Cyprus has decided to raid the piggy banks of depositors. In order to fund the excesses of wayward borrowers and a spendthrift government they have decided to scalp up to 10% from saved funds in their banks. Stealing the wealth of those who have done it right…as Cactus Kate rightly says Cypriots riot for much less.
There is going to be bloodshed and politicians will cop it.
Imagine over your weekend your government announced they are going to steal 6.75-9.9 per cent of your total savings to pay for those who ran up all the debt?
Paul Krugman is the economic equivalent of a global warming advocate. He doesnâ€™t let reality get in the way of a good theory.
The simple explanation is that the Baltic countries have pursued the opposite policy of the southern Europeans. In 2009, the Baltic governments each carried out strict austerity, with aÂ fiscal adjustmentÂ of about 9.5 percent of GDP, mainly though expenditure cuts and substantial structural reforms. The southern Europeans, by contrast, delivered substantial fiscal stimulus in 2009. Previously fiscally conservative Cyprus and SloveniaÂ ran up budget deficitsÂ of 6 percent of GDPÂ in 2009, but neither benefited from greater growth. Instead, they have been trapped with large budget deficits and are now being overwhelmed by their public debt, admittedly also because of banking crises.
One would think, given the divergent outcomes, that a serious economist would advocate for countries to follow the successful example of northern Europe rather than the failed strategies of the south. Nobel laureate andÂ New York TimesÂ columnist Paul Krugman doesn’t seem to see it that way. Throughout the crisis, Krugman has attempted to explain away or even mock the Baltic countries’ success even as they have continued to inconveniently disprove his arguments.
Good on the Baltic countries for sorting out their own shit and taking a bit of pain instead of going on the bludge.
Julia Gillard isn’t one to hold back with her opinions and her opinion on Europe and their mass credit downgrades was that they had it coming:
THE Prime Minister, Julia Gillard, has rubbed salt into the wounds of European nations reeling from weekend credit downgrades, declaring they had it coming for avoiding tough decisions.
Speaking afterÂ Standard & Poor’s stripped France and Austria of their AAA ratings and downgraded Italy, Portugal, Spain, Cyprus, Malta, the Slovak Republic and Slovenia, Ms Gillard said the moves were the “price to be paid” by governments that had put off reforms.
“For too many years, European governments have deferred the nation-building, productivity-enhancing reforms which Australia has made the foundation of our dynamic and resilient economy,” she said yesterday.
“In stark contrast to Europe”, Australia had strict fiscal rules that would return it to surplus in 2012-13. European leaders should “swiftly undertake structural reforms to boost their economic potential and lift growth”.