Spain And Greece Battle For The Bottom! Germany Is Still A Model! Why?

image

After reading an article, we see some obvious comparisons of some nations in the Eurozone.

MADRID/BERLIN (Reuters) – Anyone needing a New Year reminder of the divide that has been threatening to tear apart the 17-nation euro zone need only look at Thursday’s German and Spanish jobs data.

To the north, work. To the south, unemployment.

The number of Germans out of work actually rose for the ninth month running in December, reflecting some of the strains of the euro zone debt crisis on Europe’s largest economy.  And Mediterranean Spain’s official tally of those out of work fell in the month.  But both figures are belied by other factors.

Germany’s jobless number, for all its recent rises, remains close to a post-reunification low. Spain’s improvement was based almost entirely on temporary holiday jobs. Around one-in-four Spaniards are out of work.

The outlook for 2013 from analysts is jobs growth in Germany and further joblessness in Spain.  The labor success in Germany – unemployment rate around 6.8 percent – is partially thanks to years of wage restraint and structural reforms undertaken in the mid-2000s.

That was the good and bad comparison, now for the ugly. 

GREECE, SPAIN VIE FOR FIRST PLACE

Spain’s latest jobless data means 4.8 million people are registered as out of work, but the figures are considered less reliable than data from the National Statistics Institute (INE).

INE recorded 5.8 million Spaniards out of work in the third quarter, putting the country’s unemployment rate at a record 25 percent, the highest since the Franco dictatorship ended in the 1970s.

The only comparable level in the euro zone is in Greece which, in an economic depression for six years, recorded a monthly unemployment rate of 26 percent in September, meaning that it may by now have jumped ahead of Spain.

So, what happened?  All three nations joined the Eurozone before the new currency was printed.  All three were supposed to have met certain economic criteria before they were allowed entrance and they were suppose to maintain this criteria. 

For the sake of brevity, I’ll resist the urge to delve into cultural differences.  For now, we’ll just simply inspect what happened.  And, what happened isn’t difficult to pinpoint.  Spain’s and Greece’ joblessness is a result of two things.

Spain and Greece had/have an unusually high reliance upon the government for employment, and then they ran out of money.  Simply put, that’s what happened.  Germany, OTOH, has continued with relying upon private sector jobs.  True, like any Western nation, Germany does also rely to heavily on government jobs, but not nearly as bad as Spain and Greece. 

So, there Spain and Greece are.  They can’t really create government jobs because they’ve no money.  They’ve both raised taxes to get more, but they’ve reached the point of diminishing returns on their taxes.  In other words, they can’t tax enough to make up for the shortfall of their balances. 

What do you do about it? 

Well, socialists and Keynesians, (but, then I’m being redundant) would say to increase government spending to get the economies over the hump.  We see this advocated by the likes of Krugman.  But, these governments don’t have any money to do so.  And, this is what got them in trouble to begin with. 

If they weren’t in the Eurozone, they could simply print more money, but, that only delays and worsens the problem.  To an extent, we see this occurring in the US.  The US will have a debt ceiling discussion soon, we’ll agree to raise the debt ceiling and continue to print money in various forms.  Without constraint on the spending, we’ll only make the problem worse in the future. 

So what is one to do? —— LEARN!!!  It is a basic law of nature.  We see it in economics, we see it in physics, we see it in chemistry, we see it everywhere we look.  THERE IS NOTHING FREE.  Sooner or later, the piper has to be paid.  Spain and Greece are paying for the dance they’ve danced.  They still refuse to learn the lesson nature is teaching them.  The US is still dancing, deluding themselves that there is a perpetual money tree.  One doesn’t fix these problems without pain.  But, the solution is easily recognized once the thought of eventually paying the piper is understood.  In Spain and Greece, they’re attempting to barter with nature.  They’re trying to raise taxes with little cuts to their spending.  They’re trying to find a balance to keep as much government reliance as possible.  In the US, we’re still raising taxes and government spending, still insisting that we can do the things nothing else in nature has ever been able to do, we’re trying to cheat nature.  

It is that most of the nations in the world have the wrong consideration.  Like Spain and Greece, they’re seeking a middle ground of taxes and spending.  But, these are government equations.  In the end, they all lead to the same place —- an over reliance on the government to provide jobs and motor the various economies.  The proper view is to understand what the limitations of government are in the world of economics and hold a line there.  Because there is nothing free, we must understand that each government job, each government dependent, subtracts from the general wealth of a nation.  We also must acknowledge the role of the government.  There isn’t anything wrong with providing a safety net for the populace.  Indeed, it is our responsibility as humans to do so.  It is our imperative to care for the sick, elderly, and downtrodden.  But, if one simply acknowledges that the assistance provided detracts from the general wealth of a nation, then the foundation of good economics and good fiscal policy can be laid. 

About these ads
This entry was posted in Economics. Bookmark the permalink.

30 Responses to Spain And Greece Battle For The Bottom! Germany Is Still A Model! Why?

  1. DirkH says:

    Spain and Greece demonstrate the nature of the Keynesian Endpoint: The bureaucrats are the last man standing; their tax hikes massacre the private sector.

    (Meanwhile, the unemployed Spaniards blame capitalists; demand more socialism – the unions are of course controlled by the same bureaucrats and connected people)

    It’s not a pretty sight. But you’ve seen the same connection with OWS and SEIU etc already.

    Business in the EU SCRAMBLES to Germany; it’s an industrial singularity. Fastest bull run ever; THE BEARS GOT MASSACRED. THEY ARE DEAD; their skins hang over the campfire; it’ll be a few weeks til we see the first one again.

    It’s the big Berlin wrecking ball. There’s NO chance Greece and Spain can compete. Of course, this can’t last; and the bulls who don’t take their gains off the table in time will be the next ones to become the meal.

    Beware the summer.

    • suyts says:

      Germany benefits from others failures. Maybe if Spain and Greece just raise taxes a little bit more! That’ll fix it! And yeh, our OWS and SEIU people are no different. They will insist on the bleeding until we are as dry as Greece and Spain.

      Indeed, beware the summer. I think that’s when it hits the fan.

      • DirkH says:

        This is all a replay of how the competitive West German industry clobbered the East German industries after reunification. Just like with Greece and Spain, East German companies were suddenly at an enormous productivity disadvantage because they suddenly had to pay the wages in hard German D-Mark instead of weak DDR-Mark.

        This time, many more people are affected, and I doubt Germany can stem it. Something’s gotta give.

        • DirkH says:

          “This time, many more people are affected, and I doubt Germany can stem it. ”

          make that “and I doubt Germany can accomplish it. “

        • suyts says:

          Right, there’s just too many. The common currency is a doubled edged sword.

  2. Jerry says:

    “There isn’t anything wrong with providing a safety net for the populace. Indeed, it is our responsibility as humans to do so. It is our imperative to care for the sick, elderly, and downtrodden.”

    Wrong. There is so much wrong with this that I don’t know where to begin.

    • suyts says:

      Jerry, agreement with the author isn’t required. You are more than welcome expound.

      • cdquarles says:

        There’s nothing wrong, per se, with a ‘safety net’; just don’t expect one run by the government to do what you think it will. :) In the US, before we imported ‘Social Insecurity’ from Germany, the safety net was the civil society. That is, yourself first, your family second, your friends third, your church fourth, and any other social societies/mutual aid associations fifth. Government, under the founding notion, was never to get involved in ‘charity’, particularly not the Federal government.

      • suyts says:

        Entirely agree. I should, at some point, make clear what I mean sometimes when I discuss charity, governance and the like. Yes, Social Security proper, is an insidious example of overreach, wealth confiscation, and many other things wrong with current political thought in the US.

  3. DaveG says:

    James a little while ago you said there more blood in a stone if you just squeeze a little harder – We are witnessing it again. In good old England they drove the top tax bracket up to 90% resulting in the great the Brain drain to Australia, Canada, New Zealand the USA etc..

    I like Dirks description.

    Spain and Greece demonstrate the nature of the Keynesian Endpoint: The bureaucrats are the last man standing; their tax hikes massacre the private sector.

    • suyts says:

      For some reason, these people have an inability to learn. Why does this have to happen over and over again?

      Yeh, Dirk’s description is pretty much spot on.

  4. David says:

    “There isn’t anything wrong with providing a safety net for the populace. Indeed, it is our responsibility as humans to do so. It is our imperative to care for the sick, elderly, and downtrodden”

    Indeed, and I agree. Hoewever, first we must define a safety net. The key is two fold. One is properly limiting it to a clean bed to sleep in, and basic necessary food and weather protection, very basic medical care which should be charity, not government driven. And two and most important is to have the recipients administer the program in whatever way possible, from building shelters to preping food, to growing food, etc etc etc. Oh, and also there should be government incentives to have as much done by the private as possible, like extra tax breaks for charities designed to shrink government programs. Simple, logical, streamlined and a fraction of todays cost.

    • suyts says:

      Agreed. When I reference government, in this manner, it is in the general term.

      The point about understanding that the services, employees, and recipients subtracting from the general wealth means to equate it to “charity”. It isn’t “entitlements”, it is charity.

      • Me says:

        He lost me on the extra tax breaks for charities designed to shrink government programs. Sounds like a NGO mess we see lately.

        • DirkH says:

          We have that kind of system in Germany. It has strange consequences. The non profits make so big money that they need to blow it on modern art, expensive limos for their bosses and ongoing expansion. That means they’re in dire need of more mentally disturbed drug addicts who they can help for the rest of their lives.

        • David says:

          Hi Me, I did not speak clearly. The point is actually to set up the govt as disadvantaged competion to charity in the same areas, and to give additional tax breaks to certain giving, and at the same time to reduce govt giving and expenses in that area, as a percentage of this giving.

          So the govt expenses go down, while actual “giving” goes up, and also likely efficency goes up as govt wastefulness swallows a large percentage of any govt programs. This could be effective at both the state and fed level.

        • Me says:

          Yeah that’s the catch 22, sounds good in theory but reality is different. But I get what you were saying now.

  5. Latitude says:

    Don’t forget, there are two Spains…
    North is the givers….
    …and south is the takers

    The closer a part of a country is to the Med, the worse it gets…….

    • suyts says:

      Isn’t that a strange phenom?

    • DirkH says:

      Difficult to say. When democracy came into being after Franco’s death, the separatist tendencies of basques and to a lesser degree Katalans were appeased by declaring them autonomous provinces. To further apeease the rest of the country, they created 16 more synthetic autonomous provinces and gave each one of those control over the purse strings.

      This lead to massive waste on regional government levels, prestige projects abounded, the central state who collected the taxes had to foot the bill but had no control over the spending.

      So, looks like a dysfunctional bureaucratic structure to me, not related to North/South issues much.

      It only blew up when cheap EU money ran out in the BFC. But it was dysfunctional all the time. All these provinces have impressive art museums and airports etc; projects where a lot of money disappeared in the pockets of cronies, the usual kind of thing.

    • suyts says:

      Wasn’t Catalonia going to declare independence?

      • DirkH says:

        Yes; they are one of the two “real” regions who actually claim a kind of cultural independence. Basques the other. Don’t know about the history and why they consider themselves special, though. Don’t think they’ll actually do anything – only if the Eurozone gets further out of control which will happen if the Euro collapses.

        • Latitude says:

          Dirk, it’s north/south 100%…
          the north is very prosperous…and they are sick and tired of their money/taxes paying for the lazy blood suckers in the south….

          I’m quoting my family there…..they are Basque

          The Kats want the Bas on board…..but the Bas can’t stand the Kats either…..but if they join up..it’s a done deal…..they have a lot of political pull….that’s where all the money is

          Brief, they even speak a different language…for years their languages were banned and they were not even allowed to speak it…..recently they were allowed to teach school in their language…….they are not even spanish

        • DirkH says:

          Ok, I knew Catalonia is at the mediterranean so I thought of it as South, but I looked up the map, due to the funny shape of Spain it’s actually part of the North. So in that regard you’re right.

          https://en.wikipedia.org/wiki/Catalonia

        • DirkH says:

          Oh. Visited by the Visigoths.

          https://en.wikipedia.org/wiki/Visigoths

          That explains it.

        • Latitude says:

          naw…the Basque were there first….they even have a different DNA….some people think they are the last of the Neanderthals

        • DirkH says:

          No, what I mean is, the Catalonians were visited by Germanic tribes – like the northern areas of Italy. And just like in Italy you find industrial activity where the Germanic tribes left their mark and probably some genes as well.

          I know about the ancient heritage of the Basques and that they’re a tribe on their own.

        • Latitude says:

          Ever wonder why the Romans conquered all of that part of Europe…
          ….but went around the Basque country?
          and why the Nazi didn’t invade them?

          …because they were lined up around the mountain sides doing this!

        • suyts says:

          Oh. Visited by the Visigoths……. That explains it.

          It would the Catalona part. And, yes, the Basque are a separate people.

          As a young person, we took a couple of trips through Italy. The contrast in people (N/S) was remarkable. It does seem some cultures are simply more industrious than others.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s