I don't know where you get the "30%-35% real unemployment" figures, that to me seems absurd given that European economies are known to have large underground economies in the region of 15% of GDP... and in the case of Spain somewhat larger[0]. Albeit, unofficial, the number of jobs created by a shadow economy of €253bn is too large to ignore. Now, 25% of GDP is underground economy, and 25% unemployment seem to have something in common, don't you think? The problem to me seems to be a budget balance issue: how can Governments pay for services that a large number of the population uses, but doesn't pay. This, in my opinion is what is causing a collapse: lack of funds to pay for services, and obligations (debt), and loose cost/investment policies.
> how can Governments pay for services that a large number of the population uses, but doesn't pay
What do you mean by "large number of the population"? Most of the wasted money that Spain, Portugal and Greece pay are the interest on the loans they had to take to bail out the banks.
Including having billions sitting around waiting for the banks to fail. Of course the banks say they don't need it, but the interest is almost nil, so they all took loans from that money to borrow to the economy with giant profits. Those loans provided by the international institutions are simply wealth redistribution, from the poorer southern countries to the richer countries.
> Most of the wasted money that Spain, Portugal and Greece pay are the interest on the loans they had to take to bail out the banks.
I don't know how you draw that conclusion. What source are you using? Interest expenditure in Spain is around 3.5% of GDP, just look at the Eurostat numbers. Then, mixing Spain's and Portugal's economic situation with Greece's is just comparing apple and oranges, as both suffer crisis for completely different reasons.
3.5% of GDP is a large part of the cuts being applied now. The main disagreement is that when the richer countries ignored the deficit limits to increase investment in their economies had no sanctions, while the smaller countries are forced into signing treaties that forbid public investment, in economies that are highly dependant on the public sector. Germany also benefits from being in the common market by having a larger market for their goods, but denies borrowing money for the entire EU as a whole, benefiting selfishly from their lower interest rates. They get the benefits of the EU with no downsides.
> If no loans where provided the savings of millions of people would of been wiped out, literary.
The amount of money in low risk investments and deposits it's a small fraction of the bailout. Not just that, the European Central Bank guarantees 100k€ for each person, no questions asked. It's the investment banking that creates massive losses.
So now, to you, 3.5% is "Most of the wasted money"... 3.5% is no economic pressure compared to the cost of running oversized Government structures. Back in the 80's when cost of capital for these Governments was in the 10%-15% no one really complained.
Can you cite the source where "countries ignored the deficit limits to increase investment" and "while the smaller countries are forced into signing treaties that forbid public investment". I'm fascinated by this opinion, a source would be useful, and the name and date of the agreement too.
Again, can you provide a source for the use of capital injections as you seem to know "The amount of money in low risk investments and deposits it's a small fraction of the bailout". How small is that fraction, where can I see that split?
I've got a sense that you are quoting political propaganda, but no hard evidence. But if you want to argue with no substance, and say that 2+2=78, I'm not here to for that.
> countries ignored the deficit limits to increase investment
EU finance ministers reject the European Commission’s recommendation to initiate sanctions proceedings against France and Germany for flouting the Stability and Growth Pact’s rules.
http://ec.europa.eu/economy_finance/economic_governance/time...
This treaty defines goals that in practice leave no budget for public investment. In the last years Portugal's debt ballooned to 125% of GDP due to all the austerity implemented. Getting this to lower to the standards of the treaty in such short time forces any government to cut spending in essential public services, sell at discount prices natural monopolies such as electricity and water distribution and raise taxes (50%+ total rate for freelancers).
As for the last one, at least in Portugal the biggest amount of money was spend covering for BPN's losses, a small bank with a market share of 2% that required upwards of 5 billion euros of taxpayer's money. Another giant money sink was BPP, an investment bank.
- I'm still waiting for the specific examples, the europa.eu link doesn't show any information you mention. Again I quote you "countries ignored the deficit limits to increase investment", none of that is mentioned in the website you refer to.
- The "European Fiscal Compact" doesn't forbid public investment. Feel free to point me to the clause in question.
- And finally:
> a small bank with a market share of 2% that required upwards of 5 billion euros of taxpayer's money
What has market share got to do with the size of the capital requirements? Lehman Brother had 0% US retail banking market share, and yet the capital requirement was well above many of the largest retail US banks. You are mixing two completely independent variables! You are mixing capital structure with a vanity metric which is market share... it's mind boggling.
The specific example are right there, Germany and France were the first countries to break the treaty and they got away scott-free.
The Compact doesn't forbid public investment per-se, but the goals it sets, combined with the current situation of some countries makes any policy other than maximum austerity unfeasable. If we can't even decide how to pay our own loans, the government turns into a bunch of bureaucrats with no real power, might as well be annexed by the loan sharks.
Market Share in commercial bank should provide a metric to the size of the bank in relation to the entire financial system. It's the whole base of the "too big to fail" ethos.
This is getting ridiculous, you are digging yourself into a hole.
No, in the specific link there is no mention of "ignored the deficit limits to increase investment in their economies had no sanctions". Your words, not mine.
Ok, so we can agree that "smaller countries are forced into signing treaties that forbid public investment" is a false statement.
Again, you are mixing the vanity metric of market share with capital structure. What do you define as "market share"? Is it volume of deposits, assets on the balance sheets, assets under management, number of employees, number of clients? What market share are you referring too? Your "market share" argument is like saying that your javascript doesn't work because your company doesn't have enough Facebook likes... Haven't you ever heard of the Basel Accords?! I can't believe I'm reading your comments on Hacker News.
Before I give up on this conversation: "Too big to fail" does not refer to market size. It refers to the entities that systemically affect risk with one another, and it includes institutions that are non-depository in the financial system... unlike the Portuguese banks you mentioned. It's really frustrating to read comments like yours on Hacker News, based on loose buzz words, but empty in substance.
> The problem to me seems to be a budget balance issue: how can Governments pay for services that a large number of the population uses, but doesn't pay.
If the population doesn't pay, who does?
The way taxes work, is that the population pays the taxes to the government, and the government in return pays for/provides certain services. Taxation is basically just like insurance, coupled with some sort of progressive redistribution or wealth.
Like in most countries, including the US, budget deficit is paid with debt, and increase in taxes. That is the problem. The solution here is to uncover the underground economy, make them pay taxes (at reasonable rates), although this is no silver bullet.
thats printing plus taxing..and over doing the printing part? why not print as much as one would ordinarily tax? saves the trouble of employing 100s of 1000s of people to do the tax paperwork.. and inflation is in effect a wealth tax anyway...
[0] http://www.theguardian.com/business/2014/jan/30/spain-black-...