Can Greece Dodge Another Debt Crisis?
The Greek government has the cost of its current debt under control. However, what gives cause to worry is its soon-to-come need to build up new debt.
The Greek government has the cost of its current debt under control. However, what gives cause to worry is its soon-to-come need to build up new debt.
The socialist welfare state is inherently unaffordable. It destroys its own tax base and leads to economic stagnation.
In the face of a new debt crisis, the Bank of England, the Federal Reserve and the ECB cannot return to buying large amounts of sovereign debt. The central banks saved indebted governments a decade ago. They can’t do it again. But there are other means at their disposal.
As Croatia’s lawmakers enter the final stretch toward euro membership, it is essential that they understand exactly what happened in Greece, and why. In five short years, 2009-2014, the Greek economy imploded: one quarter of it vanished. This was a direct result of the austerity packages that the EU and the ECB forced upon the government in Athens. What will Croatia do to avoid ending up in the same trap as Greece?
A debt crisis sweeping across both continents has the potential of bringing about a new global depression. Governments have no room to use fiscal policy to mitigate the crisis; their monetary policy capabilities have already been depleted in responding to the recent pandemic. Yet there was no mention of this threat in Davos.
Bloomberg suggests that consumers “sitting on 700 billion-euro ($753 billion) cash” is reason enough to predict macroeconomic resiliency in Europe, but this report is contradicted by findings by Eurostat on retail trade in the euro area and the EU as a whole.
A new debt crisis looks unavoidable. There is practically no interest in fiscal reforms across Europe, leaving the continent vulnerable to a destructive downward spiral of rising interest rates and structural budget deficits.
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