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EU: Spanish revolt brews as national economic rearmament begins in Europe
The Telegraph ^ | 2/26/2012 | Ambrose Evans-Pritchard

Posted on 02/26/2012 5:44:29 PM PST by bruinbirdman

Spain's new prime minister has looked into the abyss and recoiled.

Though he swept into office as an apostle of orthodoxy, Mariano Rajoy has since delved into Madrid’s ghastly accounts and concluded that it would be "suicidal" to try to slash the budget deficit from 8pc of GDP to 4.4pc of GDP this year, as demanded by Europe's fiscal Calvinists.

Such a policy would require a further €40bn or €50bn of cuts and accelerate the downward spiral already underway, beyond the 1.7pc contraction expected this year by the International Monetary Fund.

The unemployment rate would rise to well over 25pc with six million out of work by the end of the year, equivalent to 30pc under the old definition used in the last jobless crisis in the early 1990s.

A study by BBVA of 173 cases of fiscal squeezes in OECD countries over the last thirty years concluded that demands on Spain are almost unprecedented. They found only four such cases, and three were offset by devaluations. Fourth was Ireland in 2009. The country crashed into slump, culminating in a 54pc fall in Dublin house prices.

There is near unanimity across the political spectrum that drastic pro-cyclical tightening at this stage is unwarranted and dangerous. Josep Borrell, ex-president of the European Parliament and the voice of Spain's pro-European establishment, said such debt-deflation risks pushing the banking system over the edge. "To cut the deficit almost four points in one year would be a true depressionary shock for an anaemic economy, made worse by the requirement for banks to mark their real estate losses to market prices."

"We have reached the point where `taxes kill taxation'. The therapy is turning fatal and is starting to take on a highly political tone. Sixty years after the end of the war,

(Excerpt) Read more at telegraph.co.uk ...


TOPICS: Business/Economy; Crime/Corruption; Foreign Affairs; News/Current Events
KEYWORDS:

1 posted on 02/26/2012 5:44:35 PM PST by bruinbirdman
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To: bruinbirdman

The ECB creating the next Greece?


2 posted on 02/26/2012 5:58:20 PM PST by RetiredTexasVet (There's a pill for just about everything ... except stupid!)
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To: RetiredTexasVet
The ECB creating the next Greece?

The Spanish are creating the next Greece.

3 posted on 02/26/2012 6:00:21 PM PST by Lurker (The avalanche has begun. The pebbles no longer have a vote.)
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To: RetiredTexasVet
The ECB creating the next Greece?

The ECB was hoping they could contain the damage to Greece, but in the end, there are a lot of EU countries that will be greatly affected, even Germany. The only question is who is next in line?

This is going to get soo bad the the EU will have to try and inflate their way out, just like we will.

4 posted on 02/26/2012 6:03:28 PM PST by Vince Ferrer
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To: bruinbirdman

If Spain goes down the drain, how much worse would that make the EU economic crisis?


5 posted on 02/26/2012 6:06:14 PM PST by muleskinner
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To: RetiredTexasVet

We may be the next Greece.


6 posted on 02/26/2012 6:07:40 PM PST by Da Coyote
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To: RetiredTexasVet
Spain was Greece, before Greece was Greece. :)

The collective joke of the EU will be tested when, Spain drifts toward the natural response of nationalism. Expect the elite to use the threat of depression and other useful terms to promote subjection.

7 posted on 02/26/2012 6:11:00 PM PST by Theoria (Rush Limbaugh: Ron Paul sounds like an Islamic terrorist)
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To: bruinbirdman

I know Ambrose Evans-Pritchard is popular here, but he really is just a deluded Keynesian who can’t understand that cutting spending will help an economy. It is the big government spending and borrowing that is the cause of the problem in Spain, and Greece, and here in the US.


8 posted on 02/26/2012 6:22:18 PM PST by MrShoop
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To: bruinbirdman

The Spanish are revolting.

Arrogant and revolting.


9 posted on 02/26/2012 6:34:02 PM PST by freedumb2003 (Spoiler Alert! The secret to Terra Nova: THEY ARE ALL DEAD!!!)
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To: bruinbirdman
"The unemployment rate would rise to well over 25pc with six million out of work by the end of the year, equivalent to 30pc under the old definition used in the last jobless crisis in the early 1990s."

Notice how governments everywhere are changing how things are calculated?

The unemployment rate of the US would be 22% if the definition when Clinton was president were used.

Inflation calculations do not include food and gasoline anymore.

10 posted on 02/26/2012 6:51:46 PM PST by blam
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To: bruinbirdman
We have reached the point where `taxes kill taxation'.

Amen! So true! This is what is happening here in the United States. obamma, Pelooski, Reid and the Democrats response?

More taxes!!

11 posted on 02/26/2012 7:06:16 PM PST by rawhide
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To: Da Coyote
We may be the next Greece.

When it happens, we will be Greece X 50, because of a more volatile population.

12 posted on 02/26/2012 7:17:17 PM PST by Mark17 (California, where English is a foreign language)
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To: Lurker

Greece, Spain, Potugal....someone should create a “The Euro-default Tour 2012” tee shirt. They could sell for a billion drachmas each. That’s about $7 US.


13 posted on 02/26/2012 7:39:31 PM PST by Vermont Lt (I just don't like anything about the President. And I don't think he's a nice guy.)
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To: Vince Ferrer
This is going to get soo bad the the EU will have to try and inflate their way out, just like we will.

Yes. But that won't work either because all of us have so many people on some sort of government funding, that the outlays will just keep up with inflation.

Everyone forgot about the wonders of productivity that brought the world out of poverty. Now, countries around the world think they can legislate productivity with more spending -- the Paul Krugman insane clown school of economics.

Spain is a great example. They blew billions--- a significant percent of their GDP, on politically correct but totally impracticable and wasteful Green Energy crap that is now driving them into the ditch. They screwed their infrastructure and ate their seed corn at the same time.

We're heading down the same path as long as we let Obamics run.

14 posted on 02/26/2012 7:54:01 PM PST by Ditto (Nov 2, 2010 -- Partial cleaning accomplished. More trash to remove in 2012)
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To: bruinbirdman
This is conjecture, but perhaps they thought a single currency could work in a continent of multiple legal and social systems, the southern half of which is nearly as politically corrupt as a Brazil or Mexico, because the end game was to be political as well as economic union. It hasn't worked out that way.

The Dollar is one of the unifying and underlining strengths of America but our history and economic environment are completely different from a Europe of 20 plus genuine nation states and widely varying national characters. They wanted a Festung Europa by non-military means, but run from Berlin just the same as the original model (with Brussels and Strasbourg as the smiling front men).

Compliance was to be bought, and the Euro did work for awhile to simplify and expand intra-European trade. But they forgot that it really is possible to run out of money and the patience of even the German people to support second world nations who don't have a work ethic or character to live off anything but tourism and loans.

15 posted on 02/26/2012 8:10:48 PM PST by katana (Just my opinions)
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To: rawhide
Josep Borrell, ex-president of the European Parliament and the voice of Spain's pro-European establishment, said, "We have reached the point where `taxes kill taxation'."

[Chancellor of the Exchequer] Osborne: "UK has run out of money."

yitbos

16 posted on 02/26/2012 8:20:41 PM PST by bruinbirdman ("Those who control language control minds." -- Ayn Rand)
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To: MrShoop

Thanks for saving me the trouble of pointing this out. AEP is a Keynesian fundamentalist, which might have been intellectually respectable in 1962, but today it tends to indicate a limited intellect.


17 posted on 02/26/2012 8:22:09 PM PST by achilles2000 ("I'll agree to save the whales as long as we can deport the liberals")
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To: achilles2000
He actually admits when he is wrong.
18 posted on 02/26/2012 8:33:38 PM PST by Theoria (Rush Limbaugh: Ron Paul sounds like an Islamic terrorist)
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To: Theoria

On that occasion, but consider the naivete of thinking that the fed isn’t political and inflationary...

Worse, like Krugman and others, AEP seems to think that by having heroic economists throw the right economic “levers” they can manage the macro-economy and thereby assure prosperity, full employment, and stability. This is absolutely delusional.


19 posted on 02/26/2012 9:24:49 PM PST by achilles2000 ("I'll agree to save the whales as long as we can deport the liberals")
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To: Vince Ferrer
What we are witnessing is the collapse of the welfare state. Government can't continue to pay the benefits promised. There aren't enough workers or taxes to pay the costs.

The problem is that trying to cut pensions and benefits is political suicide. The people don't want the austerity measures dictated by the EU. The Greek government may have passed legislation for the next round of cuts, but implementing them will be impossible. The people will resist.

We are heading in the same direction and the American public will react the same way as the Greeks and Spainards and Italians if we really start to cut government spending.

20 posted on 02/26/2012 9:31:18 PM PST by kabar
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To: kabar

Any government that can print money and inflate, will do so, because to not do that will cause riots and unrest. For us, there is no good alternative between austerity and inflation, although I prefer austerity in order to get it all over with sooner. But from the elite perspective, inflation is always better than austerity, because austerity would cause unrest which could topple the elite out of power. (Which is another good reason to advocate austerity from my perspective) So, inflation it is, and despite the debt ceilings and such, we are not going to seriously make cuts, even though I will still advocate them.


21 posted on 02/26/2012 9:49:07 PM PST by Vince Ferrer
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To: kabar
The people will resist.

And they will do so by supporting any authoritarian who promises to hang the bankers and keep the benefits flowing. Europe has been down this road before, not too many decades ago.

22 posted on 02/27/2012 5:25:29 AM PST by Mr. Jeeves (CTRL-GALT-DELETE)
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To: Vince Ferrer
Inflation will not solve our problems any more than it did in the Weimar Republic or Argentina. And don't forget that with more than 50% of our budget (and growing) devoted to the entitlement programs, inflation will drive their costs up (COLAs, medical services, etc.) and so will the debt servicing costs on the national debt, which have benefitted by the Fed's holding the interest rates below historical norms. We could be looking at debt servicing costs over a $trillion annually.

We have 54 million on SS, 47 million on Medicare, 60 million on Medicaid (Obamacare will add another 18 million to this total), and 46 million on food stamps. Inflation is not better than austerity when it comes to maintaining social order.

23 posted on 02/27/2012 7:18:06 AM PST by kabar
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To: Mr. Jeeves
And the question is how do you keep the benefits flowing? The birthrates for most of Europe are below replacement level. There are fewer workers to tax to provide benefits for aging societies.

We are in better position demographically in terms of birth rates (we are at replacement level), but we are aging as well. In 1950 there were 16 workers for every retiree, today there are 3.3, and by 2030 there will be only two. And by 2030, one in five residents of this country will be 65 or older, twice what it is now. How much can we tax our children and grandchildren to keep the benefits flowing?

24 posted on 02/27/2012 7:24:24 AM PST by kabar
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