Andrew Bosomworth, head of Pimco\’s portfolio management in Europe, said current policies are untenable in the absence of fiscal union and will lead to a break-up of the euro.
\”Greece, Ireland and Portugal cannot get back on their feet without either their own currency or large transfer payments,\” he told German newspaper Die Welt.
Those really are the only two choices available.
Either the richer countries have to pour money in, in the same way that the richer parts of the UK or US have to pour money into the poorer parts, or different currencies are needed.
And this is nothing, nothing at all, to do with Keynesian or neo-liberal solutions to anything at all. With left or right.
There is one more thing though. How much will those richer areas have to pour in? I know I\’ve asked this before but I haven\’t been given a good answer.
It obviously has to be more than 1 or 2% of GDP: for those are the sorts of amounts that the EU budget already shifts around and we\’re all clear that that isn\’t enough.
So it will have to be more than that. 5% of GDP maybe? 10% of GDP?
But here\’s the real crunch point. Given the generally high tax regime in those richer areas of the eurozone already, is there actually room to lift another 5 or 10% of GDP in taxation? Don\’t forget, this won\’t be a transfer within that domestic economy, it\’d be a transfer out of it.
Is there room to tax 5% of GDP in, say, Sweden?
I am told by my man in the know that the numbers are:
Bigger than Versailles as a share of German GDP. Perhaps 4pc, or 100bn euros a year from Germany alone. About 160bn for the teutonic bloc, forever.
Is this economically viable? Raising another 4% of GDP in taxation in the rich countries without entirely screwing over economic growth?
And if not, what should be cut from what government currently does to pay for it?
And finally, does anyone at all think this is politically viable?