In their report, they painstakingly documented that debt-ridden countries, especially those that have not taken advantage of EU bailout programs, have hardly made any progress in terms of needed reforms.
So what’s their solution? Does it involve cancelling debts? A political / fiscal union? hahahaha… Its the “lets lend more but at lower rates”-variety, which always ends well:
In the future, they intend to provide direct assistance to select crisis-ridden countries instead of waiting for other countries to join in or for the European Commission to take the lead. To do so, they are even willing to send more money from Germany to the troubled regions and incorporate new guarantees into the federal budget.
My my… will only the Germans ante up? Any other rich European country (of the ones left)?
At the moment, it is purely a German effort, and plans to get other countries on board are still little more than wishful thinking. Countries such as the Netherlands, previously considered to number among possible donor nations, have since been sucked into the crisis themselves.
Is there a better way to sum up the European dilemma?
Europe lacks the money for massive economic stimulus programs, and so far the German government has insisted that incurring new debt isn’t the way to solve Europe’s debt crisis.
What do the German people think about all this?
In addition, Germany will elect a new parliament in less than four months, after elections in September. With her administration facing pressure from the anti-euro party Alternative for Germany, and despite her offers to help Southern European countries, Merkel doesn’t want to be accused of throwing even more good German money after bad. To avoid this, the goal in Berlin is to achieve the greatest possible results while spending as little as possible.
If the economic well-being of an entire continent and the hopes of millions (especially the next generation) wasn’t on the line, this would be all so tedious.
While the federal government continues to insist that the crisis-ridden countries clean up their economies and government finances in the long term, the countries themselves want short-term relief. More than anything, what they mean by this is: a lot of money for new economic stimulus programs.
That last quote from Der Spiegel’s article should offer a clue to which way I’m leaning. Select quotes from my first two posts ever on the Euro-Debacle in 2011. The second post is as relevant today as the day it was written.
If the mode of cleaning involves sweeping the mess under the carpet, actual cleaning has not occurred and, thus, exposure to stink and the risk of rot will be greatly increased…
Plans <to save the PIGS economies> can essentially be reduced to the following 3 principles: (i) impose austerity (sideproduct: further weakening the Greek economy), (ii) improve tax collection (sideproduct: further money out of the Greek citizens’ pocket) and (iii) no debt write-offs (sideproduct: its going to take forever to repay). The end result of this three-pronged approach is a weak Greek economy that will face heavy debt burdens in perpetuity (or what seems like forever). These measures are nothing more than sweeping the mess under the rug.
To these three prongs, a fourth has now been added: lend more. Will it work?
In the last precedent to the Greek situation that immediately comes to mind, the solution involved God himself telling Moses to forgive the debts of the Jews. Any long-lasting solution to the Euro is likely to be as drastic and will begin with correcting the political imbalance…
I have no idea which is the more probable outcome. All I venture to guess is that the uncertainty surrounding the Euro will continue indefinitely until Europeans get real serious about their stillborn political system.
This has always been a political problem, as much as a financial one.
The reaction <of German electorate> is understandable really. Germany is taking on Greece’s obligations. Angela Merkel’s party has suffered at the polls as a result of this backlash. Unfairly in my opinion, but pointing out reality to an electorate that is too busy pointing fingers never works…
The German volk are not very receptive to these arguments. I don’t mean to pick on Germans in particular; plebs everywhere would have the same reaction. This is what is called a political problem for Merkel.
With impending German elections and Angela Merkel’s newfound willingness to send “more good German money after bad,” I’m guessing the elections will not go so well for her.
If I had nothing new to say, why did I post this? (ed. note: What a waste of time reading that post. I bet now zuuko’s thinking “Shit… If I had nothing new to say, why’d I spend the last hour typing this shit up?” He’s such a dumb ass… plus that was a singularly egregious example of copy-paste. What a lazy ass… Go back to your research project and only come back when you can type something worth your sorry ass… ASS!)