September 20, 2011
The Washington Post has a lengthy article on Germany which touts the austerity measures the country imposed in the last decade. It tells readers that Germany has the second highest tax rate on ordinary workers based on a chart that strangely excludes Denmark and Sweden, the two highest tax countries in Europe.
The article also never mentions the role of the European Central Bank (ECB) in the current economic crisis hitting most of Europe. The crisis was the result of the failure of the ECB to take steps to counteract housing bubbles before they grew to dangerous levels.
It has been made worse by the relatively restrictive monetary policy pursued by the ECB after the collapse of the bubble. While the Fed pushed its short-term rate to zero and engaged in several rounds of quantitative easing to bring down long-term interest rates, the ECB never allowed its overnight rate to fall below 1.0 percent and actually raised the rate to 1.5 percent in the spring. This has both slowed growth and increased the borrowing cost of heavily indebted countries.
The failure to mention the role of the ECB might lead readers to believe that the excessively generous social benefits are responsible for the European economic crisis. They are not.
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