Fresh on the heels of a banking crisis in Italy and a “surprise” budget blowout in Spain earlier today, a group of eight countries seek a change in the way the EU calculates deficits.
The countries, including Spain and Italy, want more time to meet Eurozone budget deficit requirements.
Bloomberg reports Italy Leads Eight-Nation Push for EU to Change Budget Analysis
Italy, Spain and six other euro-area nations want the European Commission to change its methods for analyzing budgets so that countries can spend more in a downturn.
Finance ministers from the eight countries said the EU should rethink how it calculates the “output gap” — the difference between a country’s actual and potential economic growth — which helps determine how much of a country’s budget deficit is considered structural and subject to euro-area limits. At the moment, nations commonly calculate the gap over four years, while the EU uses a two-year horizon.
The nations called on the EU to eliminate the differences and also consider “more substantial doubts” about the budget methodology.
The European Commission acknowledged receipt of the letter, signed by finance ministers from Italy, Spain, Portugal, Slovakia, Slovenia, Luxembourg, Latvia and Lithuania and first reported earlier Thursday by Spanish media. The EU’s next round of budget recommendations are due in May.
My, How Time Flies!
In a related article please see Spain Wildly Off Budget Target, Expect Alarm Bells and Warnings.
The reason for Spain’s miss: A huge runup in government spending as prime minister Mariano Rajoy attempted to buy votes. Rajoy’s performance in the election would have been far worse had he met the budget target he agreed to.
How many years have gone buy since the recession ended in 2009? One year? Two years? four years?
The number seems to be very difficult to calculate. Perhaps time doesn’t fly after all.
Then again, since these countries perpetually need more time, perhaps eight years fly by in an amazingly fast two years. In such setups, which we are purportedly in right now, countries logically need four times as much time to meet budget constraints as compared to times when time flies by more slowly.
I believe a musical tribute can help us sort things out.
While pondering philosophical questions about time, here’s a bonus question to consider: Did someone forget to ask France to sign that document?
Mike “Mish” Shedlock
We played Kick-The-Can all the time when I was a kid….
When your only tool is a printing press, what tool do you use?
You use the power of creation and destruction in a digital monetary system and the paradigm of monetary gifting. That way you as a merchant can sell a $10 item for $5 after a retail discount and get $5 back that you discounted to the consumer for a total of $10 again. Voila!! The modern way to make Austrian deflationary economics actually work instead of being an impossibly onerous unworkable fantasy. I think that’s what I’ll start calling it.
France does not need to sign a document – it has a permanent free pass on issues like this, albeit in living memory the French finance minister had to remind an uppity EU Commission that “Europe is not a Europe of threats” when the latter cut up rough (a tiny bit) over France’s disregard for getting its finances in EU order.
France is not Greece.
Ever rising costs due to depreciation that are not balanced by an additional supply of individual income…..will inevitably roll down hill and wreak havoc. Oh well, just implement a universal dividend to everyone 18 and over and a deflationary discount to retail prices and….stability and prosperity breaks out all over the place. Why allow the idiocy of socialism or the unnecessary pain of Austrian economics to be foisted on us? Just implement Wisdomics/Gracenomics instead and everyone is free and the system is free flowing.
These world banking cartels are mentally sick. They run countries and people into massive debt then are so greedy they expect to be paid back every dime plus interest. As much as I hate to say it, “this world needs a great big depression, repudiate all the debt and start over”. The banking cartels won’t do that. Nobody wants to take the medicine because it tastes so awful. I even think the forgive debt every seven (7) years is in the bible. If lenders had to forgive debt they would be more careful who they lent it to.
If there was automated forgiveness every 7 years no one would ever pay back a dime except perhaps to their friends.
The logical conclusion is no one would lend a dime either.
Hmmm
Mish
Loans would be 7 yrs minus a second max. with full recourse and no extensions.
Which, while perhaps not ideal in an absolute sense, would still represent a vast improvement over the current situation.
Loans extending past the death; or in the case of governments, tenure; of the guy who signed the loan papers, are nonsensical a priori. As the only “rational expectations” inherent in such travesties, are the highly rational ones, from the point of view of the borrower, of I spend, you pay. Pure, institutionalized theft, in other words.
My view of it also.
I’m a Bible illiterate, but your seven years sound fishy. According to the internet, the jubilee year for debts follows seven sets of seven years; the jubilee year is every fifty years.
As we lack the honest discipline of gold, perhaps a jubilee every 50 years would lead to an orderly ebb of private credit, with loan terms shortening to zero and self-liquidating as the year approaches. But when the year is over, wouldn’t a massive credit boom ensue?
Whichever the time frame, it could be based on when the loan was initiated, not a global date. I suppose it used to be a rendering of accounts… when money itself was not debt. Nowadays you would have to torch the central banks every now and then. Hmm.
I can hear Schauble screaming already …. but not for long. I see Merkel headed his way … on a steamroller.
euro = $1.14
too strong (if deficits to shrink)
King Dollar asks which will crack first – euro? yuan?
Deficits, just like CPI, GDP and unemployment, when you don’t like the answer, change the calculation.
New Math is always attractive to bankrupt governments….
France wrote the document .
Pingback: Meu, como o tempo voa! Oito países, incluindo Espanha e Itália implorar por mais tempo para cumprir as regras orçamentais | MishTalk | HISTÓRIA da POLÍTICA
I do not know want the problem is, as the plublic and polictians of the countries have not say just ask greece what they voted for.
Reblogged this on My Blog.