Merkel's Got it Right - Or - Rip Off the Band-Aid!

The NY Times June 19th editorial titled The Trouble With Ms. Merkel read: "As recession and banking crises have enveloped Greece, Ireland, Portugal, Spain and Italy, the crisis response, led by Germany, has been dominated by a relentless insistence on self-defeating austerity and piecemeal rescue plans."

Hmm... I think I'd characterize Europe's mess a little differently. I'd say something like:

As the inevitable economic downturn came (the economy is forever cyclical), countries whose fiscal customs literally define the word profligacy found themselves where any spendthrift, entitlement-minded entity of any sort - be it a country, a company, a family or an individual - would in the midst of recession; Dead broke! And Germany's message (go figure) to their dead-broke fellow euro-members has been, "don't even think we're going to chip in unless you markedly change your ways!"

So what's a profligate nation to do? Now there's a tough question (NOT!). Frankly; sell state assets like they're going out of style (which they are, as long as they're state-owned). Cut public salaries (starting at the top), benefits and unnecessary payrolls like there's no tomorrow (there is no tomorrow for yesterday's Greece). Default on the debt (like they have numerous times throughout history); investors were stupid to lend there to begin with. End all subsidies, and enforce the tax code. And expect financing to be very hard to come by until they can prove they've changed their ways. I.e., it's going to be one painful experience.

(AND MAKE NO MISTAKE, THE U.S. HAS GOT TO GET ITS ACT TOGETHER SOONER THAN LATER!!)

Please pardon my frankness - please pardon the fact that the only good solution is to rip off the band-aid - but, as history has shown, per the following excerpts (I did the bolding) from an essay by Global Financial Data (GFD), the premier provider of historical financial data - "ripping off the band-aid" (NOW!) needs to become Europe's (and our) new motto. And the sooner the better.

FromPaying off government debt,Two Centuries of Global Experience
Dr. Bryan Taylor, Chief Economist, Global Financial Data

"The final source of government deficits is the attempt to increase government benefits and entitlements faster than people are willing to pay for them. These deficits are secular in nature and generally require a restructuring of government expenditures and obligations to stop the accumulation of debt."

"Because of the politics involved in making these structural adjustments, reversing structural deficits is the most difficult of all."

"Unfortunately, history shows that governments have to be forced into a crisis to solve these problems, rather than addressing them before the crisis occurs."

And finally, alas:

"The burden of government debt is born by government employees, taxpayers and bondholders. Above all, politics determines who bears the costs. With low interest rates or economic growth, politicians can continue to run deficits. Above all, politics determines who bears the costs of the government