16
Oct

THE WHEEL OF MISERY

Escrito el 16 octubre 2011 por Jesus Guerro en General

Before going ahead with the adjustment policies someone should take a look at the numbers because they speak by themselves.
By 2000 the Greek deficit was 3.7%. It would also be the last year that the Eurozone was in profit, though meager, 0.1%.
Over the next 5 years and after the birth of the Euro, during the supposed economic boom, the Eurozone annual deficit raised in numbers between 2.5% and 3%, decreasing to 1.4% in 2006 and presenting their best figure of the decade in 2007 with 0.7% still negative. In 2008, the year of explosion of the financial crisis Eurozone closes with a 2% deficit.
In 2009 adjustment policies began as well as deficit reduction intentions by means of spending cutting. Well, in these years the deficit in the euro zone was doubled, increasing to 6.3% in 2009 and 6% in 2010.
The conclusion from these data is devastating. The Eurozone, since the birth of the single currency, has increased its deficit by 33%. In other words, nothing less than a third of its annual GDP. Half of this deficit accumulated in the last two years. Is that the right way?

On the other hand, Greece, between 2001 and 2007 moved between 5% and 7% annual deficit. In 2008 this increased to 9.8% and in 2010 it grew to 15.4% to descend again in 2010 to 10.5%.

If we make the same exercise as in the case of Europe we find that these figures mean that just in a decade Greece has accumulated losses, exceeding a value of One annual GDP.

The behavior of the debt was stable in the euro zone about 70% until 2008. In just one year, 2009, the debt rose 10 points to 80% and additional 5 points in 2010 to reach 85%.

In the case of Greece, the figures are panic. For 7 years the public debt had an average of 100%. Over the next 3 years, It has risen over 140%.

Who cares about this before? No one.

Since European leaders concerned about that,  what has happened? It has gotten worse. Much worse. It is estimated that the Greek debt reaches 190% in 2012. A total Disaster.

In Spain, the same kind of measures has not contributed even a bit to improve things.

The conclusion is brutal. With public debt still well below the euro area average (approx 20 points down), the financial cost of it, that is, only what we pay in interest every year exceeds the Total Cost of Personnel of Central Administration, about 3% of the national budget.

If we continue with policies of investment cutting, fueling a vicious cycle that only leads to dismantle States, damaging public services, depress and ruin their citizens just to pay interest for entities that have moved from doing business with people to do it directly with States. Again a bad idea. They also will fall acting this way cause of default rates..

When Markets tighten to the States, the States drown to their citizens. It is really Dramatic.

And in this way,  the States loose assets, capabilities.., they dilute.., disappear .. leaving people they must protect simply helpless, abandoned.
A lack of political power?

How far can this wheel of misery prevail?

Comentarios

Javier P.C. 8 febrero 2012 - 18:29

That is in a nutshell an escellent review of the regretable economic missmanagement and unethical practices extensively utilised by certain finantial organisations, especially now that they have run out of valid and legal business models. We have to stop them somehow!

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