February 05, 2012
An opinion column in the Post defending Europe against charges of being a continent of broken down socialist states, by Martin Klingst, the Washington bureau chief of the German newspaper Die Zeit, got the basic story of its economic crisis wrong. It told readers that Europe’s fiscal calamities, “stem in part from the unaffordable benefits for its citizens,” later adding, “it is also true that a number of E.U. countries have irresponsibly expanded their welfare systems and can no longer afford their bills.”
In fact, the 5 crisis countries (Greece, Ireland, Italy, Portugal, and Spain) all rank near the bottom in terms of the generosity of their welfare states. The European countries with the most generous welfare states, Denmark, Norway, Sweden, the Netherlands, France and Germany, are mostly weathering the economic crisis relatively well.
The problems in the crisis countries stem in part from real estate bubbles that were allowed to grow unchecked by the European Central Bank (ECB), massive tax evasion (especially Greece and Italy), and the inflation fighting obsession of the ECB, coupled with its insistence that it would not act as a lender of last resort. The latter policy has caused the interest burden of these countries to soar. This has meant that a country like Spain faces a far higher interest rate than the U.K., which has a central bank that acts as a lender of last resort, even though the U.K. has a much higher debt burden.
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