European leaders hammered together an early morning deal to free Greece of half of its debts. And they agreed to a new requirement that European banks increase their core capital ratios to 9%. The hope is that it will add liquidity to the financial system and prevent strains that could lead to a global financial crisis. The Greek Prime Minister, Giogios Papandreou is already acting like there is no longer a crisis. “The debt is absolutely sustainable now,” he said at a press conference this morning. These steps are good in that they had injected some confidence into the system. But that confidence should only go so far. These measures are really just band aids for a serious health problem: Europe’s cancerous problems with public debt. I write this from the United States, where we are afflicted with the same disease.
Athens…
The big problem is this: Europeans are loath to give up their welfare-state goodies, and therefore are refusing needed surgery and chemotherapy. Germany and France, for example, are demanding that Italy make serious reforms. But Italian political parties are resisting simple and needed measures like raising the retirement age from 65 to 67. And current Italian Prime Minister Silvio Berlusconi doesn’t seem to want to do anything but have more of his notorious parties.
Greece is in turmoil because of massive public protests over proposed cuts. And France appears loath to deal with its mounting debt problems. Only the Germans and the Brits appear willing to step up and start to make tough choices.
…Oakland
We here in the United States shouldn’t get too smug about this. As the so-called Super Committee, developed because congress doesn’t have the ability to make difficult choices, meets to construct a path to a balanced budget and reducing our public debt. But early indications are that they are doing nothing but squabbling. And President Obama is handing out goodies to secure votes: mortgage deals for homeowners and debt help for students. Blame Obama for this, yes. But he’s a politician scrounging for votes. This is unfortunately what politicos do for a living. The real culprits here are the people who take the money and applaud him for what he has done. The Greeks have riots over cuts in benefits–but we have protesters from New York to Oakland carrying signs that call for further demands on the public purse.
The western world needs to be ashamed of itself. We are all robbing from our children. As someone once pointed out, Christmas is when kids get goodies that are paid for by their parents and grandparents. The welfare state is when parents and grandparents get the goodies…which will be paid for by the kids.
This is a question of moral courage. Are we going to be greedy and take what we can get when we can from the government, always willing to be bought off with a new program, or are we going to show some backbone and secure a future for our children? The Occupy Wall Street protests are a sign of anger, and that anger is legitimate. But the real greed I see right now are those on the streets demanding that they be given more by the government.
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