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Guys, this article is really wrong. I am European and the problem is much deeper than that. It concerns the welfare system that has grown too big to be sustaine

Guys, this article is really wrong. I am European and the problem is much deeper than that. It concerns the welfare system that has grown too big to be sustained by income taxes. Even having a taxation that is now close to 50% of the GDP. Banks are only a small subset of the problem. Europe has to find a way to either increase welfare productivity or to reduce it in order to reduce public expenses. What is driving now the crisis are public expenses, don't fool around with other fantasies. Edit. People are voting down. Not sure why. I am being harsh, but rationale, that should be fine with HN style.

cromulent 15y ago
The article talks about "Europe" but it does seem to focus on the Eurozone countries, and the Euro is definitely a factor in the current crisis. Otherwise it would not be one crisis, but several separate crises, which could be dealt with separately (e.g. by devaluation of the local currency). Sweden, for example, does not share the same problems even though it has probably the largest welfare system and highest tax rate as a percentage of GDP in Europe.
- viandante 15y ago
  Why Euro is a current factor of the crisis? Those people saying this are mostly old fashioned monetarists that would like to "pay" out the debt producing money and inflation. Italy 80s. Not sure that is a good idea. Especially, it doesn't solve the problem that is, again, too much spending compared to the income (yes, Europe crisis is as simple as that). I am not sure about Sweden, but I know Denmark and it's like you say. But in fact the problem is not too much spending, it is too much spending in relation to the income generated by taxes.
  - loup-vaillant 15y ago
    As far as I know, one of the biggest budget for our countries is debt service. Too much spending you say? Fine, cut on that budget, it's useless anyway. Or, rather, it should be. When you think about it, the idea a government debt is ludicrous. When a government needs money, it should just "print" it. To avoid too much inflation, it just needs to destroy money through taxes. In other words, governments should be able to borrow from their central banks at 0% interest rate. Oh, and private banks should not be allowed to create money at all, be it through fractional reserve banking, credit default swaps, or tax havens. Money is too important to be left in the hands of such a tiny special interest group. Now how do the system actually works? Private banks create the money, lend it to everyone else including governments (because governments relinquished the right to create money around the 70s), and force everybody to pay back at an interest. In the end, there is more debt than money, so the system is bound to either fail or grow exponentially. This is nuts.
  - cromulent 15y ago
    The Euro is a current factor of the crisis as that is what makes (for example) Greece's problem into Germany's problem. Germany has an interest rate of 2%, Greece 18%. Germany has debt of 83% of GDP, Greece has 180%. If Greece still had the drachma, then they could devalue it and work out their own problems. However, they don't. It is now the problem of every Eurozone country as their economies are linked to Greece through the Euro. And, given the nature of Europe, if the Eurozone has severe problems then so does everyone else. That's why it's a European crisis and not a Greece/Portugal/etc spending problem - because of the Euro.
    - viandante 15y ago
      Crisis in south Europe is due to public overspending (Where do you live? Do you understand how the money is spent down there?) Anyway, of course if you produce more money, you still have a spending problem. Only way to solve this in the long term is either increasing taxes or lowering the expenses. You choose.
      - cgrand-net 15y ago
        Producing more money doesn't fix bad spending policies but it reduces debt -- both private and public -- at the expense of the lenders. It's also a way to alter the capital/work incomes ratio. There is, rightly, a German trauma towards devaluation -- and that's why they agreed to be part of the Eurozone as long as the Euro was managed like the Mark.
      - viandante 15y ago
        That kind of debt decrease is just another tax. A sublte one, but a tax. And if you do that, then nobody will want to borrow you money at normal interest rates. Again, Italy 80s, we did it and it did not work.
nl 15y ago
But that isn't true! For example, Germany has a welfare system, but a budget defict that is ~3% of GDP (which seems pretty reasonable when you are trying to get an economy growing again) Austria, The Netherlands, Denmark, etc etc all have similar (or better) welfare systems and low budget deficits. The truth is that there isn't a single cause of the problems - Iceland was very different to Ireland, which was different to Greece, which is different to Italy. Each needs to be analyzed on its own. But there is a good argument that taking private (bank) debts on as public debt isn't always a good way out of a problem this big.
- viandante 15y ago
  Germany has 80% debt/gdp ratio.
  - nl 15y ago
    Germany has 80% debt/gdp ratio Yes, and...? Lots of people have a home loan that is greater than their annual income (ie, their debt/gdp ratio is greater than 100%) - even in places that had no housing bubble. A high debt/gdp ratio isn't bad unless you can't service your debt. Germany clearly can (as can most countries when the economy is growing)
    - viandante 15y ago
      Italy and other South European countries are not growing.
      - nl 15y ago
        Exactly. But to claim that is because of some "welfare state" thing.. the facts just don't back that up.
        viandante 15y ago
        I am not claiming that. I am saying that the problem with Europe is public debt and public spending. And that at European growing rates, expecially in the south, public spending cannot go up.
nhaehnle 15y ago
It concerns the welfare system that has grown too big to be sustained by income taxes. Or, to put it another way, the income taxes have become too low to support the welfare system. To be honest, the amount of spurious framing in these debates is annoying me. Of course the welfare system is sustainable. The only question is whether there is a will to sustain it. One way to look at it (which, admittedly, may be a form of framing as well): Do we want to live in a perhaps demanding but still caring society, where you can focus on achieving great things, or do we want to live in an uncaring society, where the majority is forced to focus on maintaining what little they have. Fear of losing status or real standards of living is a great productivity killer, because fear generally switches our brains into a narrow-minded tunnel vision mode. That mode may be useful when you're chased by wolves in the forest, but it's not such a great thing for being productive in a complex economic environment. What is driving now the crisis are public expenses, don't fool around with other fantasies. There are always two sides of the coin. Where you see high expenses, I see low income. It is also important to note that public welfare systems tend to be more efficient than private ones. In the case of Germany, for example, the overhead of private pension funds is often around or above 4%, where the overhead of the public pension system is below 1%. So for the same amount of pensions provided, the private system is more expensive and less efficient than the public system.
- viandante 15y ago
  All what you want. But Italy has a tax to gdp ratio close to 50%. Germany has it probably higher than 40%. You want to increase taxes? Fine. Then say you want to nationalize the economy, because that is the end result.
  - nhaehnle 15y ago
    I am sorry, but that does not logically follow. If you think it does, then at least you have to explain why you think this is the case. There certainly have been times with higher tax ratios without a nationalized economy.
- bdunbar 15y ago
  Of course the welfare system is sustainable. Welfare is sustainable. Until you have more people on the roles than are working. Then .. not so much. I would say that welfare is sustainable at the time it was enacted, and for that time period. A good example might be US Social Security. At the time, relatively few people lived more than a few years past retirement age. This is sustainable. Time passes. People live a lot longer, there are more people drawing on the system. There are more benefits _in_ the system than originally imagined: old people vote and they vote (as a block) for pols who will give them stuff. And then more stuff. I'm simplifying of course but .. welfare is not sustainable because people want more stuff and initial conditions change.
nl 15y ago
I suspect you are being voted down because the facts aren't on your side. Firstly "Europe" isn't a single country, and by putting basket cases like Greece in the same class as Germany you weaken your argument. It concerns the welfare system that has grown too big to be sustained by income taxes. You need some facts to support that. Government spending in Germany is 43% of GDP, 45% in the Netherlands and 38% in the US. Most people would say the German and Dutch economies are stronger than the US economy at the moment. Even having a taxation that is now close to 50% of the GDP http://www.oecd.org/dataoecd/48/27/41498733.pdf http://www.oecd.org/dataoecd/48/27/41498733.pdf lists tax as a percentage of GDP. The only country with tax close to 50% of GDP is Denmark (which has a strong economy). Greece is 31%, the US 28%. Australia and Canada (examples of developed nations with strong economies) are 30.6% and 33.3%. That doesn't seem to indicate a direct link at all. What is driving now the crisis are public expenses, don't fool around with other fantasies. The evidence doesn't seem to support that. Please address the example of Ireland (where there was no public debt crisis until the government bailed out the banks) and Iceland (where banks weren't bailed out, welfare and tax are high but the economy is growing again).

cromulent 15y ago

The article talks about "Europe" but it does seem to focus on the Eurozone countries, and the Euro is definitely a factor in the current crisis. Otherwise it would not be one crisis, but several separate crises, which could be dealt with separately (e.g. by devaluation of the local currency). Sweden, for example, does not share the same problems even though it has probably the largest welfare system and highest tax rate as a percentage of GDP in Europe.

viandante 15y ago
Why Euro is a current factor of the crisis? Those people saying this are mostly old fashioned monetarists that would like to "pay" out the debt producing money and inflation. Italy 80s. Not sure that is a good idea. Especially, it doesn't solve the problem that is, again, too much spending compared to the income (yes, Europe crisis is as simple as that). I am not sure about Sweden, but I know Denmark and it's like you say. But in fact the problem is not too much spending, it is too much spending in relation to the income generated by taxes.
- loup-vaillant 15y ago
  As far as I know, one of the biggest budget for our countries is debt service. Too much spending you say? Fine, cut on that budget, it's useless anyway. Or, rather, it should be. When you think about it, the idea a government debt is ludicrous. When a government needs money, it should just "print" it. To avoid too much inflation, it just needs to destroy money through taxes. In other words, governments should be able to borrow from their central banks at 0% interest rate. Oh, and private banks should not be allowed to create money at all, be it through fractional reserve banking, credit default swaps, or tax havens. Money is too important to be left in the hands of such a tiny special interest group. Now how do the system actually works? Private banks create the money, lend it to everyone else including governments (because governments relinquished the right to create money around the 70s), and force everybody to pay back at an interest. In the end, there is more debt than money, so the system is bound to either fail or grow exponentially. This is nuts.
- cromulent 15y ago
  The Euro is a current factor of the crisis as that is what makes (for example) Greece's problem into Germany's problem. Germany has an interest rate of 2%, Greece 18%. Germany has debt of 83% of GDP, Greece has 180%. If Greece still had the drachma, then they could devalue it and work out their own problems. However, they don't. It is now the problem of every Eurozone country as their economies are linked to Greece through the Euro. And, given the nature of Europe, if the Eurozone has severe problems then so does everyone else. That's why it's a European crisis and not a Greece/Portugal/etc spending problem - because of the Euro.
  - viandante 15y ago
    Crisis in south Europe is due to public overspending (Where do you live? Do you understand how the money is spent down there?) Anyway, of course if you produce more money, you still have a spending problem. Only way to solve this in the long term is either increasing taxes or lowering the expenses. You choose.
    - cgrand-net 15y ago
      Producing more money doesn't fix bad spending policies but it reduces debt -- both private and public -- at the expense of the lenders. It's also a way to alter the capital/work incomes ratio. There is, rightly, a German trauma towards devaluation -- and that's why they agreed to be part of the Eurozone as long as the Euro was managed like the Mark.
    - viandante 15y ago
      That kind of debt decrease is just another tax. A sublte one, but a tax. And if you do that, then nobody will want to borrow you money at normal interest rates. Again, Italy 80s, we did it and it did not work.

nl 15y ago

But that isn't true! For example, Germany has a welfare system, but a budget defict that is ~3% of GDP (which seems pretty reasonable when you are trying to get an economy growing again) Austria, The Netherlands, Denmark, etc etc all have similar (or better) welfare systems and low budget deficits. The truth is that there isn't a single cause of the problems - Iceland was very different to Ireland, which was different to Greece, which is different to Italy. Each needs to be analyzed on its own. But there is a good argument that taking private (bank) debts on as public debt isn't always a good way out of a problem this big.

viandante 15y ago
Germany has 80% debt/gdp ratio.
- nl 15y ago
  Germany has 80% debt/gdp ratio Yes, and...? Lots of people have a home loan that is greater than their annual income (ie, their debt/gdp ratio is greater than 100%) - even in places that had no housing bubble. A high debt/gdp ratio isn't bad unless you can't service your debt. Germany clearly can (as can most countries when the economy is growing)
  - viandante 15y ago
    Italy and other South European countries are not growing.
    - nl 15y ago
      Exactly. But to claim that is because of some "welfare state" thing.. the facts just don't back that up.
      - viandante 15y ago
        I am not claiming that. I am saying that the problem with Europe is public debt and public spending. And that at European growing rates, expecially in the south, public spending cannot go up.

nhaehnle 15y ago

It concerns the welfare system that has grown too big to be sustained by income taxes. Or, to put it another way, the income taxes have become too low to support the welfare system. To be honest, the amount of spurious framing in these debates is annoying me. Of course the welfare system is sustainable. The only question is whether there is a will to sustain it. One way to look at it (which, admittedly, may be a form of framing as well): Do we want to live in a perhaps demanding but still caring society, where you can focus on achieving great things, or do we want to live in an uncaring society, where the majority is forced to focus on maintaining what little they have. Fear of losing status or real standards of living is a great productivity killer, because fear generally switches our brains into a narrow-minded tunnel vision mode. That mode may be useful when you're chased by wolves in the forest, but it's not such a great thing for being productive in a complex economic environment. What is driving now the crisis are public expenses, don't fool around with other fantasies. There are always two sides of the coin. Where you see high expenses, I see low income. It is also important to note that public welfare systems tend to be more efficient than private ones. In the case of Germany, for example, the overhead of private pension funds is often around or above 4%, where the overhead of the public pension system is below 1%. So for the same amount of pensions provided, the private system is more expensive and less efficient than the public system.

viandante 15y ago
All what you want. But Italy has a tax to gdp ratio close to 50%. Germany has it probably higher than 40%. You want to increase taxes? Fine. Then say you want to nationalize the economy, because that is the end result.
- nhaehnle 15y ago
  I am sorry, but that does not logically follow. If you think it does, then at least you have to explain why you think this is the case. There certainly have been times with higher tax ratios without a nationalized economy.
bdunbar 15y ago
Of course the welfare system is sustainable. Welfare is sustainable. Until you have more people on the roles than are working. Then .. not so much. I would say that welfare is sustainable at the time it was enacted, and for that time period. A good example might be US Social Security. At the time, relatively few people lived more than a few years past retirement age. This is sustainable. Time passes. People live a lot longer, there are more people drawing on the system. There are more benefits _in_ the system than originally imagined: old people vote and they vote (as a block) for pols who will give them stuff. And then more stuff. I'm simplifying of course but .. welfare is not sustainable because people want more stuff and initial conditions change.

nl 15y ago

I suspect you are being voted down because the facts aren't on your side. Firstly "Europe" isn't a single country, and by putting basket cases like Greece in the same class as Germany you weaken your argument. It concerns the welfare system that has grown too big to be sustained by income taxes. You need some facts to support that. Government spending in Germany is 43% of GDP, 45% in the Netherlands and 38% in the US. Most people would say the German and Dutch economies are stronger than the US economy at the moment. Even having a taxation that is now close to 50% of the GDP http://www.oecd.org/dataoecd/48/27/41498733.pdf http://www.oecd.org/dataoecd/48/27/41498733.pdf lists tax as a percentage of GDP. The only country with tax close to 50% of GDP is Denmark (which has a strong economy). Greece is 31%, the US 28%. Australia and Canada (examples of developed nations with strong economies) are 30.6% and 33.3%. That doesn't seem to indicate a direct link at all. What is driving now the crisis are public expenses, don't fool around with other fantasies. The evidence doesn't seem to support that. Please address the example of Ireland (where there was no public debt crisis until the government bailed out the banks) and Iceland (where banks weren't bailed out, welfare and tax are high but the economy is growing again).