Portuguese biceps. Battle of the new parliament. I would ban all those applications!
During the 6 years of “austerities”, the public debt of the Eurozone increased from less than 6 trillion euro in 2007 to almost 9 trillion euro in 2013. Given that the economy of the Eurozone progressed slower than sleigh on dirt, the debt grew in relative terms as well – from 66.2% in 2007 to 92.6% in 2013.
And since the influx of fraudulent claims of some austerity measures does not have an end, we have similar figures for public expenditure in the Eurozone. While the income of countries. Thanks to the bursting of the bubble on which they were built, returned after 2007 back to reality, spending continue to grow. Spending of Eurozone governments increased from 4.16 trillion euro in 2007 to 4.78 trillion euro in 2013. In relative GDP, the public sector grew (yes, it grew by the cuts – what a mystery) from 46% of GDP to 49.7% of GDP.
We recall these figures regularly, even though they are not talked about in decent company. Events from last week gave us an excuse to remind them once again. Let’s start in Portugal. The Constitutional Court set aside a couple of measures aimed at reducing the salaries of civil servants. Portugal plans to undermine the consolidation of public finances, to which Brussels responded by freezing the bailout payment, which Portugal was receiving since 2011.
Now, while two years ago, such a situation would provoke furious negotiations, incantations and curses (as it was regularly case with Greece, which fought for each bailout payment), now everything is different. Bonds of half-bankrupt countries (Portugal having a debt of 130% of GDP) are, due to implicit guarantee of the ECB, being sold in the markets today with such a low interest rates that they are approaching historic minimums from the time of the biggest boom in the middle of the last decade. The Portuguese government has declared that no new budget adjustments will occur and that it gives up the last bailout payment. Who would reform and sacrifice the preferences when he can borrow?
Cyprus went bankrupt just a year ago. Now, it reports the comeback on the markets until the end of June. If it manages to sell the debt, in a while we can expect the Portuguese trajectory of reforms. Many feel the chance here. Italy is fighting with the debt of more than 130% GDP. However, local politicians are more fighting the EU fiscal rules than the actual debt. The Prime Minister Renzi wants therefore to strategically use the ongoing struggle for the chair of the President of the European Commission. At a meeting with Herman Van Rompuy, Renzi plans to negotiate barter – support of Juncker for the President in exchange for the discounts of the fiscal rules. Voters need to be pleased!
But perhaps such a trade will not be necessary. French and German Economy Ministers supported the initiative of the PES to refine the fiscal rules. According to the proposal, the spending on “growth investments” and jobs should not be counted as deficit spending. The private sector probably spends the capital on parties, therefore it needs to be taken out of its hands and put into administration of officials who know best what the “growth investment” is. Well, at least in case of electoral preferences and accounts in the Caymans, we do not have any doubts about the growth effect of public investments. Europe is proud of its progressive ideas, so maybe it would be better to abolish completely the ugly word of “deficit” and to replace it with something like “growth-investment bonus”.
Europe gradually gives up the efforts to dominate the public finances, competitiveness of economy is the ideological concept of neoliberal neoconservatives, which we will gladly cede to other parts of the world and the recovery of the financial sector will somehow resolve the ECB, after all, they have a new building full of smart employees. But the fight is important. The commissioner for Economy, Olli Rehn, knows with what the new EP will fight next. “Tax evasion, tax avoidance, tax planning!” The only problem of Europe are the experts on bark beetles, kebab stands with turned off cash registers and clever accountants at Starbucks. We will tax us out somehow from everything else.
Pennies can be then invested in growth, for instant in Ukraine – or rather in Russia, since the newest loan of 500 million euro from the EU will not wait long on the Ukrainian accounts until it will flow further to the East. Or in Greece, where salaries are delayed for 3-12 months and the third of them is paid in goods. Another alternative is to send them to French railways’ trade union, which cripples the transport in the country for 6 days already. In addition to the traditional requirement of less work – more money, they also have a quite unusual demand. The French state is supposed to take over 40 billion debt of two national railway companies. Yes, those who recently ordered 2.000 trains which did not fit on the platforms.
But one applause to Brussels too. Following the Europe-wide wave of strikes of taxi drivers against the new taxi-applications, the Spanish Government asked the Commission to do something with this issue (with applications, not with strikes). Commission, ready to regulate the moon in the night and the sun in the day, sent this request to the hell. One would wonder…
But the world is not only about the EU and sometimes we can be even thankful to our bureaucrats. The consequences of price controls in Venezuela are spreading like a plague. Country with the largest oil reserves in the world suffers from the lack of actually every kind of supplies. In the last couple of weeks, even hospitals are paralyzed – suffering from the lack of gloves or antibiotics. Not even a death is redemption. Shortages sharply raised prices of coffins and entrepreneurs from the sector estimate that in two or three months, it will be necessary to perform burials without them.
Argentina is slowly approaching another bankruptcy, when the U.S. court rejected its attempt to force all creditors to accept its terms (slashing the debt). This event can be interpreted in many ways. But to assure that Argentinians will get the right one, so called Ministry of Truth was created in June, or to be prices, the Secretariat for strategic coordination of national ideas.
Waste of money. After all, it’s always the woman who’s right!
Translated by Stanislava Dovhunová
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