It’s Not About Greece Any More (Some Scary Numbers)

The Baseline Scenario ^ | 5/10/2010 | Peter Boone and Simon Johnson

[mojito]

The Greek “rescue” package announced last weekend is dramatic, unprecedented, and far from enough to stabilize the eurozone.

The Greek government and the European Union (EU) leadership, prodded by the International Monetary Fund (IMF), are finally becoming realistic about the dire economic situation in Greece. They have abandoned previous rounds of optimistic forecasts and have now admitted to a profoundly worse situation. This new program calls for a total of 11% of GDP in terms of “fiscal adjustments” (i.e., reduction in the budget deficit; now meaning government spending cuts mostly) in 2010, 4.3% in 2011, and 2% in 2012 and 2013. The total debt to GDP ratio peaks at 149% in 2012-13 before starting a gentle glide path back down to sanity.

This new program is honest enough to show why it is unlikely to succeed. Daniel Gros, an eminent economist on euro zone issues based in Brussels, has argued that for each 1% of GDP decline in Greek government spending, total demand in the country falls by 2.5% of GDP. If the government reduces spending by 15% of GDP – the initial shock to demand could be well over 30% of GDP.

[mojito]

It's no longer good money after bad. It's horrible money after insane money.

Thank you, Ben Bernanke, for allowing the US taxpayer to finance this mess.

[screaminsunshine]

Wow a trillion Obama bucks was only good for 400 on the Dow. Now they are really really absolutly out of OPM. What next??

[advance_copy]

Europe gonna get some of Obama’s stash.

[boycott]

Greece is a good arguement for states’ rights and the decentralization of government. If it wasn’t for the Euro and the European Union, all of Europe wouldn’t be getting hammered by this.

Additionally, if we had less federal government influence and power, we’d be more secure as a nation because a collapse of the federal government wouldn’t be as painful if they didn’t have much power. The federal government needs to defend us and that’s about it.

I know I am stating the obvious to people with just a little bit of common sense but it’s a shame liberls don’t get it.

I also realize that my observation isn’t going to do much to help Greece and it’s probably too late for to help the USA. We’re almost too far down the tubes already.

[Kay Ludlow]

Bernanke should be fired. He's not an elected official, and as such has no constitutional authority to use OUR dollars to bail out Europe. I didn't see any of them stepping over here to bail us out as we spent trillions to ‘shore up the economy’ (not that it really worked anyway).

[Las Vegas Ron]

It's no longer good money after bad. It's horrible money after insane money.

It's worse than that, the money that's being tossed around isn't worth the paper it's printed on, there is nothing to back it.

[mojito]

My understanding is that Obama approved this move by Bernanke and the Fed (big surprise). The great 0 was apparently on the phone often with Angela Merkle, pushing her to go along with this bailout plan.

[2aberro]

Europe gonna get some of Obama’s stash

Yep,,, haven't we always pulled their butts out of the fire of their igniting?

Only difference is we are going to get burned this time. I've stocked up as much as possible, waiting for the storm.

[lurk]

The problem is, other countries haven’t spent enough on Greece. We need to send them a gazillion dollars to fix this.

[mountainlion]

We will probably have a rush on the bank now that Europe sees the free money. Each in turn will want more.

[Verginius Rufus]

It never seemed to me to make sense for Greece to belong to the European Union. Physically it may be part of Europe, but culturally it's something different. While Europe was going through the Renaissance, the Reformation, and the Enlightenment, Greece was under the rule of an alien despotic government. (In one sense they didn't need the Renaissance, since they had never lost touch with their ancient heritage the way western Europeans had, but there was more to the Renaissance than reviving ancient knowledge.)

Maybe instead of bailing them out, the European Union should be waving good-bye. Maybe then the Greeks will get serious about fixing the mess they are in.

[qwertypie]

Rule to remember: once socialists attain power, they will do anything to keep it. The EU is nothing but socialists coalescing their power.

The rescue package was more important than straightening Greece out or protecting the economic viability of each member country by cutting Greece loose. They had to keep Greece and they had to keep Greece on the hook. Otherwise, the whole contraption flies apart.

[Verginius Rufus]

When the US Constitution was being debated by the conventions in the 13 original states, how many of the delegates saw a vote for ratification as irrevocable, something that could never been undone? There's probably no way to know, but I would guess many of them never imagined that a state might be constrained by military force from leaving the Union.

In theory, I think, a country may leave the European Union, but what will happen if one tries? Would they in fact be allowed to escape from the clutches of the bureaucrats in Brussels?

[webstersII]

“In theory, I think, a country may leave the European Union, but what will happen if one tries?”

If they try to leave? It won’t be too many years before they kick Greece out.

And then, not too long afterward the whole thing will fall apart.

[GOPJ]

We have the money to bail out Spain and Portugal too, right?

And Italy?

Then again, all these folks will be lining up to help us when we go under in 2012, right?

[BenKenobi]

Never happen.

They will destroy everyone else first, and the sad part is that the US is helping them.

[john in springfield]

They won’t have to work out puttin’ gas in their cars. They won’t have to work out payin’ their mortgages.