NYT Says Greek Election Sets Up a Conflict With Northern Europeans Who Don't Believe in Economics

January 27, 2015

That is not exactly what the NYT said. Instead its article on the dispute between the new Greek government and Germany and other northern European countries chose to use bias in the opposite direction telling readers:

“But beneath the arguments over austerity is a deeper conflict of democratic wills, between the verdict of voters in Greece, who are desperate for some relief, and those in Germany, Finland and the Netherlands, who do not want their taxes used to underwrite a blank check for countries that get into financial trouble.”

Really? The voters in Germany, Finland, and Netherlands are just concerned about issuing blank checks? Have they noticed that Greece cut its budget by 27 percent since 2008? This would be equivalent of a cut in annual spending in the United States of almost $1 trillion in its impact on the budget and close to $2 trillion in its impact on the economy.

These cutbacks, coupled with the austerity that the European Union has imposed on much of the rest of the euro zone, has had the predictable effect of throwing Greece’s economy into a downturn that makes the U.S. depression look like an economic boom. Are voters in Germany, Finland, and the Netherlands really so ignorant of economics that they do not understand this fact?

At another point the article tells readers:

“Jeroen Dijsselbloem, the head of the group of finance ministers from countries using the euro, said he did ‘not believe in this north-south divide,’ noting that ‘there are a lot of countries in the north, think of the Baltics; in the south, think of Spain; and Ireland’ in the west, and they ‘have done major reforms, and they are all back on the growth track.'”

It would have been worth pointing out that on Mr. Dijsselbloem’s “growth track” Spain’s economy is projected to first exceed its 2008 GDP in 2019. Ireland is projected to first pass its 2007 peak in 2016. By comparison, in the Great Depression, U.S. GDP was 6.0 percent larger in 1937 than it had been at the onset of the depression eight years earlier in 1929.

It also would be worth pointing out that many of the crisis countries’ problems did not stem from a lack of “budget discipline.” Several were running modest deficits and Spain and Ireland actually had large budget surpluses before the crash. Their economic problems stemmed from the fact that bankers in places like Germany, Finland, and the Netherlands were not very competent and thought that the housing bubbles in these countries could keep growing forever. Therefore they funneled hundreds of billions of dollars in loans that further inflated the bubbles and distorted the crisis countries’ economies.

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