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Brussels and the Curse of Lender’s Generosity

“Debt is the slavery of the free” Publilius Syrus

In Spain we have spent weeks hearing the supposed benefits of “relaxing deficit targets” and listening to many regional governments talk about “sharing the funds” as if debt was a donation and not a liability. Then, suddenly, the Troika arrived in Madrid and reminded us of what no one wanted to acknowledge. That debts have to be repaid and that there are no unconditional loans. Now, after a lost decade inflating the political spending burden, Spain faces more problems because the country has delayed for too long the inevitable reform of the Public Administration, and the bursting of the housing and civil work bubbles probably leads to a much more challenging solution. Continue reading Brussels and the Curse of Lender’s Generosity

Cut Taxes To Boost Job Creation

” Growth is an outcome, not a policy”

We seem to have forgotten fundamentals. Even Keynes recommended lowering taxes in periods of recession to boost consumption and investment. Sweden tackled recession cutting taxes (see here since 2006 corporate taxes to 22% and service sector VAT from 25% to 12%), and Chile, the UK and US have succesfully avoided tough economic environments by keeping low taxes to companies and job creators. Continue reading Cut Taxes To Boost Job Creation

The ECB, Europe and The Real Growth Plan

“The ECB and the creditor nations cannot and will not save governments that are unwilling or unable to save themselves”. RBS research

Slovenia has suddenly been forgotten by markets despite a banking system with average non-performing loan rate of 20%. This is what mass liquidity does to markets. If the country is in recession and the markets remain weak, it may need between 9 and 13 billion euros between 2013 and 2015 (25-38% of GDP, according to JP Morgan). If it follows a bail-in process like Cyprus, it will likely impact European banks by c15 billion. Austria, Italy, France and Germany would be the most affected. Continue reading The ECB, Europe and The Real Growth Plan