Skip to comments.Roubini Tells Europe to Stop 'the Savings Madness'
Posted on 06/12/2012 2:39:53 PM PDT by bruinbirdman
Governments in Europe should lower taxes and increase salaries to boost growth rather than insisting on austerity and continued saving, famous economist Nouriel Roubini told a German newspaper in an interview on Tuesday.
Roubini also said the German government should give its citizens incentives to go on holiday in countries in the south of Europe that were affected by the debt crisis to help those states recover.
Some leaders in major European countries have already shifted their rhetoric from austerity to growth, as tax increases and cuts in government spending have exacerbated the economic downturn, causing deep recessions in some euro zone countries. But Germany still insists on austerity as a way to bring budgets under control.
"The savings madness must be stopped. Governments must lower taxes and increase wages. Europe needs growth," Roubini told popular newspaper Bild.
"The German government should give every German household a 1000 euro ($1,250) travel voucher. However, it should only be used for holidays in crisis countries. That will help boost growth there. In addition, everyone who buys a holiday home in a southern European state should get a tax bonus, he added.
Pulling the plug on funding Greece, which has already been bailed out twice, would lead to the collapse of the single currency, Roubini
(Excerpt) Read more at cnbc.com ...
This sounds whacky, even though Roubini has been right often.
But, if you consider that a bailout through the EBC or the EFSF goes directly to the indebted country without benefitting any Germans, it makes a little more sense. This bails them out with vouchers that give the German citizens a bit of tourist joy. Also, the money is routed through the “industries” of southern Europe which are most competitive—namely tourism.
Unfortunately, I doubt that you could transfer enough money to make a difference in this manner.
Having lived in Germany for almost twenty years of my life....and been to both Greece and Cyprus...I can offer some observations here.
First, currently, the Greeks are already offering some of the best deals possible of the past twenty years. You can go over for one week (hotel, air, and buffet meals included) for 459 Euro ($600 roughly). Toss on another $200 for a second week. That’s a two hour flight from central Germany to Greece....all part of a package deal. I don’t think you really need to toss more free cash into the deal....the Greeks are already making it a pretty good deal for a two-week trip.
Second, the relationship right now in Greece with Germans....isn’t exactly great. Most Germans are very hesitant over making a trip to Greece...in fear of a confrontation. So money isn’t going to comfort them.
Third, and final....let’s say this works....but for other reasons possibly. Then would you come up next spring and offer another enticement deal to get folks to go off to Spain? Then in 2014....maybe Portugal? Then in 2015....maybe Italy? The German method of fixing something just turns into free vacation deals? A German hearing this deal....would start laughing, and then demand the political figure be fired.
Oops, of course in post 2 I meant ECB, not “EBC”.
The (European) Union shall establish an internal market. It shall work for the sustainable development of Europe based on balanced economic growth and price stability, a highly competitive social market economy, aiming at full employment and social progress, and a high level of protection and improvement of the quality of the environment. It shall promote scientific and technological advance.Sound like the USSR much? Lots of parallel goals mentioned in the USSRs constitution . . .
They are not bailouts. They are loans.
When Germany gives up the social market economy and their politicians stop talking trash about the “Anglo-Saxon economic model” (which our politicians have abandoned, frankly), I will start taking them seriously. While they hold on to it and the EU as their proxy imposes that economic model on all of the EU members, their government will look like manipulators to me.
On the off chance you are serious, look at Spanish sovereign bonds, which are clearly loans to the Spanish government. If the bank bailout for Spain goes through, the new loans will be given seniority over the old government bonds--which stretches the definition of loan priority. If you get pushed far enough down the priority chain, the old loans become worthless bailout gifts.
They may have shifted their *rhetoric* from austerity to growth — but, that's not the same as introducing measures that actually lead to growth.
The ersatz “Keynesianism”, which mainly involves more government spending, was never meant to be a prescription for growth. It was supposed to be a way to stabilize an economy — to lop the peak off bubbles, and fill in the troughs of recessions.
The only *growth* policy that the EU has implemented is the lowering of trade barriers. The EU started out as a free(er) trade zone — and free trade is a proven growth strategy.
Lower taxes are also a proven growth strategy; and Roubini is right to recommend them. However, does anyone believe that lower taxes are what the socialist governments of Europe have in mind, when their rhetoric turns to “growth”?
Another proven growth strategy is liberalization (in the original meaning of the word) of labour markets. Meanwhile, France and others are increasing the regulation of labour markets.
In the EU, growth policies are more honoured in the breach, than in the observance.
If “free trade” is a “proven growth strategy”, then how come the trade deficits for the USA are so colossal?
True, many in Brussels are pushing for that. I doubt it will ever happen. Can you see the German tax collectors marching into Italy, France, or Spain to collect moneys due? Or, for the populations of the Mediterranean counries sitting still forever for declining wages and living standards? I can't.
kudos! right on!
because imported stuff is not only very good but very cheap.
We shed the manufacturing that could be done elsewhere cheaper and perhaps better.
Americans love goods that are inexpensive compared with similar or less than equal stuff made in the USA.
We have a strong manufacturing base and our exports are strong
A loan is something that has a reasonable chance of being paid back at some point. Therefore these are not loans.
I don’t care what the EU calls them. These “loans” will never be paid back. There isn’t enough money. Period
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