Strained By Its Debts, EU Is Breaking Up

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    Nov 12, 2011 5:48 AM GMT
    My bf believes that if the EU crumbles, so too will peace... I'm a bit more optimistic...but this is definitely an unforced error on the part of the Europeans in an attempt to sustain bloated social networks.

    http://news.investors.com/Article/591486/201111111828/EU-Breakup-Is-Matter-Of-Time.htm

    Euro Zone: It's been clear for some time that the European Union is in deep trouble. But now even its own leaders admit something shocking: The EU, and its currency the euro, may soon be a thing of the past.

    The EU has had a troubled existence since the euro was first rolled out on Jan. 1, 1999. Sure, the EU has advantages — a single currency, one giant market, freedom of movement for a well-educated workforce, all benefits. Still, it's impossible to have an economic union based on rules no one follows. And that's exactly what's happened in the EU.

    Under the 1993 Maastricht Treaty, no EU country was allowed to run a budget deficit of more than 3% of GDP or issue public debt in excess of 60% of GDP. This was to be the bedrock of the EU's financial stability.

    In recent years, Greece, Ireland and Portugal have all run deficits over 10% of GDP. Worse, the debts of Greece, Italy, Ireland, Portugal and Spain average 112% of GDP. In short, the countries on the EU's periphery have used membership as a way to redistribute wealth from Europe's rich north to its poorer south.

    For a while it worked. But now the debts are enormous, and the amounts needed to bail out the peripherals from their profligacy are so large that citizens in countries such as Germany are saying "no more." By some estimates, as much as $4 trillion will be needed — a number that would bankrupt the EU.

    Sure, the poor EU countries deserve blame for running their economies into the ground. But the real problem is the EU itself.

    Bureaucratic, overly regulated, undemocratic, inefficient and innovation-stifling, the EU and its single currency face a "moment of truth," British Prime Minister David Cameron accurately observed last week.

    Alarmed at the speed of the EU's financial deterioration and by the prospect that Greece and other spendthrift nations could bankrupt the EU, French President Nicolas Sarkozy wants to forge a "breakaway" group of nations within the EU — an EU Mini-Me on steroids.

    The basic idea is to take the high-debt loser nations — Greece, Italy, Spain, Portugal and others — and put them into a separate, Euro-ghetto confederation.

    Meanwhile, France, Germany and a core of hardy, relatively responsible, mostly northern European nations will have their own EU rules, parliament and capital — a "union within a union," as Britain's Telegraph put it.

    Well, good luck. It won't solve the underlying problems that have doomed the EU from the start. To wit: The EU has too many languages, too many cultures and too many economic preferences to make unity work. And it's all based on a model of cradle-to-grave welfare state spending that is now bankrupting its members.

    The pressure to dismantle the EU will only grow. For a long time, the EU and its currency let Europeans believe the fiction that they were still a large, dynamic, growing economic bloc, not the stagnant, aging, welfare state they've become.

    They now know their only hope is to dismantle infantilizing EU bureaucracy and return responsibility for finance and economics to national governments. The only question is, will they have the courage to do it?
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    Nov 12, 2011 7:35 AM GMT
    jpBITCHva saidIt has nothing to do with "bloated social networks". The failure of the euro proves nothing except that returning to the gold standard can never work, because this is essentially, in miniature, what the euro is---a new sort of gold standard. it was killed by monetary inflexibility, not social programs. The euro countries with the strongest social networks are the ones who rode out the recession best, including Sweden which has had net growth since late 2008.

    But of course, none of this matters if you don't understand economics (which you don't) and are in thrall to rigid ideology (which you are). And are not very bright to begin with.


    My, you do seem to pride yourself in publicly extolling your ignorance of economics. Spending had nothing to do with it? Bullshit. Do you seriously believe there's no relationship between fiscal and monetary policy and the role fiscal policy has had to play in this mess? Debt comes from... monetary inflexibility? Seriously?

    The countries that overspent are the ones most in trouble - but alas, as the evidence piles up at some point even your rather narrow field of vision can't ignore it.
  • CuriousJockAZ

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    Nov 12, 2011 4:02 PM GMT
    jpBITCHva said
    But of course, none of this matters if you don't understand economics (which you don't) and are in thrall to rigid ideology (which you are). And are not very bright to begin with.


    Well, you certainly do know how to put the BITCH in JpBITCHva? icon_lol.gif Riddler may be many things, but "not very bright" i s clearly not among them.
  • Posted by a hidden member.
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    Nov 12, 2011 4:06 PM GMT
    Countries spending beyond their means with lavish entitlement programs have nothing to do with their current economic troubles? Someone is in very serious denial.
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    Nov 12, 2011 4:47 PM GMT
    socalfitness saidCountries spending beyond their means with lavish entitlement programs have nothing to do with their current economic troubles? Someone is in very serious denial.


    Didn't you know that. Its Liberal Economics 101. Spending has nothing to do with the problems in the United States either, unless its spending on our military.
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    Nov 12, 2011 5:29 PM GMT
    CHRISTOPHER34 said
    socalfitness saidCountries spending beyond their means with lavish entitlement programs have nothing to do with their current economic troubles? Someone is in very serious denial.


    Didn't you know that. Its Liberal Economics 101. Spending has nothing to do with the problems in the United States either, unless its spending on our military.


    Actually I'm pretty sure the Liberal Economics 101 you quoted must also have mentioned somewhere that your claim hinged upon an assumption of a healthy multiplier. Which would definitely not be the case in the Eurozone. Oh, and someone must also have told you that a welfare system only serves to boost spending in the short run but erode work incentive and productivity in the long run right?
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    Nov 13, 2011 4:29 PM GMT
    To anyone's knowledge, are the Scandinavian countries (Denmark, Sweden, Norway, and to a lesser degree, Finland) experiencing any deep-seated financial issues? I'm curious because the Scandinavian countries have very well developed social welfare systems and pioneered the concept of the "welfare state" decades ago. To my knowledge, they seem to be doing alright through this whole thing...so far.

    Personally, I'd like to see the EU, as it is know with the one currency and so-called capital, dissolved and go back to pre-EU days when each country had its own currency.
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    Nov 13, 2011 4:47 PM GMT
    Columbusite777 saidTo anyone's knowledge, are the Scandinavian countries (Denmark, Sweden, Norway, and to a lesser degree, Finland) experiencing any deep-seated financial issues? I'm curious because the Scandinavian countries have very well developed social welfare systems and pioneered the concept of the "welfare state" decades ago. To my knowledge, they seem to be doing alright through this whole thing...so far.

    Personally, I'd like to see the EU, as it is know with the one currency and so-called capital, dissolved and go back to pre-EU days when each country had its own currency.

    Scandinavian countries can afford more entitlements than other countries because of their wealth from natural resources relative to a low population density. But problems have occurred there as well.
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    Nov 13, 2011 5:02 PM GMT
    Columbusite777 saidTo anyone's knowledge, are the Scandinavian countries (Denmark, Sweden, Norway, and to a lesser degree, Finland) experiencing any deep-seated financial issues? I'm curious because the Scandinavian countries have very well developed social welfare systems and pioneered the concept of the "welfare state" decades ago. To my knowledge, they seem to be doing alright through this whole thing...so far.

    Personally, I'd like to see the EU, as it is know with the one currency and so-called capital, dissolved and go back to pre-EU days when each country had its own currency.


    Not really familiar with Denmark, Norway or Finland but consider this Swedish economist's perspective of Sweden:

    http://reason.com/blog/2010/05/12/swedens-march-toward-capitalis



    It should be noted of the entire European Union, only Sweden and Estonia had surpluses http://www.baltic-course.com/eng/analytics/?doc=47633

    What I think much of the Scandinavian countries have done well is cultural. They have been far more efficient at spending money than others - and that's why attempts at spending more in places like Italy, Spain and Portugal have failed so miserably. But don't forget as well that much of the Scandinavian countries started out much wealthier than much of the rest of Europe because of markets/capitalist reforms.