I'm still looking for this site to be indexed; and came across an article by a financial market analyst Charlie Fell, who writes the column 'Serious Money' for Irish Times.
Charlie Fell wrote an article today entitled Europe's suicide pact pointing out that "The summit’s proposals reveal that the EU’s political leaders remain in denial or are blind to the true nature of the crisis that afflicts the euro-zone."
Charlie mentions the incongruity between the problem and proposed solution:
"The EU’s leadership continues to believe that profligate government spending among the euro-zone’s periphery is the central problem and, insist that fiscal austerity is the only path to future stability. With this in mind, the summit proposed that euro-zone members adopt constitutionally-binding debt brakes requiring states to maintain balanced budgets, defined as structural deficits of no more than half a percentage point of GDP."
I have been writing about the same idea, and even took the same name for the blog to make my point inescapable. I have no special knowledge or training in finances. What I do have is sufficient boldness to use common sense to analyze the proposed solutions, and to suggest that they will exacerbate the disease.
This is not merely a figure of speech, but a reference to the restrictive bonds of common monetary policy that are supposed to be tightened by mutual promises in the smaller core EU.
To add something new to my prior analysis, I'd like to comment on the idea of austerity. It is a involuntary reduction in government (over) spending, imposed upon profligate members of the EU by the collective. This has the possible benefit to greatly shrink government expenditures on the periphery, but therein lies the difficulty, also. Greece, for example, would need to reduce its government expenditures by 21% to eliminate annual deficit while keeping the euro. Italy and Portugal would need to cut government expenses by at least 10% and 14%, respectively. These are average, 'across the board' cuts, targeting some cuts would require others to be even deeper. Think about the scope: these cuts affect everything from education and research to transportation and health services. Ten percent or more may not sound like so much until you think about your own occupation and its budget.
I do not believe that vague promises in the name of EU unity will conjure up the political will to cut that much. It will be really healthy, if they do. In the meantime, Germany, the Netherlands are among a few not obligated to undergo austerity. Bringing down the question of austerity to the level of an individual, I would ask you, gentle reader: "Would you go on a (lengthy) diet, if you neighbor told you to, as he continues to live large?"