The house has burnt down

Must read piece by Hugo Salinas on the European mess.

The house has burnt down. Nothing is left of it but a pile of wet ashes. Pop and Mom and their numerous progeny gaze at the ruins, speechless.

Pop turns to the family and says: “Mom and I will have a summit meeting tomorrow, to find a solution to this problem. Tomorrow we’ll have the definitive solution to this crisis; in the meantime we’ll sleep in a tent that our German neighbors will rent us.”

The European house has burnt down financially. In 1999 the Euro was installed as the single currency for a central group of European nations. The interest rates of the various nations were to be set by “diktat” of the European Central Bank. No nation was to be allowed to have a Fiscal Deficit of more that 3% of GNP.

Thus was set up the orgy of government and private sector borrowing and spending on the part of the hot-blooded nations of Europe, that is to say those that form the “Club Med” of Europe: Greece, Italy, Spain, Portugal, with the participation of Ireland and even France. Never were seen nor dreamt of in dreams such low interest rates and such easy credit in those nations.

The spending was gigantic. Never was Europe so happy. The governments showered benefits upon the governed. Life was pleasant, free of worries. The good life was assured: modern housing, autos (his and hers), free education for the kids, medical and hospital insurance, generous pensions for early retirement, a monthly check in case of unemployment; in Italy, three months’ vacations. The standard of living in Europe was the wonder of the world.

(Full article here)