Dysfunctionality in both sides of the Atlantic

Many observers have bitterly criticized the foolish threat to blow up the global economy just for the sake of scrapping Obama’s key Medicare initiative. Concern has been voiced about a debt ceiling that appears as a sword hanging by a single hair on our heads. Far more dangerous than the one Damocles placed in his banquet hall. For, this time, many congressmen were ready to cut the hair, leaving no room for Fortune to play its role.

Undoubtedly, budgetary policy in the US allows ample room for dysfunctionality whenever the executive fails to command fair support in Congress. In most countries such a stalemate would immediately lead either to ousting government from office or calling for fresh elections. We all too readily discard such a huge disarray could happen back at home. Yet, evidence on how the Eurozone works fails to support that claim.

The tough common discipline for trimming down deficits and debt has proved largely unfit for dispelling doubts on public finances’ sustainability in the absence of a robust mutual support mechanism. Rescue plans came too late and were endowed with scant resources for ring-fencing partners in distress. Only Draghi’s resolute stance saved last year the Euro from sheer implosion. The ECB mere readiness to buy as many bonds as necessary for defusing a potential default, briskly halted the wild securities sell off.

We escaped from utter collapse, at the very last minute, through a bold ECB move that openly defied the Constitutional principle barring public liabilities’ monetisation. We also faced a nasty debt trap proving unable to solveit in due time. The US has so far overcome the fiscal cliff without resorting to trespass its fundamental Chart. All in all, there is little lesson Europe can teach to policymakers in the other side of the Atlantic.

About the Author

JP Marin Arrese
Juan Pedro Marín Arrese is a Madrid-based economic analyst and observer. He regularly publishes articles in the Spanish leading financial newspaper 'Expansión'.

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