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Europe: Growth vs. Austerity

May 9 2012 at 8:54 AM
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Bob  (no login)
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With the election of the new French President, Hollande, I hear that he wants to take France toward more "growth" and away from the austerity measures that Germany has been promoting. Same in Greece, and Spain, and I'm sure a few other EU countries.

Question: Does anyone oppose "growth"? If growth growing an economy were as easy as wanting it, I'm sure that none of these European countries would be facing their current dilemma. Maybe these new leaders are referring to something akin to the "stimulus" that the Obama Administration has pursued: Borrowing more money for projects that get more people working again and improve infrastructure. I think such borrowing/spending can be a temporary relief but not a long-term solution. I agree with the startement, "You can't borrow your way to prosperity" -- it does not work for individuals, families, communities or countries. (Don't want to refer too much to the U.S. situation here, as I want to focus upon Europe . . and want to avoid setting Nat off on the "It's all Bush's fault" diatribe).

If, as appears to be the case in Europe, countries are not seen as a good risk and cannot borrow money, or under as favorable terms as they used to, then what do they do to "promote growth"? How do you grow a struggling economy without spending more money?

Marseil -- any thoughts on this? Please respond . . or you may hear me return to bitching about women again! happy.gif

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Austerity vs. growth

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May 11 2012, 4:02 PM 


I do agree with you (for once!), on the fact no one opposes growth.

(Well actually, we have some ecologists who call for degrowth, arguing that if we the earth has finite resources, so humanity can not exploit them with an exponential growth for ever. If we don't decide to degrow now, we will havoc to do ti in a more panful manner in the future.)

Now, Hollande is not in a position to oppose austerity. All European states are heavily indebted, so we will do what creditors want. In addition, the lastets EUropean treaty is signed and ratified, and besides Hollande, no ones to get into another negotiation round that could take months or years.

Hollande said he would renegotiate the Treaty, which will not be feasible. A probable way to save face for everyone will be to draft an additional agreement to the TRetay. Now, the issue is how to fund growth. I'm afraid there is only one said to restart the economic engine : by public spending. And as states are heavily indebted, public spending is to be financed by tax increases, which in turn might slow the growth or halt it altogether. The equation is not easy: the government's objective is to fund the economy enough to fuel growth, but not too much not to kill it. I'm not even sure there is a solution.

We will see if the right balance can be found.


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(Login Nafana)

Republicans should worry

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May 11 2012, 4:10 PM 

I'd say Republicans have something to worry about here since they insist on cutting social services here rather than taxing the rich.
Americans may feel the same way!

. . . . .

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