The Obama Administration on Sunday approved U.S. participation in an international bailout of Greece that will cost American taxpayers billions of dollars. Despite the objection of many members of Congress, the President went ahead with the bailout, thinking that $145 billion would be enough to bring Greece out of its economic malaise and restore stability to the global economy.
On the contrary, the President’s willingness to pump billions into a small European country such as Greece makes it more likely that other European countries with similar problems – namely, Spain, Portugal, and Italy – will be coming to the United States soon looking for even bigger bailouts.
First, some background: Greece’s economic crisis was caused by too much government spending and borrowing which weakened its already over-taxed, over-regulated economy. Although Greece’s population is just 11 million, it has more than one million public-sector employees. Greek civil servants enjoy 14 months of pay for 12 months worked, and their average retirement age is 53. Once retired, they enjoy generous pension benefits worth 80% of their salary. Greece will run a budget deficit this year worth 14% of its GDP, and its entire national debt will equal 113% of GDP. These policies proved unsustainable, and so the European Union and the IMF were called in to rescue Greece before international investors stopped lending them any more money.
The $145 billion bailout comes to $13,000 per person in Greece. An equivalent bailout of America — which has a population of over 300 million — would cost over $4 trillion. With such a large amount of cash being thrown at Greece, the bailout has to work, right? Well, according to the IMF’s own optimistic forecasts, even if Greece implements the austerity measures required by the deal, it will still run huge budget deficits indefinitely. So huge, in fact, that Greece’s debt-to-GDP ratio will soar to 150% in just four years.
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment