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Home Publications Blogs Beat the Press Excellent Post Piece on What Deficit Reduction Is Doing to Spain

Excellent Post Piece on What Deficit Reduction Is Doing to Spain

Tuesday, 13 August 2013 04:33

The Post has a lengthy piece reporting on how the austerity policies being imposed on Spain by the European Central Bank are ruining the lives of its people.

Comments (8)Add Comment
huh?, Low-rated comment [Show]
Spain Should Redistribute Wealth
written by Tyler Healey, August 13, 2013 10:14
Spain's government is not monetarily sovereign. This means that, unlike the United States government, their taxes do not destroy money. Therefore, Spain should raise taxes on its rich citizens and redistribute the cash to its poor citizens.
That is some serious derp from pete
written by AJ, August 13, 2013 10:50
Where does one even start? (yes, I know one shouldn't). Spain is a "marginal" country (well, I guess we should just ignore it then. Who cares that people actually live and die there?). And even though it's marginal, pete's apparently such an expert on it that he's written you a long comment that you need to "get real" (he's apparently a renowned expert on "reality"). And he *knows* "they" (who is "they" again? Spain's unemployed people? Its leaders from decades ago?) committed "deliberate" (pete has a mens rea machine and can see their intentions!!!) accounting "fraud" (no one else with an interest in the EZ was checking their books? That seems criminally negligent if true. I guess the rich don't have to suffer for their mistakes, just Spain's unemployed).

Ah, the ubiquity of stupidity. Why do I even try?
written by PeonInChief, August 13, 2013 11:16
What the article misses is that Spanish politicians of all stripes exacerbated the crisis by bailing out the banks at the expense of the citizenry. They didn't, for instance, require that the banks write down the debt to market value. That would have saved many families. But then, our political leaders behaved just as badly.
Euro problems.
written by Ralph Musgrave, August 13, 2013 1:14

The US and UK also have a banking crisis, so the banking crisis is not the central cause of Euro periphery problems. The central problem is the decline in competitiveness of the periphery compared to the core (which was temporarily masked by loans by core banks to the periphery). Unfortunately, the periphery is not regaining competitiveness at all swiftly, which is why Samuel Brittan in his most recent article in the Financial Times said that the Euro will eventually break apart. I'm about 75% sure he is right.
written by Widgetmaker, August 13, 2013 1:48
Pete sez: "south Asia and African growth will simply decimate them unless they get their act together."

Well, for Spain to have "its act together" they must endure a brutal internal devaluation so that they may compete in the global markets. That is taking place right now and it takes a long time for prices to adjust downward. Spain has no control over its monetary system - it is locked into the Euro - so it cannot devalue the currency - they must devalue internally.

Spain was fiscally responsible prior to the crisis. They had low debt to GDP levels. In the run up to the crisis they were experiencing a housing boom and inflationary environment with all those private loans coming in from abroad, and it is very difficult for their economy to adjust now because they are locked into the euro straight jacket.

It is human nature to turn this into a morality play - the Spaniards had it coming to them for being so irresponsible, buying all that housing (like the rest of the world was doing). Now countless people are suffering through no fault of their own. Serves them right. Yeah, sure.
Accounting Fraud in Spain and Italy?
written by Dean, August 13, 2013 2:35

you better report your information to the European Union at once. They would want to know about this fraud in Spain in Italy.

In fact, Greece did commit pseudo-fraud in using a swap (courtesy of Goldman Sachs) to conceal debt. I say pseudo-fraud because friends in finance tell me that everyone knew about this trick and therefore were not really fooled. The other countries let Greece into the euro even though they knew it did not meet the requirements.
"Am I missing something?"
written by John Parks, August 13, 2013 4:19
@ Pete
Yes. What's a few billion among friends. One of Merkel's requirements to help out Greece was the Greek purchase of more new fighter jets and a submarine. Of course Greece was not forced to accept the offer, it was just a friendly offer they could not refuse. I suppose you could call it friendly persuasion.

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.