I used to think Europe had got it right. Let the US be a military superpower; let China be an economic superpower ”“ Europe would be the lifestyle superpower. The days when European empires dominated the globe had gone. But that was just fine. Europe could still be the place with the most beautiful cities, the best food and wine, the richest cultural history, the longest holidays, the best football teams. Life for most ordinary Europeans has never been more comfortable.
It was a great strategy. But there was one big flaw in it. Europe cannot afford its comfortable retirement.
Greece’s financial crisis is, unfortunately, an extreme example of a broader European problem. Investors have been looking nervously at debt-levels and budget deficits in Spain, Portugal and Ireland for months. But even Europe’s big four ”“ Britain, France, Italy and Germany ”“ are hardly immune from concern. Italy’s public debt is about 115 per cent of gross domestic product. Some 20 per cent of this needs to be rolled over during the course of 2010. Britain is currently running a budget-deficit of nearly 12 per cent of GDP, one of the largest in Europe. George Osborne, who is likely to end up as chancellor of the exchequer in the new government, has described Britain’s official economic forecasts as a “work of fiction”. The French government has not produced a balanced budget for more than 30 years. And one of the reasons for the deep bitterness in Germany at bailing out Greece, is the knowledge that Germany is already struggling to balance its own books.
It is true that the citizens of Latvia and Ireland have already swallowed actual cuts in wages and pensions. But these are both countries that have experienced real poverty in living memory, followed by massive and unsustainable booms. They know that the last few years have been a bit unreal.
As the riots on the streets of Athens illustrate, however, not all Europeans will react so stoically to deep cuts in spending.
Read it all.
Gideon Rachman in the FT–Europe is unprepared for austerity
I used to think Europe had got it right. Let the US be a military superpower; let China be an economic superpower ”“ Europe would be the lifestyle superpower. The days when European empires dominated the globe had gone. But that was just fine. Europe could still be the place with the most beautiful cities, the best food and wine, the richest cultural history, the longest holidays, the best football teams. Life for most ordinary Europeans has never been more comfortable.
It was a great strategy. But there was one big flaw in it. Europe cannot afford its comfortable retirement.
Greece’s financial crisis is, unfortunately, an extreme example of a broader European problem. Investors have been looking nervously at debt-levels and budget deficits in Spain, Portugal and Ireland for months. But even Europe’s big four ”“ Britain, France, Italy and Germany ”“ are hardly immune from concern. Italy’s public debt is about 115 per cent of gross domestic product. Some 20 per cent of this needs to be rolled over during the course of 2010. Britain is currently running a budget-deficit of nearly 12 per cent of GDP, one of the largest in Europe. George Osborne, who is likely to end up as chancellor of the exchequer in the new government, has described Britain’s official economic forecasts as a “work of fiction”. The French government has not produced a balanced budget for more than 30 years. And one of the reasons for the deep bitterness in Germany at bailing out Greece, is the knowledge that Germany is already struggling to balance its own books.
It is true that the citizens of Latvia and Ireland have already swallowed actual cuts in wages and pensions. But these are both countries that have experienced real poverty in living memory, followed by massive and unsustainable booms. They know that the last few years have been a bit unreal.
As the riots on the streets of Athens illustrate, however, not all Europeans will react so stoically to deep cuts in spending.
Read it all.