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Yes, but that overspending was enabled by the Euro. When the peripheral countries (Italy, Spain, Greece, etc) entered the Euro, their cost of borrowing fell dra
by martythemaniak 15y ago
Yes, but that overspending was enabled by the Euro. When the peripheral countries (Italy, Spain, Greece, etc) entered the Euro, their cost of borrowing fell dramatically and people/governments responded to those incentives and borrowed, creating a false boom.
One of the key planks of economics is that people respond to incentives, so is it really suprising that when incentivized to borrow (whether it's southern european governments, or low income earners with sub prime mortgages), people borrow?
- riffraff 15y agodo you have numbers showing that peripheral countries borrowed more after they entered the euro? AFAIK Italy's deficit has been more or less stable for the last twenty years while debt has gone down for the first few years of the euro presence and has only risen again after 2008. As far as i can tell italy's problem has been and continue to be a de facto stagnation with growth rate around 1%, which surely is not the case for others e.g. spain.
- barrkel 15y agoYes, and you'd think that the people lending money would have also responded to incentives, and refused to lend so cheaply (both privately and publicly - each of the PIIGS has its own distinct malaise) to countries with a poor credit history. A lot of planks of economics have failed lately, and it's not all government fault.