Greece is now implementing several so-called “austerity” measures as a pre-condition of receiving the rest of Europe’s bailout benevolence. But what sounds “austere” to the Greeks is still quite excessive when compared to the government largesse being doled out elsewhere on the continent. In fact, at its heart Greek “austerity” amounts to little more than tinkering around the edges of the nation’s overextended entitlement culture, and in typical Ponzi fashion this political path of least resistance includes several new tax hikes that will only exacerbate the fundamental problem.
Meanwhile, even more frightening is the likelihood that the financial woes in Greece presage a broader European solvency crisis – one that will spread to other nations that are similarly drowning in the red ink of unsustainable government welfare. Spain, for example, is on the verge of having to tap into hundreds of billions of Euros tied to the EU/IMF bailout, and even that may not be enough to stabilize its teetering economy.
Spain’s welfare state includes a socialist labor system that makes it nearly impossible to fire workers for any reason. And like Greece, its habit of dispensing unsustainable taxpayer-funded largesse has been propped up for years by government denials and deception. Most recently, Spanish Prime Minister José Luis Rodríguez Zapatero chose to deal with the brewing fiscal crisis by ignoring it and delaying long-overdue reforms in an effort to maintain his political positioning.
It’s the Ponzi mentality all over again.
Eventually, though, the scammers will run out of people to scam – and Spain could very well represent the last great heist. Spain represents 10% of the euro zone banking system and 16% of all net euro-zone loans, meaning that its collapse could very well bring the entire global house of cards tumbling down. Such an outcome would clearly have disastrous effects on the American economy, which makes the aggressive expansion of the welfare state here in the United States all the more unexplainable. Greece and Spain (as well as Portugal and Ireland) are clearly cautionary tales – not examples for America follow.
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