Thursday 19 April 2012

The welfare state did not cause the Euro crisis

On the We are all dead blog Matt Cowgill has written that The welfare state is not to blame for the Euro crisis. It's an interesting post that shows that the idea that the "Euro crisis is a crisis of the welfare state, caused by high taxes and/or welfare spending as a proportion of GDP" is just plain wrong. In a series of graphs Matt shows that the assertion that "European countries tax & spend too much, and that the bond markets have finally stopped the party" is false.

Matt notes that:
The European sovereign debt crisis is about a currency area that encompasses too many diverse regions, with too little fiscal integration and weak oversight. It’s about a central bank that is reluctant (or unable, depending on your point of view) to play the role of lender of last resort. In the case of Greece, yes, it’s about a government that spent too much, taxed too little, and fiddled its books to hide its deficit. But look at Ireland: it’s a low-tax, low-spending country that was held up as a paragon of fiscal virtue by conservatives before 2007. George Osborne declared Ireland to be “a shining example of the art of the possible in long-term economic policymaking.”

The crisis is not about the welfare state. I can’t understand Carr’s motivation in suggesting otherwise.
This is a blog post well worth reading, but then so it the rest of Mark's blog.

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