Eurostat came out with the EU debt figures and just as predicted they were diabolically bad. What's more they'll only continue to get worse.
It is important for you to note that too much emphasis has been placed on the debt-to-GDP figure. Always remember this: Plenty of countries have gotten in to trouble when their debt-to-GDP has been below 60%.
Especially with smaller nations, short sharp shocks to the system are what cause defaults.
Austerity vs. Stimulus.
The discussion is completely out of whack. It is not either or. If only it where that simple.
The fact is that EU countries have borrowed too much, and if they continue to try to borrow, the interest payments will become so high they won’t be able to handle them.
The reason the troubled EU countries are still able to borrow money is the European Central Bank and the implicit promise that Germany will sort the troubled countries out.
Let me be very clear, and this is as certain as my last year’s bonus: This will not continue indefinitely. It will end and it will end soon.
The ECB exists thanks to the grace of the German nation. That’s all there is to it, and ven zi Germanz decide zat enough iz enough. Zey vill have zi elections vich vill say: Nein!!! It is at that point that the whole European project thingy will come apart. There is a finite amount of bailouts zat zi German electorate vill accept.
Then there is the bit about spending, as in spending for stimulus. When proponents of "stimulus" speak out, what they are saying is that governments need to borrow more money and then that money will be spent/invested by the government/public sector to kick start the economy.
Sounds lovely, doesn't it? And as an idea it is lovely.
I hate to sound like an old capitalist, but when have governments been the best possible investors? Honestly. That’s a serious question. I would appreciate anyone who would send me evidence on that.
The root problem is this
Just look at the people in politics nowadays, they are not entrepreneurs, they are not risk takers, they aren't even "normal" working people. They are people who have built their careers on being bureaucrats. That is their experience in the world. Many are second generation politicians, to them politics is the family business.
And I am not talking about left or right, conservative or liberal, I am talking about all people in politics. Look at any European politicians CV and you’ll find a long list of political NGOs and party postings, but rare is the experience in the private sector. A career spent being paid with tax money earned by the private sector to spend the tax money earned by the private sector.
So let me ask you. Are they really the people you would trust to invest billions in debt to lift us out of the doldrums?