- 14-02-2012, 11:47 #3401
- 14-02-2012, 12:42 #3402
Spending more than you earn and going ever deeper into debt has to be addressed.
Throwing ridiculous amounts of tax income away on interest payments has to be addressed to a point where it can be offset.
I will repeat for the hard of thinking, austerity policies are a short term realignment process that has consequences to growth, but they are needed at this point in time because the markets simply will not tolerate the risk of financing non-performing nations right now.
- 14-02-2012, 12:48 #3403
So - in short, we're waiting for the markets to become more scared of the risks posed by zero growth in the West / world than those posed by debt?
- 14-02-2012, 13:03 #3404
- Join Date
- Jan 2010
For example Merkel could offer to finance and manage the installation of the infrastructure and software for a new, difficult to avoid tax collection system. That would help Greece improve its governmental system efficiency and cut down on tax evasion - thus boosting revenues.
Further financial assistance could then be given after the new system was up, running and proven to be running with a minimum of tax evasion. In other words, the Greek have to put a properly functioning tax system into service in order to qualify for the next tranche of aid.
Similarly, the euro zone could offer to finance a new motorway after a verifiable 20,000 people have been made redundant from the civil service.
That puts the onus back on the Greek government - because the Greek electorate would know that if the government met its promises, Greece would get the funds to help the country recover.
Pretty simple concept really...
- 14-02-2012, 13:07 #3405
Debt can be huge and manageable if you have the growth to offset it and several examples exist where this works fine.
If you have debt and your growth is vulnerable in some ways, then you are exposed to changes in the wind. Osbourne understood this and plunged in hard and fast. Now things are dragging on, the lack of growth - particularly with all the stimulus (which is a bill to pay back somewhere down the line) - has now become the major problem.
All of the big European economies have different issues, and can tolerate differing rates of growth, types of growth, and types of debt - a we are seeing changes at a psychological level, for example UK credit spending dropping.
Growth is the is most important issue right now, but not one that is acceptable (or even possible IMO) to be achievable by public spending, at this point.
If, as I suspect, we see a general trend in improved government finances in Europe over the next 6 months, coupled with stronger rules to give confidence the trend will continue, then we will see a loosening of monetary policy.
In the US the growth simply has to be self generating at a faster pace than the debt, which is a major concern.
The UK meanwhile has completely run out of cards to play, and is now dependent on demand coming from the US, Europe and Asia.
- 14-02-2012, 13:17 #3406
We can assume support and assistance will be forthcoming from the Commission (they have no other role to play in this equation and explains their involvement), and we can assume some further write downs or profit repatriation from the ESCB bond holders.
- 14-02-2012, 13:23 #3407
"For example Merkel could offer to finance and manage the installation of the infrastructure and software for a new, difficult to avoid tax collection system. That would help Greece improve its governmental system efficiency and cut down on tax evasion - thus boosting revenues. "
Obviously not based on the German tax system then.
- 14-02-2012, 13:25 #3408
- Join Date
- Jan 2010
Surely - if such a program is planned - it would be far better to announce it and the conditions the Greece would have to meet to qualify for it.
Might even have stopped the centre of Athens being torches a day or two ago...
- 14-02-2012, 13:36 #3409
But nobody is going to officially offer anything until the Greeks start sticking to what they agree.....and to be honest, nothing that would be responsible can be done that is going to avoid a year or so of extreme hardship for many Greeks.
- 14-02-2012, 15:19 #3410