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Spain – The Latest Plan from the EU

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A draft of the EU plan for Spain.

For some background on the topic  you can read El País.

  1. Implement the already planned budget strategy on all levels of administration – central and local – to reduce deficit and public spending limit.

Establish an independent institution for analysis and control of the implementation.

  1. Postponing retirement and institutions to reintegrate workforce.
  2. Tax-reform that shift the focus from taxation of work to consumption. Reduce the advantages of debt and home owning. An emphasis on “green energy”.
  3. Set the reforms of the financial system in motion. Especially discover and confront (known) weaknesses. A strategy for dealing distressed assets on the balances. A structure as to how banks are to be supported – and how it is intended to be financed.
  4. A reform on employment agencies and coordination of said down to a local level.
  5. Implementation of an action plan against youth unemployment.

This plan is Spanish, but the same day (yesterday) a similar plan was announced in Denmark. Indeed all the EU members will get a report card to take home to “mum and dad”. One thing is nasty B- and D+ which will need either “grounding” or preparing for a severe hiding.

The Dutch are told to abolish interest tax deductibility. The Volkskrant provides some background:

There are specific “recommendations” to each brat.

It is an individual plan or draft for each country but from the same paradigm. Now it is the task of the national parliaments to hammer out the details – how much leeway each country has depends.

I had wondered why the Prime Minister had a hair in a bun: There was to be no jerking of pigtails. (Coiffure is NEVER unimportant to a woman – EVER!). It is a bit unfortunate that the Prime Minister is fluent in English and not so much in German – but she will learn: Trust me. That “bun” should indicate a C-!

Casting aside national stereotypes: There is little doubt that this draft really twists the heel on the gouted feet all over Europe. The problems are general and of varying severity in the different countries and available in different flavors – but no country are entirely without affliction – not even Germany that has her little hate-hate relationship with the financial sector.

i) There is a general public overspending problem ranging from noticeable to disastrous. The public sector is generally inefficient and expensive. All over Europe.

ii) Europe is stuck with early retirement of the perfectly fit. Not only do people live longer; but they are in infinitely better repair than their parents and grandparents.

iii)  There is no doubt income tax is to high in Europe to finance a health and social benefit sector reminding of a school of sharks in a feeding frenzy. There is no doubt that price is a way to prioritize what you really need – and if paying true cost makes priorities better…..

Homes are definitely mortgaged way over the overpriced high rise roofs and the distortion in price and interest does impair proper use of square feet.

The “green energy” is a question of reducing import dependence more than pandering to religious tree hugging.

iv) The European bank can only be counted as having a pulse due to lavish public money transfusions and tolerated non-service of debt by a negative real interest and Walt Disney appraisals of real estate value.

v) The employer/union relationship works from nearly reasonable to a deserted battlefield after the post 1970’ies battles between social democrats and communists.

vi) The youth is in general educated into jobs few and far between; they are over educated where college degrees are common for school teachers and clerks. At the same time there is a shortage of competent skilled manual workers.

The majority of the issues are not news to the regular reader of this website, where I (among others) have had the temerity to address various pertinent issues – and hopefully will continue to do so as the situation develops.

Indubitably a general plan of action is called for to come to terms with the problems and get economic growth with a sense of proportion. Up to now any type of growth has been considered as equally beneficial as the science of economics makes no value judgment. This lack of proportion has led to a stagnation that will last for years because the investments have been into areas without realistic profit perspective.

Simultaneously Europe must avoid being played by China, Russia and even the USA that have their understandable agendas that might not be precisely the ones most beneficial to Europe. It is very much a question of leveling the internal European playing field – getting rid of some nasty bumps. The weakness of the Euro is that the proper institutions for managing a common currency weren’t implemented from the start – due to political convenience. These will now be forced upon Europe – at a cost and the hard way.

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