No Return To Normal - the Galbraith article | 96 comments (96 topical, editorial, 0 hidden)

He has been comparing Spain to Florida for a while.

NYTimes.com: The pain in Spain ... (Paul Krugman Blog, January 19, 2009)

The pain in Spain ...
... isn't hard to explain. Spain was basically Florida, with a housing bubble inflated by both resident and holiday purchases, and now the bubble has burst.
But Spain is in worse shape than Florida, for two reasons -- reasons familiar to anyone who was involved in the great debate about whether the euro was a good idea.
First, Europe doesn't have a central government; Spain, unlike Florida, can't draw on Social Security and Medicare checks from Washington. So the burden of recession falls entirely on the local budget -- hence the country's declining credit rating.

To which I replied (but my comment didn't pass moderation) that Spain is a sovereign country with its own central government, taxes and fiscal policy and, yes, it could draw from its own "Social Security and Medicare". Spain's budget per capita probably exceeds Florida's "local budget" severalfold.

He's just wrong on what it is like to be an EU member state, and has been for two months.

Most economists teach a theoretical framework that has been shown to be fundamentally useless. -- James K. Galbraith

by Carrie (migeru at eurotrib dot com) on Fri Mar 20th, 2009 at 09:33:51 AM EST
[ Parent ]

Re: Latest column (none / 1)

True enough, but Spain does have the SGP, which is where I think his -- admittedly very muddy, even with a generous reading -- main point would come in. Spain has a much larger budget than Florida, but what's that got to do with the price of eggs in Taiwan? I think he'd argue that Spain is under certain restrictions on what it can do fiscally, not wholly unlike state governments in America, but that also the EU can't do the kinds of things the federal government here can do.

Not as strict as what Florida must adhere to, but then I think the comparison with Florida has a lot more to do with the two areas having been boom-states for construction due to their warmer climates attracting Brits and Northerners.

The SGP is obviously not set in stone, and maybe that's where he gets tripped up. But that would be more a failure to understand the nuances of EU politics than a failure to grasp the main concepts.

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (pedobear@pennstatefootball.com) on Fri Mar 20th, 2009 at 10:49:24 AM EST
[ Parent ]

Re: Latest column (none / 1)

This is what Joaquín Almunia, European Commissioner For Economic And Monetary Policy has to say about the Stability and Growth Pact (25 February 2009)

...
The downturn, interventions in the banking sector and stimulus measures are all taking their toll on public finances. The government deficit is projected to reach 4.8% of the EU GDP in 2010, its highest level in 15 years.
...
This morning the Commission adopted opinions on the second batch of Member States' Stability and Convergence Programmes - the documents in which countries detail their budgetary plans for the next five years. Six countries foresee deficits above 3% of GDP and therefore, in accordance with the Treaty, the Commission has adopted excessive deficit reports under Article 104.3.
...
I want to stress that the Pact is not about sanctions; is about peer pressure and support for sound policies. It is about anchoring credibility for member states public finances - and that is particularly pertinent when we consider widening spreads and the pressure that some countries are being placed under by the markets.
...

Most economists teach a theoretical framework that has been shown to be fundamentally useless. -- James K. Galbraith

by Carrie (migeru at eurotrib dot com) on Fri Mar 20th, 2009 at 11:10:35 AM EST
[ Parent ]

it's a failure (none / 0)

to go beyond the Europe.Is.Doomed common wisdom, too.

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Sat Mar 21st, 2009 at 01:48:33 PM EST
[ Parent ]

No Return To Normal - the Galbraith article | 96 comments (96 topical, 0 editorial, 0 hidden)

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