Markets, Germany wary as Hollande wins in France. Why?

[Huskermedic]

Why?

http://news.yahoo.com/socialist-hollande-ousts-sarkozy-french-leader-002303980.html

http://finance.yahoo.com/blogs/breakout/french-greek-elections-rattle-global-markets-threaten-austerity-120249714.html

[Huskers57]

Sarkozy shouldn't have lost.

[Red_in_Blue_Land]

Why?

http://news.yahoo.com/socialist-holl...002303980.html

http://finance.yahoo.com/blogs/break...120249714.html

Sounds all too familiar with our current President, spend. Spend like there is no tomorrow and make false predictions on deficit and debt reduction that are based on massively over blown estimates on what that excessive spending will do to GDP growth.

[Showman]

Sounds all too familiar with our current President, spend. Spend like there is no tomorrow and make false predictions on deficit and debt reduction that are based on massively over blown estimates on what that excessive spending will do to GDP growth.

We have seen the opposite to spending on our country with Europe's austerity initiatives; people are clearly in revolt over their poor results.

[Red_in_Blue_Land]

We have seen the opposite to spending on our country with Europe's austerity initiatives; people are clearly in revolt over their poor results.

And the World markets are increasing at a blistering pace today due to the elections of France and Greece...

[Showman]

And the World markets are increasing at a blistering pace today due to the elections of France and Greece...

Oh it's a mixed bag for sure. But other people are talking about our terrible 8% unemployment here. It's 22% in Spain, and their conservative government is begging the EU to ease up on the savage cuts the likes of which the Paul Ryan crew would like to see here. Greece is at 20%.

[Red_in_Blue_Land]

Oh it's a mixed bag for sure. But other people are talking about our terrible 8% unemployment here. It's 22% in Spain, and their conservative government is begging the EU to ease up on the savage cuts the likes of which the Paul Ryan crew would like to see here. Greece is at 20%.

Greece got into this problem by trying to take advantage of their fast growing economy in the early 2000's by running up a large structural deficits, most of which were basically fiscal irresponsibility. These large deficits are what makes countries like Spain, Greece and now if the new French regime get their way, countries that are unsafe places to invest in. Exactly what happened in the markets today was a signal that these places are not safe for investments. If investors do not invest in Greece, their chances of recovery are decreased significantly and if the elected officials do not agree to the austerity measures in the bail-outs, then no more bail-outs.

The last option for the newly elected regimes would then be to opt out of the Eurozone and in Greece's case start printing drachma's that would have virtually no value, the political and economic effects would be rather large. So does the Eurozone ease up on the austerity measures or let Greece default?

[nems]

When conservatives predict future dire consequences to our governments unsustainable government spending, could the fiscal problems of Europe be what they are talking about?

I mean, what happens when your government spending and high taxes reach such levels that you can't maintain both? Eventually there is a tipping point where a government can't implement austerity measures without massive public backlash.

This is how 3rd world countries are created.

[cm husker]

When conservatives predict future dire consequences to our governments unsustainable government spending, could the fiscal problems of Europe be what they are talking about?

I mean, what happens when your government spending and high taxes reach such levels that you can't maintain both? Eventually there is a tipping point where a government can't implement austerity measures without massive public backlash.

People who draw sharp conclusions when comparing a $15 trillion economy to an economy 2% as large should have their heads examined.

But, here's an interesting article about what could be cut: http://www.guardian.co.uk/world/2012...ng-debt-crisis

Greece defense spending is 4% of GDP, which is about twice as much as the EU average.

US defense spending is about 5% of GDP (or twice the size of Greece's entire GDP).

This is how 3rd world countries are created.

Which 3rd world country was created that way?

[nems]

People who draw sharp conclusions when comparing a $15 trillion economy to an economy 2% as large should have their heads examined.

The Eurozone is a $17 trillion economy.

But, here's an interesting article about what could be cut: http://www.guardian.co.uk/world/2012...ng-debt-crisis

Greece defense spending is 4% of GDP, which is about twice as much as the EU average.

US defense spending is about 5% of GDP (or twice the size of Greece's entire GDP).

People who think our government's spending problem is military spending should have their head's examined. If all we needed to cut was 5% of our budget, we wouldn't have a problem.

Which 3rd world country was created that way?

Heavily nationalistic, with heavy poverty, high unemployment and shrinking economic elite? France and Greece are on the way.

[cm husker]

The Eurozone is a $17 trillion economy.

And what percentage of the EU is subject to default? Greece would be less than the equivalent of Georgia or a similarly sized state defaulting.

People who think our government's spending problem is military spending should have their head's examined. If all we needed to cut was 5% of our budget, we wouldn't have a problem.

You just tried to pull a subtle but important switch. Cutting military spending by half (to $300b plus) would reduce our yearly budget by some 10% and our deficit by about 30%. That's significant.

Heavily nationalistic, with heavy poverty, high unemployment and shrinking economic elite? France and Greece are on the way.

Ill take that to mean you have no examples.

And a shrinking economic elite? Really?

[Chi-Town Cube]

People who draw sharp conclusions when comparing a $15 trillion economy to an economy 2% as large should have their heads examined.

But, here's an interesting article about what could be cut: http://www.guardian.co.uk/world/2012...ng-debt-crisis

Greece defense spending is 4% of GDP, which is about twice as much as the EU average.

US defense spending is about 5% of GDP (or twice the size of Greece's entire GDP).



Which 3rd world country was created that way?

I agree with you that any attempts to parallel the US and Greece are laughable.

I do think this is a cautionary tale about the government though. There is no accountability. Because politicians only care about getting reelected, they jump at the opportunity to expand entitlements, cut taxes to their favorite contributer, so on and so forth. I mean, who doesn't like to get something for nothing?? This inherent conflict of interest leads to the government making financial promises it can't sustain. However, now we see what happens when the huge public sector tries to contract and shed some its fiscal commitments. Mass unrest. Economic recession/depression as governments try to cut spending and devastates the populace that became dependent on that government spending in the first place for employment/services.

Greece is in the weeds. There are no answers for them. They should probably leave the Euro just so they can have some degree of autonomy in their own suffering. At least when there is 50% unemployment, the Greeks can't blame Germany for it. Certainly, if they think that leaving the Euro is going to make things better, they have another thing coming. There is no easy way out.

We'll see what happens in France. The bond market has shrugged its shoulders so far with Sarkozy's ouster. If the French think that he will stop the austerity train, I think they have another thing coming. The market will make sure of it. But, perhaps if they feel that it is the French and not the Germans dictating the fiscal policy, things will go over easier with the French public though.

Again, if there is a cautionary tale for the US, it is that the government has no spending accountability and is more than happy to make commitments for votes.


On an aside, I agree with you about defense spending. It has to be on the table. Of course, that will not help our economy much as defense contractors and their employees will take a hit, but that goes back to the original point.

[FLA4NEB]

We have seen the opposite to spending on our country with Europe's austerity initiatives; people are clearly in revolt over their poor results.

I think for Greece it was less the actually austerity (which really hadn't kicked in yet) and more having the Eurozone demand what the austerity looked like. In Greece most of the economic turmoil is from the government not being able to pay the entitlement bills currently.

France (like the UK) has really done austerity either. They cut discretionary spending (mainly the military) and slowed the growth of entitlement spending while raising taxes (and now Hollande is signaling uncapping spending and dramatically raising taxes).

Neither Greece or France had gotten into their austerity packages and what they had implemented are only about a month or 2 old (and minor changes).

If you want to see a country that has implemented austerity and lived with it look at Germany. They cut their budget over a year ago and now they have a strengthening economy. They were on a similar trajectory as Greece, France, Spain but changed direction (slightly) and are on a much better footing.

There is only so much strength in a countries economy and what we are witnessing in France, Greece, Spain, Ireland is the private sector buckling under the weight of unproductive, inefficient, government spending.

[McKinneyTXHusker]

I agree with you that any attempts to parallel the US and Greece are laughable.

I do think this is a cautionary tale about the government though. There is no accountability. Because politicians only care about getting reelected, they jump at the opportunity to expand entitlements, cut taxes to their favorite contributer, so on and so forth. I mean, who doesn't like to get something for nothing?? This inherent conflict of interest leads to the government making financial promises it can't sustain. However, now we see what happens when the huge public sector tries to contract and shed some its fiscal commitments. Mass unrest. Economic recession/depression as governments try to cut spending and devastates the populace that became dependent on that government spending in the first place for employment/services.

Greece is in the weeds. There are no answers for them. They should probably leave the Euro just so they can have some degree of autonomy in their own suffering. At least when there is 50% unemployment, the Greeks can't blame Germany for it. Certainly, if they think that leaving the Euro is going to make things better, they have another thing coming. There is no easy way out.

We'll see what happens in France. The bond market has shrugged its shoulders so far with Sarkozy's ouster. If the French think that he will stop the austerity train, I think they have another thing coming. The market will make sure of it. But, perhaps if they feel that it is the French and not the Germans dictating the fiscal policy, things will go over easier with the French public though.

Again, if there is a cautionary tale for the US, it is that the government has no spending accountability and is more than happy to make commitments for votes.


On an aside, I agree with you about defense spending. It has to be on the table. Of course, that will not help our economy much as defense contractors and their employees will take a hit, but that goes back to the original point.

Good post, many good points.

[Huskers57]

some times the sacred cow has to be slayed.

[Chi-Town Cube]

I think for Greece it was less the actually austerity (which really hadn't kicked in yet) and more having the Eurozone demand what the austerity looked like. In Greece most of the economic turmoil is from the government not being able to pay the entitlement bills currently.

France (like the UK) has really done austerity either. They cut discretionary spending (mainly the military) and slowed the growth of entitlement spending while raising taxes (and now Hollande is signaling uncapping spending and dramatically raising taxes).

Neither Greece or France had gotten into their austerity packages and what they had implemented are only about a month or 2 old (and minor changes).

If you want to see a country that has implemented austerity and lived with it look at Germany. They cut their budget over a year ago and now they have a strengthening economy. They were on a similar trajectory as Greece, France, Spain but changed direction (slightly) and are on a much better footing.

There is only so much strength in a countries economy and what we are witnessing in France, Greece, Spain, Ireland is the private sector buckling under the weight of unproductive, inefficient, government spending.

Right now, the bond market is feeling out what Hollande is going to push. He probably is going to raise taxes and try to spend a little bit more, but he will be constrained by the market.

Again though, this is the cautionary tale about a bloated public sector and wildly unsustainable entitlements. When the market forces the government into austerity, it can be devastating economically. In essence, the government becomes "too big to contract". How is that a good idea?

The advantages of a single currency in the Eurozone is tempered by the lack of sovereign control of currency. Not a lot of room for fiscal "creativity".

There are parallels here. My current state, Wisconsin, is a prime example. Next month, we will see how austerity flies as Scott Walker takes on Tom Barrett (I assume). The bottom line is that Scott Walker went after public sector unions and their benefits/entitlements in the name of austerity for a state with a large budget shortfall. Again an example of a government making promises that it can't sustain. In the private sector, that results in layoffs or corporate bankruptcy. Those rules don't seem to apply to the public sector and that is the problem.

You know what the funny thing is....Tom Barrett made the Milwaukee city employees contribute more to their retirement/healthcare and now he has almost no union support in the Democratic primary.

[ChitownHusker]

We have seen the opposite to spending on our country with Europe's austerity initiatives; people are clearly in revolt over their poor results.

Austerity is all about short term pain in exchange for long term gain. The only way a country like Greece is going to avoid complete financial collapse and depression is austerity. If Greece defaults on its debt, which is once again looking increasingly likely, they will no longer be able to borrow, which would be austerity on steroids. It is unfortunate that voters are unable to see the shortsightedness of refusing to accept austerity.

[Chi-Town Cube]

Austerity is all about short term pain in exchange for long term gain. The only way a country like Greece is going to avoid complete financial collapse and depression is austerity. If Greece defaults on its debt, which is once again looking increasingly likely, they will no longer be able to borrow, which would be austerity on steroids. It is unfortunate that voters are unable to see the shortsightedness of refusing to accept austerity.

I don't think most people understand. They are either too emotional about it or just don't understand how a government "pays" for things. They only know that they are suffering.

Right now, I think that Greeks feel that austerity is "put upon" them. But, there is no easy answer for their woes. I'm not sure the average Greek understands that though. Maybe it is hard to understand when you are starving and/or homeless as well. I suppose it probably would be.

But, as you point out, default and devalue is no quick easy fix. The only advantage would be that there would be no boogeyman to point the finger at.

A sad situation and a cautionary tale.

[Huskers57]

I don't think most people understand.

of course. it's all greek to them.

[Chi-Town Cube]

of course. it's all greek to them.