There Is One Problem With Europe's So-Called Austerity

Tyler Durden's picture

The one most recurring laments coming out of peripheral European countries which boast near record youth unemployment, in most cases around the 50% area, is that the only reason why there is no growth is due to "evil austerity", imposed upon them by Germany and other frugal Northern Europe overseerers, who do not permit the rampant issuance of debt to fund domestic spending and fiscual stimulus programs.

There is one problem with that: the peripheral European countries are not only issuing debt at a pace that is well greater than the "pre-austerity" period...

... as Italian ANSA just confirmed:

Italy's public debt hit a new record high of 2.1945 trillion euros in April, up 10 billion euros on the previous high set in March, the Bank of Italy said on Monday. The data was used as ammunition by opposition parties against Premier Matteo Renzi's government. "Even though interest rates are down, the debt keeps going up vertiginously and it is threatening the stability of the public finances and of Italian people's savings," said Elvira Savino, an MP for Silvio Berlusconi's centre-right Forza Italia.

 

"Renzi has not just abandoned the young, condemning them to unemployment, but he is also jeopardizing the future of the next generations". Economy Minister Pier Carlo Padoan rubbished the criticism, saying it was normal for the debt to increase while Italy is running a budget deficit. "This thing about the debt record is really boring," he said.

Worse, the so-called structural reforms that these countries are implementing so they can escape from the dreaded austerity have resulted in debt to GDP ratios that, drumroll, have never been higher!

 

In the meantime, without any reform and without any actual changes, the bad debt keeps accumulating and as Italy's Banking Association reported earlier today, bad loans, aka NPLs, in the country's financial system rose by 15% from a year ago and hit a record high of €191.5 billion in April, up from the €189.5 billion reported in March, and a total of 10% of all Italian bank assets. One can imagine what the real, unadjusted number is if the reported one rose by €25 billion in one year.

So to summarize Europe's plight for the past 5 years: PIIGS creditors and the Troika will pretend to impose austerity on them (with the ECB as a guarantor and buyer of first and last resort), while the PIIGS will pretend to reform.

In the end, nothing has changed and the pre-crash status quo is still here with the only difference that relative and absolute debt levels have never been higher.

Or, as Italy's economy minister called it, "boring"... until such time as the Troika decided to yank its guarantees and the next Greece emerges. Only then does it get "exciting."

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JustObserving's picture

Western debts will never be repaid.  But Central Banksters have accomplished the miracle of NIRP in 14 or 15 countries.  There is a sucker born every nanosecond.

LawsofPhysics's picture

yes, but up until fairly recently, even fiat money creation had some real collateral requirements.  What you have now is in fact a global "let the majority eat cake" monetary experiment.  Simply put, the banker and financiers are now nothing but useless overcompensate criminals stuck between the computer/printer and the producer/consumer in the real economy.

Fuck em., where is my computer/printer?

TeethVillage88s's picture

I'm looking at 1985 as a starting date.

-

Private Credit by Deposit Money Banks and Other Financial Institutions to GDP for United States
2011: 189.51640 Percent (+ see more)
Annual, Not Seasonally Adjusted, DDDI12USA156NWDB,
https://research.stlouisfed.org/fred2/series/DDDI12USA156NWDB

KnuckleDragger-X's picture

Having been born and raised in farm and ranch country, I'm familiar with herding cattle. It's really easy, you just get a few moving in the direction you want and the rest will follow.....

El Vaquero's picture

Yeah, but in my experience, cows can be pretty dumb...OH SHIT!

asteroids's picture

Cows, will also eat anything. Grass, wire, BLS employment numbers, anything. Stupid cows!

zvzzt's picture

honestly, I'm jealous. great skills you will be needing the coming years. (again, seriously)

LawsofPhysics's picture

How can you say anything about "austerity" when a select few people can print/create money for nothing and without any real collateral requirements?

Fuckit, where's my printer/computer?!?!

El Vaquero's picture

They do too have collateral!  USTs and Bunds and CDOs and CDSs!  What's that you say?  Those are just paper too?  Fuck!

KnuckleDragger-X's picture

Don't forget derivatives.....

El Vaquero's picture

Something tells me that the derivatives won't let us forget derivatives.

TBT or not TBT's picture

All that new government debt issuance put the F in Funemployment, and after all it really is all fun and games till you run out of other people's money.   So the rabble shouts to keep the music on and the refreshments flowing.  

WTFUD's picture

Austerity is the Poor's Penance!
The meek shall inherit what the Bankers leave behind.

joseJimenez's picture

Everyone is wrong in this scenario.  There this thing called fiscal responsibility.  The bankers are scumbags but why did this governments go into unmanageable debt?  It takes two to tango.  The question is rhetorical but just blaming one side seem a bit disingenuous.  Just like Greece, it was easy to party at the beginning, now the crap has hit the ceiling!  The fucking fan stop working a long time ago.

LawsofPhysics's picture

"The bankers are scumbags but why did this governments go into unmanageable debt?" -  Because the bankers/financiers ARE the government.

These useless paper-pushers ddo not know anything about creating real value or work.  Remember, money creation no longer requires any real collateral or risk.

Now, where the fuck is my printer/computer?

ThirdWorldDude's picture

Hey, how come Spain doesn't get to cut pensions by 1%?  

Fuckin' hilarious...

TeethVillage88s's picture

I'm just screwing around. Looks like International Debt is a key.

Household Debt to GDP for Spain©
2013: 82.78504 Ratio (+ see more)
Annual, Not Seasonally Adjusted, HDTGPDESA163N,

International Debt Issues to GDP for Spain
2011: 124.81570 Percent (+ see more)
Annual, Not Seasonally Adjusted, DDDM07ESA156NWDB,

Gross Portfolio Debt Liabilities to GDP for Spain
2011: 60.692 Percent (+ see more)
Annual, Not Seasonally Adjusted, DDDM10ESA156NWDB,

Projection of General government gross debt for Spain©
2019: 99.636 Percent of GDP (+ see more)
Annual, Not Seasonally Adjusted, GGGDTPESA188N,

-

International Debt Issues to GDP for Ireland
2011: 237.24410 Percent (+ see more)
Annual, Not Seasonally Adjusted, DDDM07IEA156NWDB,

-

International Debt Issues to GDP for Greece
2011: 144.54070 Percent (+ see more)
Annual, Not Seasonally Adjusted, DDDM07GRA156NWDB,

Gross Portfolio Debt Liabilities to GDP for Greece
2011: 32.826 Percent (+ see more)
Annual, Not Seasonally Adjusted, DDDM10GRA156NWDB,

-

International Debt Issues to GDP for Portugal
2011: 114.95650 Percent (+ see more)
Annual, Not Seasonally Adjusted, DDDM07PTA156NWDB,

-
Projection of General government gross debt for Italy©
2019: 125.623 Percent of GDP (+ see more)
Annual, Not Seasonally Adjusted, GGGDTPITA188N,

Household Debt to GDP for Italy©
2014:Q2: 56.57473 Ratio (+ see more)
Quarterly, Not Seasonally Adjusted, HDTGPDITQ163N,

International Debt Issues to GDP for Italy
2011: 63.52245 Percent (+ see more)
Annual, Not Seasonally Adjusted, DDDM07ITA156NWDB,

Gross Portfolio Debt Liabilities to GDP for Italy
2011: 56.216 Percent (+ see more)
Annual, Not Seasonally Adjusted, DDDM10ITA156NWDB,

-

Projection of General government gross debt for Japan©
2019: 241.331 Percent of GDP (+ see more)
Annual, Not Seasonally Adjusted, GGGDTPJPA188N,

International Debt Issues to GDP for Japan
2011: 7.49463 Percent (+ see more)
Annual, Not Seasonally Adjusted, DDDM07JPA156NWDB,

-

Projection of General government gross debt for United States©
2019: 103.686 Percent of GDP (+ see more)
Annual, Not Seasonally Adjusted, GGGDTPUSA188N,

Household Debt to GDP for United States©
2014:Q4: 79.96307 Ratio (+ see more)
Quarterly, Not Seasonally Adjusted, HDTGPDUSQ163N,

Gross Portfolio Debt Liabilities to GDP for United States
2010: 56.551 Percent (+ see more)
Annual, Not Seasonally Adjusted, DDDM10USA156NWDB,

International Debt Issues to GDP for United States
2011: 48.64225 Percent (+ see more)
Annual, Not Seasonally Adjusted, DDDM07USA156NWDB,

Projection of General government gross debt for France©
2019: 95.876 Percent of GDP (+ see more)
Annual, Not Seasonally Adjusted, GGGDTPFRA188N,

International Debt Issues to GDP for France
2011: 75.91690 Percent (+ see more)
Annual, Not Seasonally Adjusted, DDDM07FRA156NWDB,

Household Debt to GDP for France©
2013: 54.97816 Ratio (+ see more)
Annual, Not Seasonally Adjusted, HDTGPDFRA163N,

Household Debt to GDP for Germany©
2014:Q3: 53.96150 Ratio (+ see more)
Quarterly, Not Seasonally Adjusted, HDTGPDDEQ163N,

Household Debt to GDP for Australia©
2014:Q4: 98.26740 Ratio (+ see more)
Quarterly, Not Seasonally Adjusted, HDTGPDAUQ163N,

Household Debt to GDP for Republic of Korea©
2014:Q2: 85.22364 Ratio (+ see more)
Quarterly, Not Seasonally Adjusted, HDTGPDKRQ163N,

The Delicate Genius's picture
The Delicate Genius (not verified) Jun 16, 2015 1:47 PM

But Paul Krugman said....

TeethVillage88s's picture

FRED obviously has different numbers and usually data only up to 2012.

- Japan, Greece & USA the worst? (JUSAG)(GUSAJ)

Japan, up to 2012, must be 220% at least

Central government debt, total (% of GDP) for Japan
2012: 195.99270 Percent of GDP (+ see more)
Annual, Not Seasonally Adjusted, DEBTTLJPA188A,
https://research.stlouisfed.org/fred2/series/DEBTTLJPA188A

PIIGS

Central government debt, total (% of GDP) for Portugal
2012: 122.76329 Percent of GDP (+ see more)
Annual, Not Seasonally Adjusted, DEBTTLPTA188A,
https://research.stlouisfed.org/fred2/series/DEBTTLPTA188A

Central government debt, total (% of GDP) for Italy
2012: 126.16437 Percent of GDP (+ see more)
Annual, Not Seasonally Adjusted, DEBTTLITA188A,
https://research.stlouisfed.org/fred2/series/DEBTTLITA188A

But look at the trend line for Ireland from 2007 - 2012.

Central government debt, total (% of GDP) for Ireland
2012: 120.45806 Percent of GDP (+ see more)
Annual, Not Seasonally Adjusted, DEBTTLIEA188A
https://research.stlouisfed.org/fred2/series/DEBTTLIEA188A

Ireland looks like what we expect Greece to look like.

Wait... Greece blew out in 2012.

Central government debt, total (% of GDP) for Greece
2012: 163.55746 Percent of GDP (+ see more)
Annual, Not Seasonally Adjusted, DEBTTLGRA188A,
https://research.stlouisfed.org/fred2/series/DEBTTLGRA188A

Central government debt, total (% of GDP) for Spain
2012: 65.91501 Percent of GDP (+ see more)
Annual, Not Seasonally Adjusted, DEBTTLESA188A,
https://research.stlouisfed.org/fred2/series/DEBTTLESA188A

Germany...wow.

Central government debt, total (% of GDP) for Germany
2012: 55.18233 Percent of GDP (+ see more)
Annual, Not Seasonally Adjusted, DEBTTLDEA188A,
https://research.stlouisfed.org/fred2/series/DEBTTLDEA188A

USA, Magic Freeze

Federal Debt: Total Public Debt as Percent of Gross Domestic Product
2015:Q1: 102.75718 Percent of GDP (+ see more)
Quarterly, Seasonally Adjusted, GFDEGDQ188S,
https://research.stlouisfed.org/fred2/series/GFDEGDQ188S

UK

Central government debt, total (% of GDP) for the United Kingdom
2012: 97.16670 Percent of GDP (+ see more)
Annual, Not Seasonally Adjusted, DEBTTLGBA188A,
https://research.stlouisfed.org/fred2/series/DEBTTLGBA188A

France, Pre Holland?

Central government debt, total (% of GDP) for France
2012: 100.85397 Percent of GDP (+ see more)
Annual, Not Seasonally Adjusted, DEBTTLFRA188A,
https://research.stlouisfed.org/fred2/series/DEBTTLFRA188A

Nederlands

Central government debt, total (% of GDP) for Netherlands
2012: 67.88622 Percent of GDP (+ see more)
Annual, Not Seasonally Adjusted, DEBTTLNLA188A,
https://research.stlouisfed.org/fred2/series/DEBTTLNLA188A

Australia

Central government debt, total (% of GDP) for Australia
2012: 40.49159 Percent of GDP (+ see more)
Annual, Not Seasonally Adjusted, DEBTTLAUA188A,

Mexico

Central government debt, total (% of GDP) for Mexico
2000: 19.74615 Percent of GDP (+ see more)
Annual, Not Seasonally Adjusted, DEBTTLMXA188A,
https://research.stlouisfed.org/fred2/series/DEBTTLMXA188A

Switzerland

Central government debt, total (% of GDP) for Switzerland
2011: 24.26987 Percent of GDP (+ see more)
Annual, Not Seasonally Adjusted, DEBTTLCHA188A,
https://research.stlouisfed.org/fred2/series/DEBTTLCHA188A

South Korea

Central government debt, total (% of GDP) for the Republic of Korea
1997: 8.82341 Percent of GDP (+ see more)
Annual, Not Seasonally Adjusted, DEBTTLKRA188A,
https://research.stlouisfed.org/fred2/series/DEBTTLKRA188A

Russian Federation

Central government debt, total (% of GDP) for the Russian Federation
2012: 9.43628 Percent of GDP (+ see more)
Annual, Not Seasonally Adjusted, DEBTTLRUA188A,
https://research.stlouisfed.org/fred2/series/DEBTTLRUA188A

Haager's picture

It's austerity for the people.

Private debt > public debt (bailouts) and money-printing to pay the debts. Austerity and cuts on spending helps to have M3 sustained.

All those people having lost their jobs, homes, their income and under several circumstances even their lives must know (except the deceised) that they 'pay' to feed the greed of those who did irresponsible lending and buying of trash offered in the sub-prime crisis.

gcjohns1971's picture

Kinda puts the lie to all the 'Because...Austerity' bitching, doesn't it?

CHX's picture

Where is the (unfunded liability + official debt) / GDP chart of the goo' ol' U$$A ?

JoJoJo's picture

Smart Germany has such a low birth rate - along side Japan - that it will have no youth to inherit any debt. This also means no Germany. Just keep up the Austerity Shaming y'all, Krugman loves you for it.

shutterbug's picture

The world is being led by the wrong people.

And nobody wants to do anything about it, except complain :)

 

PS Yes!! I'm - finally - part of a large group, called SHEEP. It was a lot of work to join you all.

Bemused Observer's picture

The only reason austerity is imposed is so that the debtor-nation can continue to service its debt.

If you are so in debt that the majority of your income goes to make the payments, what happens when you run to the grocery store?

You pull out the credit card. Because you gotta EAT.

At some point, you have to ask yourself if all this is really worth it. Debt repayment should NEVER be a major part of anyone's budget. Not people, and not nations.