Via the TUC Blog, this chart from the IMF is worth studying. It shows the sources of public debt in Europe since 2007 for Germany, Italy, France, and the UK.
You will notice that: yes, Virginia, the Germans bailed out the banks. Also, the Germans carried out the biggest discretionary fiscal stimulus in Europe at 5% of GDP. In all, German public debt increased as a percentage of GDP by more than Italy or France’s and second only to the UK’s. Also, Italy’s problems are entirely to do with growth or else with interest rates. And it looks like the political ability to pull in taxes is pretty important (something Daniel Davies pointed out not so long ago).
Someone needed to do some stimulus. Real stimulus. Keynes warned that not everyone could decide to save at the same time. Did anyone tell the guys who decided the euro was a good idea?
In fact there is no stimulus. There is another graph in the IMF Regional Outlook : Europe report immediately to the right of the one published here that shows Germany did no stimulus in net terms. But one can easily see it in the published graph, too. The “accommodated revenue loss” is a gain for Germany, so it nets out with the fiscal stimulus.
One can check all this on page labeled 3 (but page 21 of the .pdf file) of the report here : http://www.imf.org/external/pubs/ft/reo/2011/eur/eng/pdf/ereo1011.pdf/SB10001424052970204449804577068380487319736.html
http://www.imf.org/external/pubs/ft/reo/2011/eur/eng/pdf/ereo1011.pdf
the correct link
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George: the chart is perfectly consistent with the Germans dropping a 5% GDP boost, then taking it back out in 2010. Crass Keynesianism!
Check this account of the deeper causes of the Eurozone crisis
http://varoufakis.files.wordpress.com/2011/12/eurozone-crisis_jan-toporowski.pdf
And this suggestion http://varoufakis.files.wordpress.com/2011/12/the-us-new-deal-and-resolving-the-eurozone-crisis-dec-2011.pdf from the co-author of the Modest Proposal
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