We can only hope. The Greek crisis once again shows that socialism does not work. How are the overspending Europeans trying to fix this problem, by spending even more money.
Yesterday, the subprime government debt crisis, the direct product of the above-mentioned summits and other meetings of the world’s economic and political leaders, produced another threat. The European Union, its members sliding into stimulus debt and losing market confidence, would again do “whatever is necessary” to end the crisis, restore confidence and protect the euro.
Whatever is necessary turns out to be more of the same. The amazing European and IMF economic stimulus machines will tackle their debt crisis with a new strategy: More debt! Already racked with rising deficits and debt loads that are in dangerous territory, the EU plans to fix the problem with US$1-trillion loan packages. And if the debt doesn’t work, they’ll crank up monetary policy and have the European Central Bank buy up government bonds and private bonds of banks that are lending money to the governments. That spells inflation, although the ECB said it would be taking countermeasures to “sterilize” or neutralize the inflationary impact of its bond plan.
Robert Samuelson sees this as the death spiral for the welfae state. Increased entitlements with ballooning debt and rapidly aging populations.
The Welfare State's Death Spiral
By Robert Samuelson
WASHINGTON -- What we're seeing in Greece is the death spiral of the welfare state. This isn't Greece's problem alone, and that's why its crisis has rattled global stock markets and threatens economic recovery. Virtually every advanced nation, including the United States, faces the same prospect. Aging populations have been promised huge health and retirement benefits, which countries haven't fully covered with taxes. The reckoning has arrived in Greece, but it awaits most wealthy societies.
Americans dislike the term "welfare state" and substitute the bland word "entitlements." The vocabulary doesn't alter the reality. Countries cannot overspend and overborrow forever. By delaying hard decisions about spending and taxes, governments maneuver themselves into a cul de sac. To be sure, Greece's plight is usually described as a European crisis -- especially for the euro, the common money used by 16 countries -- and this is true. But only up to a point.