Posting in Government
BERLIN -- From precarious bailout packages to civil unrest, European woes are poised to hit home in the continent's largest economy.
BERLIN -- Tear gas and tanks in Rome, tens of thousands of street protesters from Madrid to Athens, and union strikes that grounded planes and stalled trains across Europe gave a sense Wednesday of the frustration pervading the ailing Eurozone nations.
While Greece waits in the wings, its troika of creditors - made up of the International Monetary Fund (IMF), the European Central Bank (ECB) and the 16 Eurozone countries led by Germany - is hashing out the best way to move forward in sidestepping what has been feared as the Euro's impending collapse.
But as officials focus on saving the continent's currency, northern European countries such as Germany, Belgium and Holland are also reflecting signs of looming economic challenge.
Following the declaration of Wednesday as "Solidarity Day" by the European Trade Union Confederation (ETUC), a 24-hour Belgian railroad strike brought public train transport to a standstill there, forcing Germany's Deutsche Bahn to run buses to complete certain routes. Head of the Confederation of German Trade Unions (DGB) Michael Sommer simultaneously called for a policy change in fighting the economic crisis in a talk with Berlin's RBB Inforadio.
"A plan that brought more wealthy citizens to shoulder the costs of the crisis and to get the financial markets back in order would be sufficient," Sommer said.
Meanwhile, economic experts monitoring Germany's economic growth index are forecasting slowed growth prospects for November. Although a small margin of positive GDP growth is expected for the entire fourth quarter, the prediction seems poised to confirm the economic interdependency of Eurozone economies.
The Center for European Economic Research (ZEW) said the index fell from minus-11.5 in October to minus-15.7 in November in what ZEW economist Marcus Kappler called a "sign that Germany cannot be decoupled from the recessions around it," according to the Wall Street Journal.
The news presents the possibility that Germany could technically slip into a recession; although experts surveyed say slowed growth is more likely than a GDP decrease for this and the next quarter.
Should things indeed take a turn for the worse, unanimity on the question of how to deal with the situation within Germany could prove difficult. Despite Chancellor Angela Merkel's push for European austerity, Germany's center-left SPD party supported much of Wednesday's strike activity, along with the country's leftist party, Die Linke. Critical of austerity, politicians say the strict measures create a catch-22 that has already proven counteractive to economic growth.
SPD representative Sigmar Gabriel told Germany's Abendblatt Wednesday in Berlin that unemployment, poverty and national debt in southern Europe would only continue to worsen along this path, suggesting instead an integrated growth and employment program for Europe.
Europe's left isn't alone in their general assessment of the situation: the Washington-based IMF also appears to have grown weary of austerity measures, asserting that they have caused more problems in Europe than they have fixed. Instead of a 2-year extension of the timeframe allowed for Greece to meet its debt-reduction targets, the institution prefers a write down of large portions of Greek debt. This solution is controversial among Eurozone members, since this would mean no chance of repayment of loans made thus far. Furthermore, a write down could cause Germany problems in balancing future budgets.
Meanwhile, the country's Die Zeit newspaper brought the realities of austerity measures home to Germany by commissioning experts from the OECD to redraw the situation as if it were happening on Teutonic soil.
As an example, the scenario cites Greek pubic sector workers and pensioners, who in 2010 and 2011, shouldered cuts amounting to 2.5 percent of Greece's GDP, or some 5.5 billion Euros. The entire Greek government only reduced its budget by a total of 8.2 billion Euros in 2010, meaning public workers and pensioners paid a disproportionately high price for austerity cuts over the past three years.
That same program in Germany would see public workers such as teachers, police, fire fighters and pensioners take a 13.5 percent cut to their income.
"Those would be some serious adjustments for Germans to have to make", Claude Giorno, OECD's Greece expert, told Die Zeit.
PHOTO: PK Fotogafie / Flickr
Nov 14, 2012
Why does Germany always want to control Europe? It always ends in disaster. This rotten, corrupt, anti democracit state, the EU, is yet another German creation that is again causing so much misery in Europe. Not long to go now and the whole sorry mess should collapse and we can return to independent, soveriegn countries, with our own parliaments elected by the people, and our own currencies.
The same blind policies designed to maintain the riches of the super wealthy, while beggaring ordinary people. It worked so well last time, with such charming political consequences, why not try it once again ?... Henri
Since the rich can't be reason with and they tend to hoard at every turn I see them having no choice and will probably not be able to keep up with continuing to cut and cut and tax what is left of the middle class. If the middle class gets to the point of real pain well lets just say "of with the riches head" is a good alternative to writing down the debt problem.
can't be reasoned with, and they insist on remaining intransigent on their positions not to negotiate in order to try to get their economies going in the right direction, then, the only thing left to do, is to give in to the unions and government dependents and government workers. Then, when a country (or countries) and the Eurozone become completely insolvent, there won't be any one left to blame but the people. The people insist on having socialist type "utopias", let them have at it. Perhaps after that, they'll have learned the ugly lessons of socialism, or perhaps not, since, the lessons about the failures of socialism have always been there, but people refuse to learn from them. It's like it's said: he who doesn't learn from the lessons of history, is doomed to repeat the mistakes of that history. I wish them well, but, there is no way to save them.
...the decision will be made for them. It won't be pretty. They can't go on borrowing forever. It's basically a giant game of musical chairs where all players will ultimately lose; the only question is who will lose first.
Saying large portions of debt should 'just be written off', sends all the wrong signs. It basically means, as a country, you can piss money up the wall, and then walk away from it.
I see Germany, and to a lesser degree the surrounding northern European nations, as the last responsible nations standing. All the central and southern European nations in the EU zone have foolishly run up their annual deficits and national debts up to unsustainable levels. As they run to Germany and the other northern European nations looking for a bailout they are demanding Germany support a continuation of the policies that got them into the mess they are in. And then they have the nerve to act shocked that Germans oppose such actions. Fools.
It's just that inevitably, the borrower becomes slave to the lender. And Germany is becoming the lender of Europe. It's a little different now than it was the last time around.
because, the causes of the economic downturns can be traced to government intervention into those economies, and to workers rights and higher demands by those workers for higher salaries and bigger benefits packages. The unions and the people made far too many demands on the corporations, which could no longer support those demands, and so, they either had to downsize or lay off people, or shut down completely, or they stopped investing on growth and fewer people got hired. It's a fact that, there is a direct relationship between government intervention and the lack of growth of an economy. The more demands that government makes on businesses, the slower the economy will grow, or it will stop growing altogether, and even contract to a size which can't support the work-force. That is precisely what's happened in Europe and it's the same thing happening in the U.S. The same problems that cause the 1929 depression, are again at play in this economic disaster which is plaguing so much of the world. But, the disaster is not being caused by businesses or the wealthy. Economics is, quite clearly, something that you have no understand of whatsoever.
Playing the class card, never induced an economy into success. In fact, it does the opposite, since, it's the rich and the well-off and the investor class and the entrepreneurs and the idea people who make any economy successful. Take away the rich, and you end up with a Somalia or a Haity. Take away the investor class, and you end up with economies with no hope whatsoever. Take away their money, and you end up with economies such as existed in the stone age. The most important people in a successful economy are the rich and the well-off and the investor class and the business owners, because, without them, there is no economy. Punish them with higher taxes, and the people who will feel it the most will be the poor and middle-class, because, the money wont be there to support the creation of businesses or jobs.
Across the free market, you could counter-argue about robber-baron's and the rich not paying their dues. From Romney's tax @ 10%, to Starbucks not having paid a penny in UK corporation tax in 14 years because they wash intra-company licensing fee's and coffee purchases through other countries where there are tax breaks. Also covers Google, Amazon and many other companies acoiding tax throughout Europe, and no doubt the US too. http://www.bbc.co.uk/news/business-20288077
When someone looks like a fool to you, most probably you are missing something. If they are so responsible, why did they (German public and private funds) lend Southern Europe all that money during the last 20 years, fueling housing bubbles and inefficiency? This is a European Union with a currency tailored to Germany's wishes via Maastricht Treaty. They were going to get some payback sooner or later for compromising the future of Europe with their greed.
Your argument that the workers managed to impose "too many" demands on the companies, making them unviable, is in clear contradiction with several facts: 1.- The workers with greatest benefits are those in Germany, France, etc. which are countries with much less unemployment than the countries struggling right now. 2.- At a European level, labour is ever less important in the creation of wealth. 3.- Especifically, Germany 15 years ago went for a policy of constant wages that promoted capital acumulation and its allocation to booming Southern Europe. That is, banks with no intervention of government took quite short-sighted decisions that fueled the PIGS crisis. By the way, I see the problem in letting employment go to countries where workers have no rights. While Apple's shares keep rising, the Chinese are not making any progress at all in gaining freedom while they manufacture iPads. This "trade promotes welfare" pantomime must end, since it only benefits those that already had the money to start with.
have surprisingly rich citizens. Just very few. The vast majority are grindingly poor. The most important in any economy are definitely NOT the rich. They show deplorable tendencies to hoard their wealth, a failure to re-invest, and a generally selfish attitude when it comes to taxes. They are, in a word, "entitled". The middle classes are without doubt the most important members of a civilized society, shouldering the majority of the tax burden, and generating (through their actual work) most of the wealth. Plutocrats simply make money out of money by economic "trickle up".
Neither Romney nor any other investor, should have to pay taxes on any of their earnings, because, the money invested has already been taxed, and taxing again, means double taxation. Furthermore, the money invested by Romney or anyone else, is going towards creating more jobs when that money is reinvested in any enterprise. Secondly,, that 10% tax that Romney paid, is more than the taxes of 47% of the people in the U.S., combined!!!! Why would that even beigin to be unfair? The unfair part is where 47% of working age people don't pay any taxes at all. But, the bottom line is that, investors like Romney should not even pay any taxes on his investments or earning from those investments. Those investments is what makes an economy grow, and taking that money away leaves a lot less for the economy to grow, and with less money for economic growth, there will be a lot fewer jobs. Which, in the end means that, the investments from Romney, created more jobs in the economy than anything Obama has ever done, before and during his presidency.
So many things wrong with your comment it's hard to know where to start. So let's start with Scandinavia, a bunch of Socialist countries and all of them doing very well. So saying Socialism doesn't work simply shows that you are ignorant of how things truly work in the world. A key to making things work as an economic and political system is that the system must be built from the ground up, not imposed from the top down. That's why Socialism works in Scandinavia and not in the U.S.. Any time the U.S. government tries to impose something structural on the economy, without sufficient buy-in from the people, it fails and makes things worse. Denmark's socialist policies generally have over 80% buy-in, which is why socialism works there. As for rich and poor, since together they contribute less than 30% of the GDP of western countries, they are mostly irrelevant to any discussion of economics. SMBs account for over 70% of the GDP of most western nations, and over 99% of SMBs are started and run by middle class individuals without outside investment. So really, the prime movers of the economy are the middle class. Greed and Selfishness play less of a role in the economy than most people think. I can't say they play no role because that's obviously untrue, but they do not account for 100% of economic business drive. We are not all a bunch of sociopaths. The main psychological driver for the economy is that we want to provide the best lives possible for our families and make the world a better place for our children. Economy is not about dollars, but about trade. Money is simply a mechanism to facilitate trade. Money not in circulation is effectively worthless. Money has its greatest value, not in investment, but when a single piece of currency can facilitate multiple trades. Each SELLer "earns" that money and then spends it to BUY something else. So the more times a dollar changes hands, the more the economy grows. Employees can thus be seen as sellers, selling their skills to their employers. An example of this "Circular Flow" is the "Circle of Money" story found here: http://smokeschool.net/moneycircle.htm The last thing you want in a market is a "Beggar Thy Buyer" scenario. Such scenarios are tantalising on the surface because they produce short term gain, but the result is always long term pain. Because of how Germany ran itself compared to Greece, Germany put itself in one of these scenarios. In joining the Euro, each country had agreed to maintain an inflation rate of 2%. France was very good at this. Greece, with an inflation rate of 2.4% was not so good. But Germany, with an inflation rate of 1.3% was much worse. The effect of this was that over time, Germany's products did not increase in price as fast as Greece's. (If, at the start, a loaf of German bread and a loaf of Greek bread cost the same, and nothing else changes, after 10 years, the Greek bread costs more than twice what the German bread costs.) This meant that the Greeks were less able to sell their goods and thus earn the cash they needed to buy things. Now they are bankrupt. So that means Germany has lost a customer. Since Europe is the number one export market for Germany with 80% of their goods being exported to the EU, as time goes on, this approach will hurt Germany more and more as more and more customers cease to have enough money to buy German goods. So while the Greeks could buy German goods, the Germans got rich, but when the market collapses because no one has the money to buy German goods, the German economy will collapse as well. The advantage of a Social-Democratic system such as the ones found in Scandinavia is that they are able to regulate the market to prevent "Beggar Thy Buyer". Wages always increase by the sum of inflation and the unit growth in GDP. This means that as the price of things go up, the wages go up by the same amount. That means that the very large middle class, the ones who perform 99% of the transactions, always have sufficient money to keep buying things which thus keeps the wheels of industry turning. So high wages are used as a means to maintain market viability. The catch is, if it is a catch, the profit ratio is stagnant. If you made 5% profit this year, you will make 5% profit next year, and the year after that, and the year after that. The Swedes don't seem to mind. Could such a system work in the U.S.? OF COURSE NOT! Such systems need to be grown from the ground up, not imposed from the top down. You'd never get sufficient buy-in from Americans to make such a system work in the U.S. The U.S. system is very Adam Smith. As a result, the government has 3 obligations: 1) To protect the society from outside threats (which is why we have a military.) 2) To protect members of society from internal threats (which is why we have police, courts, various regulators, and so forth) 3) To provide those services which cannot be economically or effectively provided by the private sector (which is why we have interstate highways and so forth). Given these societal principles, any time the government involves itself in an area not covered by one of these 3 principles, it will have a negative impact on the economy. So the government can easily hurt the economy by too much meddling where it doesn't belong, but there is very little it can do to help the economy. The only thing it can do is provide sufficient regulation and enforcement (principle 2) so that everyone can compete and participate in the free market on an even footing. After that, we each need to find our own way to profitably serve one another.
Like it or not, the rich and well-off are what make an economy hum. The rich are "entitled", of course, to the wealth they created. And, trickle up never made any one rich. The rich and the investor class are the ones who take the risks to make an economy grow. Trickle up, from the middle class or the poor, has NEVER created a healthy economy, and never will. And trickle out from government has also NEVER worked anywhere and anytime it's been tried, and it's best known as socialism. There has never been a successful socialist economy anywhere, and Europe and even the U.S., are proving socialism to be an economy killing system. Take a look around, or in the least, get informed about what is happening around the world, and THINK about the true reasons, because, those reasons will continue to be with us for a few more years, and we WILL regret being so stupid when we allowed the liberals and socialists to run (and ruin) any economy. BTW, greed and selfishness is part of what capitalism ia about, because, without that kind of drive, there wouldn't be much success in an economy. The money being "earned" by the middle-class and the working class, is as a result of the hard work and risks the the imagination of those who do know how to run businesses. Any successful business or successful idea, eventually leads to the need to hire more people to grow a company, and that's how jobs are created. Jobs don't magically appear to which the "greedy and selfish" will then latch on to, to draw their riches from. It's the complete opposite. First the company needs to be created and grown, and then the jobs materialize.