ARmy Rumour SErvice

**FORMER_FYRDMAN** · 14-02-2012, 11:47

Originally Posted by geezer466

The tail is wagging the dog. Until someone sits down and addresses the massive amounts of debt throughout the system there will not be any economic recovery. This is the one simple denominator, everything else they do without addressing this is fluff.
Byword of the week is downward spiral of debt with GDP. It's happening in Greece it will happen in the other club med's in due course.

Why have you no faith in Alsacien's financial wizards and their failsafe economic potion of owl shit, bat's ears and leper's testicles? Unless you are able to borrow recklessly and without consequences, or unless Germany gives you regular cash injections gratis, it's hard to see what the Euro benefits for the weaker economies are. It looks as though Pedro, Spirou and Guiseppe are finally tumbling to this essential truth and, more worryingly for the Boche, it looks as though the Centime is beginning to drop in France as well.

**Alsacien** · 14-02-2012, 12:42

Originally Posted by geezer466

The tail is wagging the dog. Until someone sits down and addresses the massive amounts of debt throughout the system there will not be any economic recovery. This is the one simple denominator, everything else they do without addressing this is fluff.
Byword of the week is downward spiral of debt with GDP. It's happening in Greece it will happen in the other club med's in due course.

Exactly.
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.

**Charlie_Cong** · 14-02-2012, 12:48

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?

**Wordsmith** · 14-02-2012, 13:03

Originally Posted by Alsacien

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.

I think the markets would be very happy with a situation where Portugal and Greece were given financial assistance in return for verifiable improvements in their systems/economy.

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...

Wordsmith

**Alsacien** · 14-02-2012, 13:07

Originally Posted by Charlie_Cong

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?

It is dangerous to generalise, but in principle going further into debt with long term global forecasts looking mediocre at best, suggests hitting a wall, therefore something needs to be done in cases like Greece.
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.

**Alsacien** · 14-02-2012, 13:17

Originally Posted by Wordsmith

I think the markets would be very happy with a situation where Portugal and Greece were given financial assistance in return for verifiable improvements in their systems/economy.

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...

Wordsmith

...and is in effect what is happening with this IMF designed program (and pretty much every other program they have done).
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.

**Drlligaf** · 14-02-2012, 13:23

"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.

**Wordsmith** · 14-02-2012, 13:25

Originally Posted by Alsacien

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)...

Does the assistance to Greece involve a crystal ball so they can work out that this unannounced program is coming?

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...

Wordsmith

**Alsacien** · 14-02-2012, 13:36

Originally Posted by Wordsmith

Does the assistance to Greece involve a crystal ball so they can work out that this unannounced program is coming?

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...

Wordsmith

Indeed, I find it odd that carrots are not visible publicly, not to say they are not known the Greek coalition.
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.

**FORMER_FYRDMAN** · 14-02-2012, 15:19

Originally Posted by Alsacien

Indeed, I find it odd that carrots are not visible publicly, not to say they are not known the Greek coalition.
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.

So we do nothing to ameliorate the situation and assist those charged politically with hauling Greece back from the brink and we do this in the knowledge that, if Greece can't hold on for 12-18 months, the markets will move on to the next of the PIIGS with similar results only this time with an economy that may be too big for anyone to do anything about? And we're taking this risk, not because it is the only thing to do, but because we want to 'teach the Greeks a lesson', as if this is the only way to do that. Finance to one side, whatever the drivers, it is the policy of the politically inept to rub a nation's nose it simply because they can. I agree with Wordsmith 100%; all stick, no carrot invites an equally inflexible response, a poisonous legacy and a perpetual faultline between Northern and Southern Europe.