Friday, March 27, 2009

Europeans against stimulus

The case for a big-deficit economic stimulus isn't so cut-and-dry obvious as the Obama Administration and liberal economists would have all believe -- at least in the opinion of European leaders, whom you might think would be the big spenders themselves in today's situation ...

EU presidency: US stimulus is 'the road to hell'

The head of the European Union slammed President Barack Obama's plan to spend nearly $2 trillion to push the U.S. economy out of recession as "the road to hell" that EU governments must avoid ... Topolanek took aim at Washington's deficit spending.

"All of these steps, these combinations and permanency is the road to hell," Topolanek said. "We need to read the history books and the lessons of history and the biggest success of the (EU) is the refusal to go this way."

"Americans will need liquidity to finance all their measures and they will balance this with the sale of their bonds but this will undermine the liquidity of the global financial market," Topolanek said. [AP]

"Road to hell" might be a bit harsh, but most of the rest of Europe seems to agree in substance...

Mr. Topolanek is not alone in his concern that Mr. Obama’s stimulus package, which will push the United States budget deficit this year to 10 percent or more of gross domestic product, will put a huge strain on global financial markets.

German officials have also criticized the evolving American program, and many other European nations have declined to create fiscal stimulus programs anywhere near as large as that of the United States... [NY Times]

A cacophony of top voices is rising. European Central Bank chief Jean-Claude Trichet opposes stimulus, as does the German finance minister, the British central bank chief, the European president, and others.

In the German-French view, sealed by Chancellor Merkel and French President Nicolas Sarkozy in a summit two weeks ago, public debt in the form of stimulus is premature... [CSM]

The head of the European Central Bank, Mr. Trichet, interviewed in the Wall Street Journal:
WSJ: Do you think the criticism that European governments have not done enough, in terms of fiscal stimulus, is justified?

MR. TRICHET: I think it's not...

... you have to reassure your own people that you have an exit strategy, to reassure households that we are not putting in jeopardy the situation of the children, and to reassure businesses that what is done today is not done to the detriment of their own taxation in the years to come.

Activation of the economy depends crucially on confidence. And confidence today needs that we can prove to our own people that we have the right balance between the short-term and the medium-and long-term perspective....

If your people have the sentiment that they will be not better off in an endless spiraling of deficits, they will not spend any money that you give them today.
And -- get this -- Europeans are warning that the stimulus deficits are setting the U.S. on the path to socialism. Europeans!

After behind the scenes conversations about the aggressiveness of the U.S. approach, the views of a number of American allies are now crystal clear — America is spending itself into a hole which it cannot get out of, and the nation is on a course which will eventually lead to socialism. [Time]

Europeans, who generally see American fiscal policy as too laissez-faire, think Mr. Obama is moving the U.S. too far toward big government ...

And they’re balking at U.S. prodding to follow suit. European governments want their role in economic stimulus to be smaller than it is in the U.S. On the economic crisis, the EU, which more often draws disapproval than praise from Republicans, finds itself more aligned with the GOP thinking than that of the Democrats.

As they say on TV, you can’t make this stuff up.

[Peter A. Brown, assistant director of the Quinnipiac University Polling Institute, in the WSJ]