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Comparing the Europe and US debt crises

The Economist has an insightful commentary on both debt crises. Excerpt below.

Both the US and the European Union have public finances that are out of control and political systems that are too dysfunctional to fix the problem,” Mr Rachman writes. I have some quibbles about the way he frames the economic issues as a generalised problem of “an unsustainable and dangerous boom in credit”, viz homeowner credit in America and the overdrawn borrowing of Greece and Italy in Europe. This seems to smooth over a lot of differences a bit too easily; the American housing bubble was fueled by CDOs, but the economic problems in Europe aren’t about an asset bubble caused by Greek or Italian government borrowing, and to the extent that the problems are due not to asset bubbles but to financial interconnectedness, the interconnectedness caused by private-sector issuance of CDOs and CDSs isn’t really the same as the interconnectedness caused by the adoption of the euro across 17 countries.

Europe’s “austerity measures” hitting some hard

September 24th, 2010 No comments

In this New York Times special report, Europeans speak out on government plans across the continent to bring public finances under control amid corruption and suspicion of governments not doing enough for the common man. Well this currently in France amid protests against raising the retirement age as part of a larger pension reform package to help control spending. Those who are protesting see bankers getting large bonuses while they are forced to work longer. But France’s retirement age is the lowest in Europe and many French know that their social safety net cannot remain the same for future generations.

You can see a series of insightful video interviews from Athens, Madrid, Paris, London and Frankfurt here.

Also, an interactive map of Europe’s debt crisis.

“…Some acknowledged that they might have contributed to the crisis by spending beyond their means, and said there was probably no alternative to bailing out banks and countries like Greece to prevent a wider downturn. They are, grudgingly, willing to accept cuts in pensions and salaries, provided that politicians, whom they see as complicit in the crisis, quickly clean up the mess. Yet despite the problems, they would also be unhappy to see the European Union unwind…’We are part of a generation who knows that things can vanish,” said Mathilde Donovan, 29, a French public relations executive….”

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