Lawrence Person's BattleSwarm Blog 2/6/2022
Let’s talk about the European Debt Crisis.
[The sound you hear is the countless multitudes clicking off to another blog.]
Way back last decade, dispatches on the ongoing crisis were a regular staple of the blog. To summarize the crisis for those who weren’t paying attention back then:
• A bunch of countries joined the Eurozone without following the requirements outlined for membership, including limiting budget deficits to 3% of less of their GDP, and overall debt-to-GDP ratio of 60% or less. How were they able to join? Simple: They lied and the Eurocrats turned a blind eye, because EU.
• Foremost among those running into trouble were the PIIGS (Portugal, Italy, Ireland, Greece and Spain). (Cyprus and Malta also had serious issues, but their tiny size meant they presented no systematic risk for other nations, and Cyprus relieved it’s problems by becoming the dirty Russian money laundering capital of Europe.)
• Ireland was probably the most incongruous of the five, since their debt only spiked when the Irish government nationalized Anglo Irish Bank to prevent it from collapsing.
• In all other cases, the cause of of the problem was obvious: Each ran huge budget deficits to underwrite generous welfare state programs for countries with below replacement birth rates, and they were allowed to get away with it for a while because they used Germany’s credit rating in lieu of their own thanks to the Euro.
• The problem finally came to a head after the SubPrime Meltdown in 2008 made various banks and regulatory agencies actually scrutinize balance sheets and realize just how broke the PIIGS were.
• Greece was the worst, being the most dysfunctional, and absolutely refusing to slow down spending on their own. There followed a reoccurring farce where various Euro regulatory agencies (including the International Monetary Fund, the European Commission, and the European Central Bank, collectively known as “the Troika”) demanded Greece end their ridiculous high levels of deficit spending, Greece refused, the Troika threatened to cut off the tap entirely, Greece promised to be better, the Troika reluctantly extended them another loan, and then Greece continued to spend recklessly, setting up the next round of the farce.
• A bunch of Eurozone countries then implemented “austerity,” which involved not cutting spending to balance their budgets, but merely reducing the deficits slightly.
More:
https://www.battleswarmblog.com/?p=50473
