| Acura604 | 11-15-2017 12:25 PM |
European countries are running out of CASH!
what's your take on this? France ran out of money last Tuesday ? and within days, so will the rest of Europe | The Province
Analysis: European countries are being forced to borrow well before the year ends — and sooner or later, that debt will catch up with them
At first glance, not a lot was going on last Tuesday. Priti Patel was desperately trying to hang onto her job, unsuccessfully as it turned out. Donald Trump was mouthing off on a trip to South Korea. Manchester City were rumoured to bidding for an incredibly expensive footballer, and somebody somewhere was inevitably moaning on about Brexit. It was all fairly run-of-the-mill stuff.
But for number-crunchers, something interesting happened. It was the day when France ran out of money. As of Nov. 7, all the money the government raises through its taxes – and this being France, there are literally dozens of them – had been spent. The rest of the year is financed completely on tick.
And yet France is far from alone. All the main European countries, the UK included, are running out of tax revenue well before the year is over. That is worrying for three reasons. It is reminder that spending is still way too high. It tells us that governments have failed to curb deficits. And it is a warning that next time there is a recession governments won’t have any room to respond with a fiscal boost.
There are lots of dry ways of pointing out that governments are spending a lot more money than they raise in tax revenue. Economists and statisticians wheel out debt to GDP ratios and chancellors and finance ministers set targets for deficit reduction. Those, however, usually come in hard-to-follow percentages, or else the billions and billions involved pile up so quickly that most of us simply glaze over. But in France, the Institut Molinari has come up with a very neat way of illustrating the issue in simple terms. It works out the moment in the calendar after which everything the government does has to be financed through borrowing. If you wanted to, you could call it the day the money runs out.
So how’s that going? France, perhaps not very surprisingly, turns out to be the country that is out of cash first. A government which last managed to balance the books in 1980 used up all its money with 55 days of the year still left. That was a day earlier than the year before, and four days earlier than back in 2014. France is not only living beyond its means, but it is now doing so at an accelerating pace. And that was despite the fact that taxes and social security charges have gone up. Once those charges are combined, the state is raking in 53 per cent of GDP in revenues – its problem is that it then spends an even more massive 56 per cent of GDP over the same period. | 