A world in economic crisis

Finnish anti-Euro party gains in election – Portugal rescue package in doubt

Posted in European Union, Greece, Ireland, Portugal, Spain, unemployment, welfare state by Aussie on April 19, 2011

Now for the latest in the Euro rescue saga. Portugal is next to last of the PIGS nations to need a financial rescue package. Spain is still on the cusp, but has not needed to be rescued so far. However, the Portugal package is on the line, the Greeks are revolting (again) and the Finns are becoming more and more anti-Euro zone.

The success of the TrueFinns means that the Portugal rescue package is not a sure thing, since the TrueFinns have vowed to vote against the supplying of any more funds for these failing economies.

Portugal has opened its doors to the IMF and the European Commission, who will need to evaluate the economy and make recommendations. It is expected that Portual requires a package worth about $70 million Euros.

However, just like Spain, Ireland, Greece, and yes, even the U.K. unless these countries are willing to evaluate their social welfare criteria these packagaes are truly a waste of time. All of these countries need to re-evaluate their socialist system, because long term welfare policies do not work.

Greece has been a prime example of what has gone wrong. The lazy Greeks simply do not want to understand that the changes are necessary if the economy is to survive. Those changes include reforming social welfare payments in order to cut the government debt. However, I doubt that the Greek government has the will to make the deep cuts, especially in the face of protests from the Greek anarchists. The Greeks have shown themselves to be lazy and selfish in that they are unwilling to make the necessary sacrifices for the good of the country.

For a different perspective on the same European economic woes, there is more here and here is a snippet to get a taste of what is in store if there is no change in a welfare system that is bankrupting countries left, right and centre:

Greece is now paying 19.7% on 2 year bonds and there is a real fear of government default. This will put even more pressure on the other PIIGS, who are either on or already over the edge. The question then becomes which economies are triaged. Greece, Iceland, and Ireland are all moribund. Portugal is in the middle of a political crisis, and Spain is teetering on the edge. We are seeing the slow motion destruction of the economic and social programs that helped these economies enter the 21st century. It is hard to believe where these countries ranked economically and demographically even 25 years ago.

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3 Responses

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  1. cantueso said, on April 19, 2011 at 7:31 pm

    But no, it is not simply the welfare systems, which, by the way, here in Spain was started off by General Franco who ruled Spain as a dictator for 40 years and can hardly be classified as a socialist.

    Both Portugal and Spain, and I think Greece, too, lack a strong industrial base. You call it laziness. I don’t know about Greece, but I do know that Spaniards are not lazy, but somehow they won’t or cannot give themselves to certain kinds of work. It could even be that the problem is in a lack of commercial rather than manufactoring virtues. And there the US has also not been so outstanding, have they.

    • Aussie said, on April 19, 2011 at 8:04 pm

      I have seen no evidence of that laziness in Spain, but definitely in Greece. They are very lazy. The welfare system is only one part of the equation that has led to structural failures, and you quite rightly point to one very good reason why it is failing… the industrial base is not strong. All of your points are quite valid.
      General Franco was a fascist (ooch horrible word I know) but the fact is that fascism is a form of socialism. It is not Communism but it is socialism. The evidence of socialism is actually the welfare state – the giving of pensions, and the dole. In some countries the unemployed have received the dole without giving anything in return. However, my understanding is that in Spain, even the illegal immigrants have to work to get money. In my view that is a good thing. I believe that there should be work for the dole, otherwise people become very lazy.

      Rather than criticising Spainards in General, I am aiming at the U.K. in particular because of its inherent problems with the paying of pensions, the NHS and giving the dole to the unemployed etc. etc. on a long term basis which has developed a class of people who are structurally unemployed.

      The other thing about Spain, at least what I have understood, is that you do not have a very good export market, which is weird because you do manufacture the goods, but it would be rare to see those goods in markets outside of Europe. Perhaps the real problem is the European common market because it could be argued that the European Common market is interfering with free market forces.

      I have not concentrated on the USA because I am still trying to find out the problems that exist there. I live in Australia, and yes Australia has difficulties as well. Those difficulties were more pronounced when we did things like removing tariffs. Our manufacturing base disappeared, and thousands of jobs disappeared at the same time. This is also the USA experience. However, this is where we have to look more closely at the impact of higher taxes, on the individual as well as on the company. For example here in Australia there is an extra tax on employment that is levied by State Governments. It means that companies try to keep the level of the employees below a certain number so that they do not have to pay that tax.

      The problem with such taxes is that the taxes decrease employment opportunities. When employment opportunities are decreased it means that fewer people are paying the taxes, and it also means that more people are demanding things like unemployment benefits.

      Perhaps you can give me some further details on Spain 🙂

      Personally, I had been watching the Spanish situation. What I see as one of your problems is the size of illegal immigration. It is illegal immigrants that tend to strain welfare systems in various countries. (even in Australia this is the case) So far they have avoided requiring a bailout, and they have remained a lot stronger than Portugal. Greece on the other hand is a basket case. It is Greece that needs the structural reform. They really do need to get off their butts and remain in employment until the age of at least 60 so that there is less of a burden when it comes to welfare.

    • Aussie said, on April 19, 2011 at 8:05 pm

      p.s. I should have said thank you very much for the response and I look forward to more contact since you can probably fill me in on more detail about what is happening in Spain.

      I am really hoping that Spain does not need the bailout. However, the money was accepted and the roads were built with that Euro money.


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