Global financial worries continue…

Posted: October 21, 2010 in Government, Uncategorized
Tags: , ,

Several articles struck my eye from overseas today. They are especially interesting in light of the existence and work of the G-20 since 1999, who will be meeting in S. Korea in November to try to fix these global economic woes — perhaps of their own making? Just wondering…

Europe Seen Avoiding Keynes’s Cure for Recession
New York Times online
October 20, 2010

Photo: Demonstrators in London marched on Wednesday against the $130 billion in spending cuts proposed by the government.

LONDON — The British economist John Maynard Keynes (http://topics.nytimes.com/top/reference/timestopics/people/k/john_maynard_keynes/index.html?inline=nyt-per) may live on in popular legend as the world’s most influential economist. But in much of Europe, and most acutely here in the land of his birth, his view that deficit spending by governments is crucial to avoiding a long recession has lately been willfully ignored.

In Britain, George Osborne, chancellor of the Exchequer, delivered a speech on Wednesday that would have made Keynes — who himself worked in the British Treasury — blanch.

He argued forcefully that Britons, despite slowing growth and negligible bank lending, must accept a rise in the retirement age to 66 from 65 and $130 billion in spending cuts that would eliminate nearly 500,000 public sector jobs and hit pensioners, the poor, the military and the middle class because of what he insisted was the overwhelming need to reduce the country’s huge budget deficit.

In Ireland, where the economy is suffering through its third consecutive year of economic slump, Keynes is doing no better. Devastated by a historic property crash and banking bust, the Irish government is preparing another round of spending cuts and tax increases.

Combined with what Dublin has already imposed, the cuts could add up to as much as 14 percent of Ireland’s gross domestic product, an extraordinary amount for a modern industrial country. Ireland’s budget deficit reached 32 percent of total economic output this year.

Indeed, across Europe, where the threat of a double-dip recession remains palpable, governments from Germany to Greece are slashing public outlays.

But even as students and workers in France clash with the police and block fuel shipments to protest a rise (2-year rise from age 60 to 62) in the retirement age, the debate in Europe is more on how fast to cut government spending rather than whether such reductions are the right thing to do under the circumstances.

“Everything Keynes established about the primacy of maintaining demand at a steady pace is gone,” Brad DeLong, a liberal economist and blogger at the University of California, Berkeley, said mournfully.

“Europe obviously thinks it can focus on sound finances while the U.S. manages world demand,” he said in a telephone interview, “but unfortunately we are not doing that.”

Joseph E. Stiglitz argued that the British government’s plan was “a gamble with almost no potential upside” and that it would lead to lower growth, lower demand, lower tax revenues, a deterioration of skills among the unemployed and an even higher national debt.

“We cannot afford austerity,” he wrote in The Guardian.

Mr. DeLong and others on the left have long argued for more stimulus spending in the United States and abroad to lift growth, even if deficits rise temporarily as a consequence.

While that notion may have its adherents in the White House and among many American and European academics, in Europe there is hardly a policy maker to be found who is making the argument that governments need to spend more, not less. (emphasis added)

This is particularly true in Britain, where a combination of collapsing tax revenues and government spending to prop up banks and support the unemployed during the financial crisis has contributed to a budget deficit equal to 11 percent of gross domestic product, second highest in Europe after Ireland.

“Keynsians are regarded here as heterodox, not orthodox,” said Andrew Lilico, an economist at the London-based research institute Policy Exchange, which has close intellectual ties to the Conservative Party. “And it goes back to one thing: we have this internal fear of losing control of our deficits and having foreigners telling us what to do. There is also a sense that deficits of this scale are morally lax.”

http://www.nytimes.com/2010/10/21/world/europe/21austerity.html?_r=1&partner=rss&emc=rss

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Britain Plans Deepest Cuts to Spending in 60 Years
New York Times online
October 20, 2010

LONDON — The British government on Wednesday unveiled the country’s steepest public spending cuts in more than 60 years, reducing costs in government departments by an average of 19 percent, sharply curtailing welfare benefits, raising the retirement age to 66 by 2020 and eliminating hundreds of thousands of public sector jobs in an effort to bring down the bloated budget deficit.

http://www.nytimes.com/2010/10/21/world/europe/21britain.html?partner=rss&emc=rss

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French union calls for massive new pension protest
Reuters US Edition online
October 21, 2010

Photo: High school students shout slogans as striking railway workers burn railway tracks during a demonstration at the old port of Marseille October 21, 2010. Credit: Reuters/Jean-Paul Pelissier

PARIS (Reuters) – One of France’s biggest unions called on Thursday for further “massive” strike action next week against a planned pension reform that has triggered the biggest and most sustained anti-austerity protests in Europe.

A final Senate vote on President Nicolas Sarkozy’s unpopular bill is set to be speeded up to make sure it happens on Friday, a parliamentary source told Reuters, following pressure from the government as protests and fuel blockades drag on.

Sarkozy, a conservative who is determined to face down unions and force through an increase in the retirement age, is battling 10-day-old refinery strikes and fuel depot blockades that have dried up a quarter of the nation’s petrol pumps.

http://www.reuters.com/article/idUSTRE69E43320101021?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+reuters%2FworldNews+%28News+%2F+US+%2F+International%29

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