Steffan said: Using Spain as an example of the effect of such a decision, if Spain already has 22% unemployment and massive further cuts will be needed and certainly will be required and dictated by the imposed Mandarins, then unemployment will soar to probably 40% possibly more. No country can support benefits at that level
HundredthIdiot said: Putting aside debt servicing costs, is it really true that a developed country cannot cope with 40% unemployment? Surely the standard of living just has to drop until there is enough export income to feed everyone.
Norfolkit said: Totally with Steffan on this, imposing a savage austerity package on a country that already has 25% unemployment is politically impossible. Unemployment levels and loss of tax income would soar catastrophically, benefits would have to be cut again to match, probably down to subsistence levels, the Government would effectively have to sacrifice an entire generation for the greater good. People bought that in 1914, they'll never buy it again. It would be political suicide Such savage austerity will neither sort the defecit out nor allow the country to function. It is a dream of politicians desperate to solve a crisis entirely of their own making. It will not work. Indeed IMO the complete failure to recognise the absolute impossibility that this can work speaks volumes about how utterly out of touch the elite of the EU are becoming. This is NOT a workable solution.
But the "savage austerity" is being imposed extremely unevenly. There are presumably lots of people in Greece and Portugal doing just fine; there certainly are in Ireland.
In 2004 average public sector pay was €35k in the UK, €34k in Germany and €46k in Ireland (I don't have more recent figures to hand). According to the ECB, public sector compensation in Ireland grew by 64 per cent between 1999 and 2007.
Despite some cuts in public sector pay in the last couple of years, Ireland is still paying twice as much for hospital consultants as the UK and Germany, and has kept in place annual increments for time in service. Where is the austerity there?
My argument is that certainly in Ireland and probably in Greece this "austerity" message is being pushed by a self-serving, union-protected establishment. It's bulls
t - the gravy train rolls on.
Certainly an interesting view. And well argued.
HundredthIdiot is certainly correct that there will be winners as well as losers. He may well be right, that collapse is not inevitable.
But I disagree.
My concern is that the inevitable economic aftermath of countries like Ireland, Greece, Spain, Portugal and so forth living way beyond their means for year after year can only be collapse. This is about economics: countries that are wholly insolvent in the way that these defaulters already are cannot recover without first admitting the debt and then withdrawing from a currency they probably can never actually afford to join.
Ireland is so small the EU could comfortably subsidise the country without any real pain. Possibly Greece could be supported.
But Spain and Portugal are simply too big for the EU to support. The contagion also goes way beyond these countries. The Banks of France are bust if these countries fail as DJRC pointed out months ago.
Italy really is too big to fail. Dealing with the Insolvency of Italy in itself is too much for the EU.
The real problem is that the EU remedy is a smoke and mirrors subsidy from QE. Nothing is being done to address the fundamental problems inherent in whole countries spending way beyond their gross domestic product. These countries have NEVER had the economic strength to remain in a currency largely controlled by Germany. This has always been a smoke and mirrors job, ably abetted by the corrupt EU accounting policies.
The real problem is that the economic smoke and mirrors is gradually thinning out. Reality, in the shape of hopelessly insolvent sovereign states is beginning to dawn of world economics and the markets.
The conundrum is how this is to be resolved.
I believe that the clearly Insolvent countries must fall out of the Euro and not return for decades if ever. This will take decades to resolve whether by collapse or continuous subsidy.
Can the EU get its act together? I do not think so. I believe collapse and recovery is the only real way for Insolvent organisations to recover.
I also think the reality of the EU actually agreeing the Tobin Tax and Central Fiscal collection process in Brussels within a reasonable timescale is most improbable if, in fact, it is actually possible at all.
Time waits for no man: that is why I am convinced that default is inevitable.