Very interesting graph, Samseau. Admittedly, I had lots of doubts about its sources, so I went to Eurostat to check but could find only data on deficits, not actual budgets. They are available on the respective countries' websites for financial ministries, though. Assuming that this Tyler Durden has gathered everything correctly, I am still asking, how is that possible? The deficits are becoming larger and larger, and the layoffs, tax increases and spending cuts are very real. Why would all those people be protesting if they still had jobs, i.e. if nothing was cut? I don't think they would!
My only explanation for that graph is that the "spending" represented in it actually includes the spiraling costs (interest rates) of servicing the debt, so even though the budget revenues stay the same, paying off the interest raises the budget size (and deficits, since you need to take out additional debt to service the old one). I'll have to research this more, thanks for the information.
With all that said, however, I still don't agree about socialism. First of all, during recessions, the so called "handouts" from unemployment benefits, transfers and etc are the only thing that keeps the economy from drowning even faster - it's called "automatic stabilizers" and I think it's a good thing. Sure, giving out handouts above what you can reasonably pay is a problem that needs to be solved (along with excessive immigration) because it will slowly become a burden, but it is a problem that is not relevant to the debt crisis.
The debt markets and interest rates react ONLY to your GDP and growth prospects (and thus your ability to pay off debts in the future), not your existing debt or your country's level of socialism. That is why Japan has had levels of debt between 100 and 200% of GDP for decades now, and still borrows at extremely low rates. The markets don't care about socialism, only about growth prospects. However, if you cut excessively (such as during a recession), you ruin your growth prospects. I am convinced that Paul Krugman (who pioneered the term, I believe) had it right when he said that it was the "confidence fairy" at work - the pervasive, economically unsupported and unscientific myth that cutting the government and reducing deficit will lead to lower interest rates.
To what Keyser Soze said about Greece, I agree wholeheartedly, but with the caveat that even if all of those measures were performed and the corruption 100% eradicated, Greece would still go bankrupt very soon - its situation is that bad right now. The EU first has to stop digging the Greek hole even deeper (by pushing austerity that shrinks the economy further, which in turn sends interest rates skyrocketing), or no amount of extra tax collection will help. Unfortunately, while ECB could have saved the day by acting as lender of last resort before (at the cost of some joint inflation throughout the Eurozone - note that inflation is anemic right now, fluttering) between 2 and -0.5% so definitely not worrisome), I fear it is too late now.
With all that said, I do believe that Euro zone's structural defects are immense, and unless real integration occurs soon (i.e. ECB as lender of last resort + debt mutualisation + some degree of fiscal integration), the Euro is doomed to fail. It is simply impossible to sustain that many countries with wildly different productiveness rates, wages, budgets and markets while eliminating all of their monetary freedom (i.e. the ability to have its own currency that can appreciate or depreciate freely).
My only explanation for that graph is that the "spending" represented in it actually includes the spiraling costs (interest rates) of servicing the debt, so even though the budget revenues stay the same, paying off the interest raises the budget size (and deficits, since you need to take out additional debt to service the old one). I'll have to research this more, thanks for the information.
With all that said, however, I still don't agree about socialism. First of all, during recessions, the so called "handouts" from unemployment benefits, transfers and etc are the only thing that keeps the economy from drowning even faster - it's called "automatic stabilizers" and I think it's a good thing. Sure, giving out handouts above what you can reasonably pay is a problem that needs to be solved (along with excessive immigration) because it will slowly become a burden, but it is a problem that is not relevant to the debt crisis.
The debt markets and interest rates react ONLY to your GDP and growth prospects (and thus your ability to pay off debts in the future), not your existing debt or your country's level of socialism. That is why Japan has had levels of debt between 100 and 200% of GDP for decades now, and still borrows at extremely low rates. The markets don't care about socialism, only about growth prospects. However, if you cut excessively (such as during a recession), you ruin your growth prospects. I am convinced that Paul Krugman (who pioneered the term, I believe) had it right when he said that it was the "confidence fairy" at work - the pervasive, economically unsupported and unscientific myth that cutting the government and reducing deficit will lead to lower interest rates.
To what Keyser Soze said about Greece, I agree wholeheartedly, but with the caveat that even if all of those measures were performed and the corruption 100% eradicated, Greece would still go bankrupt very soon - its situation is that bad right now. The EU first has to stop digging the Greek hole even deeper (by pushing austerity that shrinks the economy further, which in turn sends interest rates skyrocketing), or no amount of extra tax collection will help. Unfortunately, while ECB could have saved the day by acting as lender of last resort before (at the cost of some joint inflation throughout the Eurozone - note that inflation is anemic right now, fluttering) between 2 and -0.5% so definitely not worrisome), I fear it is too late now.
With all that said, I do believe that Euro zone's structural defects are immense, and unless real integration occurs soon (i.e. ECB as lender of last resort + debt mutualisation + some degree of fiscal integration), the Euro is doomed to fail. It is simply impossible to sustain that many countries with wildly different productiveness rates, wages, budgets and markets while eliminating all of their monetary freedom (i.e. the ability to have its own currency that can appreciate or depreciate freely).
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