All politicians know the moment they drive an unpopular reform, a financially illiterate populist is waiting in the wings, vowing to defy economic and political reality.

Germany to underwrite their broken economic models - Comment on 2012 June 29

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2012 June 29

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Obama's team has driven American deficits and debt to such levels that their nation's debt has been downgraded while Germany's remains triple-A. France, Italy and Spain clearly believe it will be easier to persuade Germany to underwrite their broken economic models with euro-zone bonds than to persuade their electorates to accept change. Read more:

Here two excerpts from two articles which again highlight Obama’s, and his followers’, destructiveness and Merkel’s constructiveness:

 

Pulitzer Prize-winning columnist Charles Krauthammer is not alone in arguing that the euro-zone disease, unless cured, might well turn slow growth in the U.S. into recession, and scupper any chance President Barack Obama has of avoiding a forced return to Chicago in 2013. Which is why Mr. Obama will do more than present German Chancellor Angela Merkel with the Presidential Medal of Freedom when she arrives in Washington Monday evening. He and Treasury Secretary Tim Geithner hope to persuade her to stem the rot. Whether she is prepared to take advice from the team that has driven American deficits and debt to such levels that their nation's debt has been downgraded while Germany's remains triple-A is uncertain.

Whatever the reason — voter opposition to more transfers of their wealth to beach-lolling southerners, a desire to force reforms on reluctant profligates, a desire to force several nations to surrender even more sovereignty, or mere self-interest—Ms. Merkel is earning her sobriquet as Madame Nein. And will continue to do so until she has persuaded her colleagues to amend the euro-zone treaty to permit Brussels (spelled B-e-r-l-i-n) to control the tax, spending and fiscal policy of euro-zone members.

 

But the G-20 leaders need to do far more. Far from complaining about their lack of economic levers, politicians need to recognize the importance of the supply-side powers they do possess: The true role of politicians lies in the micro, not the macro. Only they can decide on the proper balance between social protections, welfare spending, infrastructure investment, regulations and the appropriate burden of taxation. It is their responsibility to ensure economies are competitive, productive and not vulnerable to financial shocks via excessive debts, deficits or balance of payment crises.

Yet politicians find this difficult to accept. In the post-gold-standard world, voters have been conditioned to believe pain-free solutions are always available. France, Italy and Spain clearly believe it will be easier to persuade Germany to underwrite their broken economic models with euro-zone bonds than to persuade their electorates to accept change.

U.K. politicians privately ask whether a Greek euro exit might provide an opportunity to push through reforms they don't have the courage to risk now. All politicians know the moment they drive an unpopular reform, a financially illiterate populist such as Greek radical-left leader Alexis Tsipras is waiting in the wings, vowing to defy economic and political reality.

 

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