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Politics : American Presidential Politics and foreign affairs
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To: TimF who wrote (43312)5/20/2010 8:31:37 AM
From: DuckTapeSunroof  Read Replies (1) of 71588
 
Why "assume" or otherwise speculate about anything?

(When we have ACTUAL REAL TIME RESULTS for 2010 that can be, and are, measured now....)





Notice that Ireland has the largest deficit, at 14.7%. This is in spite of (or more aptly because of) the enactment of severe austerity measures, far beyond what Greece, Portugal, and Spain have contemplated. And what has that gotten them? An economy that has shrunk by almost 17% in the last two years, 14% unemployment, and a country in the grip of outright deflation. Property prices have fallen by 34% and are still falling. Their banks are in shambles.

And their debt-to-GDP is rising, because even as they borrow their GDP is falling. It is hard to cut that ratio when GDP is falling. If GDP falls 20%, then the debt-to-GDP ratio rises by 25%. And that means your interest-rate costs are an ever bigger chunk of your tax revenues.

Let's be clear. These austerity measures are not growth plans. They are not designed to help countries grow their way out of the problem. There is no reason to think that if Greece enacts the measures that have been proposed, that what happened to Ireland will not happen to them. It almost certainly will. Credible estimates I have seen suggest that the Club Med countries will see their GDP drop at least 4% this year.

It is not just the PIIGS. All of Europe will be making cuts. And in the short term that is going to be a drag on growth and a headwind for the euro....
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