It is surprising that those who are “managing” the economy are still sticking to the same formulas even though it has been shown that they are failures. They are tightening their seat belts as they drive the bus off the edge of a cliff. Much better plan would be to get of the bus!
May 6, 2010, 6:11 am <!– — Updated: 3:52 pm –>PETER BOONE AND SIMON JOHNSON
The Greek “rescue” package announced last weekend is dramatic, unprecedented and far from enough to stabilize the euro zone.
The Greek government and the European Union leadership, prodded by the International Monetary Fund, are finally becoming realistic about the dire economic situation in Greece. They have abandoned previous rounds of optimistic forecasts and have now admitted to a profoundly worse situation. This new program calls for “fiscal adjustments” — cuts to the fiscal deficit, mostly through spending cuts — totaling 11 percent of gross domestic product in 2010, 4.3 percent in 2011, and 2 percent in 2012 and 2013. The total debt-to-G.D.P. ratio peaks at 149 percent in 2012-13 before starting a gentle glide path back down to sanity.
This new program is honest enough to show why it is unlikely to succeed.
Daniel Gros, an eminent economist on euro zone issues who is based in Brussels, has argued that for each 1 percent of G.D.P. decline in Greek government spending, total demand in the country falls by 2.5 percent of G.D.P. If the government reduces spending by 15 percent of G.D.P. — the initial shock to demand could be well over 30 percent of G.D.P.
ITS NOT ABOUT GREECE ANYMORE. Well, duh was it ever? The riots in Greece were all about the oppression of people by an unjust economic system, and if you don’t believe these words of mine, just look at the pictures in this post from 16 December 2008: Greece, Clues and Lies