Why Europe’s Debt Crisis is Barely Getting Started
By Nick Hubble
April 13th, 2013
If you’re sick of hearing about Europe’s economic crisis, you’ve got a long hard slog ahead of you in coming years. The steady stream of good and bad news is ‘hiding the decline’, as climate scientists would say. But the decline continues nonetheless.
Countries implementing so-called austerity are still running deficits. Politicians say the crisis has passed while their economies shrink. Debt to GDP ratios are rising as debt grows and GDP falls. In short, everything is slowly getting worse.
But the gradual decline throws up some much more interesting and insightful day to day news. Let’s take a tour of the absurd before we get to the deep and meaningful takeaway.
Greek newspapers are reporting that 1,000 homes lose electricity each day in Greece. Not just because they can’t pay their power bills, but also because the commonly evaded property taxes are now included in electricity bills.
Maybe some of the disconnections are legitimate though. Der Spiegel is reporting ‘more than 120,000 professionals have left Greece since the start of the country’s financial crisis in 2010, according to a recent study by the University of Thessaloniki.’ The last time we were in Greece, we got stuck in a lift and it took forever for the technician to turn up. A country in crisis has very real consequences for the people there.
In Portugal, public workers may have to get paid in Portuguese government debt. The constitutional court ruled part of the country’s budget unconstitutional, so cash is tight. There is some truly beautiful irony in this. Public workers getting paid in dodgy public debt.
It turns out that Spain’s social security fund is 97% invested in Spanish government debt. Diversification anyone? But what happens when the fund reaches 100%? Who will be left to buy the additional Spanish government debt being raised? And if Spain experiences a bond crisis, what will happen to Spanish pensions?