Euro Crisis

Americans Set to Learn Wrong Lessons From the Euro Crisis as Fiscal Cliff Looms


The Greek government has approved its 2013 budget by a vote of 167 to 128. The passing of the budget was required in order for Greece to continue receiving bailouts from international lenders. Thousands protested the budget outside the Greek Parliament in Athens while inside left-leaning politicians argued for the budget to be rejected. 

The budget anticipates a contraction in the economy, a growth in the national debt, and cuts worth 9.4 billion euros. A rather important assumption made in the budget is that Greece will be granted two additional years to meet its deficit reduction goals, something that has yet to be formally approved by international lenders. A report from the International Monetary Fund, European Commission, and the European Central Bank (collectively referred to as the 'troika') on Greece's reforms has not been completed.

The recent budget debates and the protests leading up to the vote have highlighted tensions that have been growing in Greece. Anti-bailout left-leaning parties and the xenophobic nationalists Golden Dawn are enjoying increased popularity. In the case of Golden Dawn some see no reason to think that the surge in popularity will diminish. From Reuters:

Political analysts see no immediate halt to its meteoric ascent. They warn that Golden Dawn, which denies being neo-Nazi despite openly adopting similar ideology and symbols, may lure as many as one in three Greek voters.

"As long as the political system doesn't change and doesn't put an end to corruption, this phenomenon will not be stemmed," said Costas Panagopoulos, chief of ALCO, another independent polling company. "Golden Dawn can potentially tap up to 30 percent of voters."

What is especially worrying about the situation in Greece, and the eurozone more broadly, is that some Americans are claiming to have learned all of the wrong lessons from the fiasco. From Bloomberg

When the housing bubble burst in 2006, U.S. policy makers looked to Japan for clues about what to do—and not do—in response. Now their attention is shifting to Europe as America gets set to follow that region with a concerted attack on its budget deficit.

Among the lessons being drawn: Don't put off budget action until the financial markets demand it. Big, immediate cuts aren't always the best way to reduce deficits. And central bankers should be ready to try to offset the economic impact of any fiscal contraction.

Elsewhere in Europe The Spanish Banking Association has put a two-year freeze on house evictions after a woman killed herself shortly before she was to be evicted from her home.

Unsurprisingly, it looks like Iceland, which was hit hard by the financial crisis but enjoyed a relatively speedy recovery, is not in a hurry to join the European Union. Unfortunately, it is a little too late for Iceland's lessons to be learned by American policy makers who seem intent on sending the U.S. on a path more familiar to the Greeks. 

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  1. Sure. Why not self-destruct? I can’t think of how that would hurt the guys running the show now.

  2. A while ago on Facebook I saw one of those political graphics that claimed that Iceland had applied some leftist solutions to their crisis, and that’s why they were recovering. I’ve forgotten the details, though.

    1. Kind of like those stats showing that Holocaust denial is a valid position to espouse.

    2. I seen the same thing I know for the most part it boiled down to lefties praising Iceland for screwing over those “evil” creditors.

      1. Jesus they’re dumb. Screwing over creditors is not the same as refusing to bail them out.

    3. As I recall, the government of Iceland wanted to do the standard issue bankster bailout. The voters revolted, and if memory serves, had to do it twice.

      So, the creditors of those banks got screwed, but that’s just biz the way it should be.

      And, waddayaknow, with the bad capital pruned from the system and a notable lack of moral hazard, Iceland has done just fine. Its a mystery.

      1. My problem with the whole thing is that moral hazard is a multi billion-dollar industry. And it’s completely unregulated.

  3. When Greece gets bogged down in civil war, can we all pool our dough and buy Crete? There, we can set up the Republic of Columbia, or something, and maintain a free paradise!

    1. Republic of Columbia

      How about “Republic of Colombia”?

      1. You guys are so unoriginal. It will obviously have to be the Republic of Coluambia.

    2. How about we buy the Island of Lesbos, and rename it the Island of Lipstick Lesbos?

      1. ^this

        I’ll be in my bunk – dreaming

      2. Will it have a female leader with the title of Golden Dawn? Golden Dawn sounds like a porno star.

        1. Maybe if you’re into wetwork.

    3. Until the caldera blows up again. Then things might suddenly take a turn for the worse.

      1. I’m sure we can get some volcano insurance.

  4. The fiscal cliff LOOMS LARGE

  5. We need to get away from the idea of GDP as the defining metric of our economy, and especially as the end goal of economic policy.

    Yes, it provides an instant snapshot of what is happening.
    But it is too manipulable through the G component to be our consistent measure of economic policies and management, and it combines many different elements that have very different long term effects, while obliterating our sensitivity to those differences through aggregation.

    1. GFL. Good Fucking Luck.

  6. I believe that the lesson we are all learning from the Eurotards, unfortunately, is that you can teeter of the brink of financial disaster, apparently forever, without actually falling off the cliff.

    I mean, I can’t even remember how many weeks and months have gone by without seeing a plethora of articles, daily, with titles like ‘This is it, Europe has 2 minutes to solve financial crisis, or it’s all over! Merkel meeting with ‘someone’. Barf.

    1. It’s all because everyone is racing to the bottom. It’s a race to see who will be the last turd to flush.

  7. When Europe goes over the edge this time and they resume killing each other, can we just sit this one out?

    1. That would be wise. If we’d done that the first time, probably no Nazis and no Soviet Union.

  8. Not only Europe, but Japan is slowly sinking back in to recessions as well, let’s not forget that side of the world.

    The fall in GDP translated into an annualized rate of decline of 3.5 percent, government data showed on Monday. While U.S. growth showed a modest pick up in the third quarter, Japan and the euro zone economies are shrinking.

    “The GDP data confirms that the economy has fallen into a recession,” said Tatsushi Shikano, senior economist at Mitsubishi UFJ Morgan Stanley Securities in Tokyo. “It is set for a second straight quarter of contraction in the current quarter.”

    A recession is commonly defined as two consecutive quarters of contraction.

    The data kept government pressure on the Bank of Japan to boost monetary stimulus even after it eased policy in October for the second straight month as a strong yen and a territorial row with China exacerbate weak demand for exports.


  9. Neo-Nazi? How about neo-Crowley?

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