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leonine -> RE: Krugman's Revisionism Now the EU on fire (11/16/2011 3:00:54 PM)
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quote:
ORIGINAL: FirstQuaker
quote:
The root of Europe’s financial crisis lies in decades of over-spending and over-borrowing, largely to pay for overgrown and bloated welfare systems, vast public sectors, and incredibly generous pension plans. Europe has a huge entitlements disaster heading its way, with graying electorates unable to sustain the status quo.
A mistake many British writers make is to discuss the USA as if it were one country with one culture and politics. Americans make the same mistake discussing Europe, with less excuse, since we never claimed to be one nation indivisible.
The economies of Europe show everything from the crisis you describe, to countries that would be doing very nicely, thank you, if the US hadn't crashed the world financial system. Germany is still, in spite of everything, making enough money to prop up the rest, and would be even better off if their banks hadn't made the stupid mistake of trusting US banks. The UK's problems come from the same mistake, made worse because Thatcher told us we did'nt need real industries any more, we could all get rich from derivatives trading. And up North where nobody bothers to look, Scandinavia, with the highest tax take and the biggest welfare states, is still quietly prosperous, thanks to the sort of buoyant industries and innovative businesses which neo-liberals believe cannot possibly exist in such countries.
The crisis in the Mediteranean economies comes not from any kind of socialism but from plain old-fashioned pork barrel politics. Ever since WW2 Southern governments of all shades, conservative as well as socialist, have got elected by promising more government spending and lower taxes (and kept the 1% happy with a tax regime full of holes - it's been pointed out with increasing force that if Italy actually collected the taxes they are owed by corporations and the rich, their deficit problems would be over.) The problem with the euro was that it let them borrow money at the same rate as Germany, which was like giving a teenager Dad's credit card; but they were still muddling through until the banks crashed, and loans they had thought could be renewed for the asking suddenly became liabilities.
As for the pensions crisis, didn't that go out of fashion years ago as a bogeyman? Like most disaster stories, this was based on an analysis that showed trouble IF we went on as we were: therefore, we aren't going on as we were.
The euro will (here is a bold prediction) survive, but it will survive by more regulation and unification, not less. I would even go so far as to guess that in another ten years, the UK will be complaining that the eurozone countries must be cheating somehow to be doing so much better than us.
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