In the past, in order to estimate a country’s wealth it was considered necessary to analyse the quality of the country’s soil or sub-soil assets... and to look at the country’s geopolitical or strategic position or the amount of its exports. Unfortunately, these maps are all obsolete today.
This does not mean that because a country is well-positioned, rich in minerals or is a big exporter, it will not be hit by the “economic cancer” of “over-indebtedness”.
In fact, even if the debt of rich countries shows signs of stabilisation, it is situated in “historically high levels” that make it necessary to reduce public spending, stated the International Monetary Fund (IMF) on April 30.
On average, the public debt of rich countries should, as in 2013, achieve 107.1% of their gross domestic product (GDP) this year before declining slightly by 0.2 percentage points in 2015, according to the IMF’s estimations. But this estimate is rather volatile, in my opinion.
In comparison, emerging economies are expected to reach only 33.7% of GDP this year!
With a ratio of debt to GDP at 243.5% in 2014, Japan is expected to top the list of the most indebted developed countries, followed by Greece (174.7%) - a country that has been receiving financial assistance since 2010, and Italy (134.5 %), but other countries are close behind.
So, is there really a solution to the over-indebtedness of European nations?
It is very difficult to change our lifestyle when we have formed our habits and we have been living beyond our means for decades. An old saying goes: “Il n’est pas bon d’attraper froid par ses pieds”. Or, in other words, you have to know the size of its coverage otherwise you risk getting sick. This is what profoundly plagues Europe.
For decades, through successive governments, all political logic has been mixed up, and they have been continuing to gangrene the state’s finances by successive debts.
It is true that the funds that have been borrowed will eventually be paid off by our children and their children. But this has permitted certain governments to offer some electoral promises or build a political clientele.
It’s icing on the cake, with the entrance of countries to the European Union, following the famous Maastricht criteria and the Stability Pact (unfortunately it has been so little monitored and so little mastered), has symbolised the written guarantees of a stable and strong economic zone. It is exactly what the banks expected in order to get out their chequebooks and to give loans to the European States “initially” at very low interest rates.
This phenomenon has created the infamous vicious cycle: The bank lends to the state - the state can’t pay back the bank - the pressure of debt falls on the middle-class - the bank turns off the tap and stops lending - austerity reduces growth ... and again from beginning.
This week, the European Parliament adopted by a large majority a collection of texts to complement “the banking union,” to ensure that future bankruptcies of banks in the eurozone are not borne anymore by the taxpayers.
In the meantime, if European countries do not undertake urgent steps to harmonize their budgetary and fiscal policy, if they do not revise labor costs down, if they do not ensure an improvement of the competitiveness of their companies, if they do not take some measures of “chemo therapy” type with its side effects, or deprivation for a while ... I fear that the economic battle against the over-indebtedness will be lost...
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