The news:
Angela Merkel, the German chancellor, mounted stiff resistance tonight to any swift bailout of Greece, as a rift opened up between European capitals over how best to tackle the risks posed to the euro.
Despite a show of Franco-German unity on the crisis and the first statement from EU leaders pledging to safeguard the currency’s stability, hopes on the markets of a German-led rescue plan to shore up Greece’s critical public finances were dashed by Merkel, who repeatedly emphasised that Athens would need to put its own house in order and brushed aside all questions of financial support.
“Germany is stepping totally on the brakes on financial assistance,” said a senior EU diplomat. “On legal grounds, on constitutional grounds and on principle.” Another senior diplomat said of the Germans: “They’re not waving their chequebooks.”
Even if Germany wanted to, she can’t – there isn’t enough money in Germany to bail out all the troubled nations of the Euro-zone. Spain is actually in worse shape – while Portugal, Ireland, Italy and a host of other nations in Europe teeter on the brink of disaster. They’ve taxed, borrowed and spent themselves in to oblivion – and not having children over the past 30 years hasn’t helped, either (you know, if they had some kids in Europe they’d have workers and innovators and such…).
The ball cannot be kept in the air forever – and while Germany is healthier than all other European nations, it is on the skids to financial disaster, too. In fact, all nations pretty much are – or, at least, any nation which runs a regular annual government deficit. Even if we wanted to suppose that government spending can stimulate the economy (it can’t; not in any meaningful sense, but lets grant it for the sake of argument), this would only work in short spurts. Well, aside from a couple odd years, all the major economic powers of the world have spent the last 70 years “stimulating” their economies via deficit spending.
What we have, now, is a situation where there isn’t enough wealth to tax to make up for the shortfall – only massive reductions in government spending offer a way out of the mess. And this is precisely what short-sighted politicians don’t want to do because it will really anger an electorate to have its baby-bottle ripped away. This could result in the biggest nightmare a politician has – losing election. Politicians hope never to face such a thing – they hope to keep things going and that, some how, an exhausted, bankrupt economy will produce the funds to paper over the fiscal cracks.
But it cannot go on. Eventually, you not only have to balance the budget, you have to keep it balanced until such time as you are out of debt. Think in terms of decades of no deficits – or, at worst, very small deficits which will be made up within a year or two. There is nothing left.
The party is over.
The bill has come due.
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