Quotulatiousness

May 11, 2010

A trillion dollars doesn’t buy as much as you’d expect

Filed under: Economics, Europe — Tags: , , , — Nicholas @ 07:54

It doesn’t, for example, buy exemption from the laws of economics:

European Union President Herman Van Rompuy said European governments need to consider pooling their national powers and create a joint economic government.

“We can’t have a monetary union without some form of economic and political union and that is our big task for the coming weeks and the coming months,” he said.

He said he would draft tougher rules for EU leaders to discuss in October that go beyond current EU limits on debt and deficit.

The core problem is near-zero economic growth, high unemployment and governments unwilling to take painful steps to get people to work more and longer.

Simon Tilford, an economist at the Center for European Reform think tank, warned that EU governments so far haven’t come up with anything “game changing.”

“What Europe needs is a growth pact because without growth, public finances aren’t going to be sustainable,” Tilford said. “The bond markets are going to be forcing them to make those kind of changes.”

Even EU president Van Rompuy warned that the bloc risks irrelevance and the end of its expensive welfare programs if it can’t speed up economic growth, forecast to expand by just 1 percent this year.

“With 1 percent growth we can’t finance our social model any more. With 1 percent structural growth we can’t play a role in the world,” he told the World Economic Forum in Brussels. “We need to double the economic growth potential that we now have.”

So even with a trillion dollar injection, you still can’t spend more than you make, year after year, and hope to carry on as if there wasn’t a problem. Who knew?

2 Comments

  1. So what will they do when this loan comes due? Are they not just delaying the inevitable?

    Comment by Da Wife — May 11, 2010 @ 07:57

  2. Do what any economically illiterate family would do: double-down and borrow even more. If somebody is crazy enough to continue to lend, they’ll continue to borrow.

    Structural changes, like raising (in some cases incredibly low) retirement age, cutting government staff, reducing spending, and reining in automatic wage increases all cost votes. As long as the voters are told they can have it all with no painful tax increases, they’ll throw their votes to the politicians who pretend they can offer all these things, plus a government-paid foreign vacation every year . . .

    Comment by Nicholas — May 11, 2010 @ 08:02

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