![[identity profile]](https://www.dreamwidth.org/img/silk/identity/openid.png){kind=small}
luzribeiro.livejournal.com posting in ![[community profile]](https://www.dreamwidth.org/img/silk/identity/community.png){kind=small}
talkpolitics...At least as far as Europe is concerned.
http://online.wsj.com/article/SB10001424127887323582904578484711384991702.html
Seems like Japan has enjoyed a 1% growth for the first quarter of 2013. The nice-sounding result is mostly thanks to a combination of aggressive fiscal policies plus massive government expenses, something called "Abenomics" (after Shindzo Abe). And this of course is causing some awe and applause in the Eurozone. Because even the most stable European economy, Germany, only has a 0.1% growth for the same period. While everyone else is stagnated.
So why not apply the Japanese experience to Europe, and do someting like an "Euronomics" policy? Well, the main reason is the different way these two economic spaces are organized. First of all, the Eurozone consists of 17 member states, and every time one of them faces some problems, this threatens the entire structure. While the Yen, being a currency of a single country, is not necessarily subject to such hazards. In other words, Japan could afford to pump up its public debt for short-term goals, and to have enough money at its disposal for playing with its financial infrastructure at short- to mid-term scales. Thus, the government's main debt is mostly owed to its own citizens. This removes some external factors that might be out of the government's grasp. And brings some other risks.
Suppose Spain or Italy plunged deep into debt because of their spending/stimulus programs while ignoring the necessary reforms in the budget that come with them. This would inevitably bring higher interest rates on their bonds. As far as re-financing is concerned, the Eurozone countries are much more dependent on foreign investors, and those might not be so willing to allow a backtracking on the austerity course that's been set in.
Beside these economic limitations against the stimulus programs, there's also Germany's staunch position on the issue. The German minister of finance Wolfgang Schaeuble is concerned that the target goals for cutting public debt that were agreed upon at the 2010 Toronto meeting, could now be put in jeopardy. Back there, the industrialized countries made a commitment to work for improving their budget indexes. So Schaeuble keeps repeating like a mantra the necessity for structural reforms and cutting public debt. Respectively, the first part of the so-called "Abenomics" cannot possibly be done in the Eurozone. Moreover, the leading economic power in the Eurozone is against that.
The second part of the Japanese recipe is excessive spending by the local central bank. Its goal is to double the fiscal base through massive purchase of state bonds, in order to put an end to deflation and achieve a slight inflation of 2%. Meanwhile, the ECB has no way of folloing that example, moreover it has already surpassed its delegated mandate.
But ultimately, will the Japanese recipe bring a happy end eventually? Some experts are not that optimistic, because growth should be doubled with structural reform in all sectors. But so far the Japanese government hasn't done that, and it seems they have no intention to embark on such a risky mission.
What's certain at this point is that the discussion about austerity, stimulus and growth will be ignited once more, as soon as the results from the current quarter come up. And, while Japan keeps recovering slowly but steadily (at least for the time being), the Eurozone will remain stuck in the economic swamp.
http://online.wsj.com/article/SB10001424127887323582904578484711384991702.html
Seems like Japan has enjoyed a 1% growth for the first quarter of 2013. The nice-sounding result is mostly thanks to a combination of aggressive fiscal policies plus massive government expenses, something called "Abenomics" (after Shindzo Abe). And this of course is causing some awe and applause in the Eurozone. Because even the most stable European economy, Germany, only has a 0.1% growth for the same period. While everyone else is stagnated.
Suppose Spain or Italy plunged deep into debt because of their spending/stimulus programs while ignoring the necessary reforms in the budget that come with them. This would inevitably bring higher interest rates on their bonds. As far as re-financing is concerned, the Eurozone countries are much more dependent on foreign investors, and those might not be so willing to allow a backtracking on the austerity course that's been set in.
Beside these economic limitations against the stimulus programs, there's also Germany's staunch position on the issue. The German minister of finance Wolfgang Schaeuble is concerned that the target goals for cutting public debt that were agreed upon at the 2010 Toronto meeting, could now be put in jeopardy. Back there, the industrialized countries made a commitment to work for improving their budget indexes. So Schaeuble keeps repeating like a mantra the necessity for structural reforms and cutting public debt. Respectively, the first part of the so-called "Abenomics" cannot possibly be done in the Eurozone. Moreover, the leading economic power in the Eurozone is against that.
The second part of the Japanese recipe is excessive spending by the local central bank. Its goal is to double the fiscal base through massive purchase of state bonds, in order to put an end to deflation and achieve a slight inflation of 2%. Meanwhile, the ECB has no way of folloing that example, moreover it has already surpassed its delegated mandate.
But ultimately, will the Japanese recipe bring a happy end eventually? Some experts are not that optimistic, because growth should be doubled with structural reform in all sectors. But so far the Japanese government hasn't done that, and it seems they have no intention to embark on such a risky mission.
What's certain at this point is that the discussion about austerity, stimulus and growth will be ignited once more, as soon as the results from the current quarter come up. And, while Japan keeps recovering slowly but steadily (at least for the time being), the Eurozone will remain stuck in the economic swamp.
