Europe Incomprehensible

Europe, like the ostrich, don't want to see their problems. On Saturday, while returning from South America, I had the opportunity to read a Financial Times article that left me more than surprised. I must admit that I had to red it several times before I can understand that part was a joke and that part was written seriously.

In this article, the author, Tim Harford, made a parody on on the presentation of the UK government's budget before parliament. He assumes that the Minister of Economy, George Osborne is licked in a closet to give the opportunity for a "economist say things with meaning".

This economist "meaningful" begins to develop his plan for ending the crisis. "My plan is simple, says this imaginary character. Short-term stimulus, long-term consolidation and reform that generates a healthy taxation system". 


Until now, says nothing new. But starting my concerns when I hear the phrase "short-termstimulus." In Europe all short-term measures became permanent, exacerbating their problems.


"Mr. Osborne has been proposing to cut taxes while reducing expenditure. But in fact this is the last thing needed in a time when aggregate demand is weak," continued the "prudent economist." 


"I will implement a package of spending on roads, railways, primary schools inovercrowded areas and social housing. By using the surplus resources in the economy, this plan will stimulate demand and would provide a low-cost infrastructure and urgent need for economy in general.

Appealing to the principle that prevention is better than cure, we will reduce the need forpublic spending in the next decade and the next.

Bond investors have shown an enormous appetite for granting loans to governments that are outside the euro area, and it would be foolish to ignore this provision to lend money when it would increase the UK's fiscal position over time.

These measures increased the deficit. But none of them increase the structural deficitand would cause substantial long-term changes in the debt profile of the country."Judgment this economist. 

Finally, this "economist" concludes that intends to help reduce the deficit, taking awaybenefits for the elderly and simplifying the tax system.

Once I finish reading this article and this set of ideas, I had to get some air, count to ten and start reading again. I thought he had not understood or it was a joke. However, after reading it a third time, I realized one of the biggest problems that exists in Europe.

The population and the authorities are unwilling to accept the level of crisis they face.Psychologically, they are at the stage of denial.

The origin of this huge problem is the chronic deficit incurred by the government for many years. Year after year, governments spent beyond his income, "stimulating the economy" artificially. As it was possible to maintain for many years these huge deficits?.This was possible thanks to the availability of financing (and also cheap). 


Currently, UK has a debt level equivalent to 90% of its GDP and a fiscal deficit that is approaching 10% to GDP.

Hahaha, and the "prudent economist" want "stimulate the economy" with more spending on railways, homes and schools. Recognizes that these costs increase the deficit but do not increase the "structural deficit" (what?). Insists that can continue to fund these deficits by issuing bonds. 


Ah!, but has a plan to reduce the deficit in the next decade and in ten more years. This means that this "economist" thinks they have 20 years to begin to lower its deficit.


In fact, in UK and the rest of Europe still will not understand that their economic situationis untenable. They have to make radical changes to enable them to grow back. But first they have to stop spending so much. That the government can not keep paying the billsof the population.Reduce spending will have a serious impact its economy in the short term and possibly also the medium term. But do not is mortgaging the future of their children and grandchildren.

UK and Europe economies are "addicted" to the deficit and debt. More spending is like trying to cure a drug addict, giving a little more of cocaine or crack.

Finally, the must understand they are not as rich as they think they are. Get out this big problem that must mean more impoverished before they begin to recover. Otherwise, the only thing that will make is to delay the pain of going through an inevitable way.