May 16, 2012
As President Reagan used to say, “there you go again.” Yes, the Washington Post is once again telling its readers that the problem in Europe is profligate spending by the crisis countries. The fact that this is not true apparently does not concern the paper.
At one point a front page article on the governmental crisis in Greece tells readers:
“Governments have dramatically cut spending in Greece and other euro-zone members — including Spain, Italy and Ireland — to try to restore investor confidence in nations that drastically overborrowed and overspent during the past decade.”
Fans of arithmetic know that Italy’s debt to GDP ratio, although high, was actually declining in the years just before the crisis. Spain and Ireland were both running budget surpluses. So this story does not fit the facts.
What did happen was that these countries, especially Spain and Ireland, had unsustainable housing bubbles that were fueled by foolish bankers in Germany and elsewhere in northern Europe. The bubble is the story of the crisis in these countries, not profligate government spending.
Comments