In light of the many traffic accidents lately, Rachel called her husband Shmulik: "Listen honey, I just heard on the news that on Highway 6 someone's driving against the traffic, so be careful." Shmulik answered: "I'm on Highway 6 now and I'm telling you that it's not just one guy, it's hundreds! What's wrong with them, are they crazy?"
So who's the crazy guy? The guy driving against the traffic or the hundreds of others? And who's the crazy guy in the economy? The one calling for the government to increase spending and enlarge the deficit, or all those European countries that not only are not increasing spending but are slashing their budgets?
This week, the president of the European Central Bank, Jean-Claude Trichet, said Italy's government must act quickly to reduce spending, implement reforms and privatization, and reduce the budget deficit so it disappears by 2013. The reason is Italy's huge public debt, 1.9 billion euros - 110 percent of the country's gross domestic product. The Italians wanted to work little, vacation often and enjoy a welfare system that gives everybody everything. Until they collapsed. In an attempt to prevent bankruptcy, the Italian government decided to cut its budget by 45 billion euros in five years, meaning fewer services, wage reductions and a freeze on hiring new workers in the civil service.
But Italy is not alone in its troubles. Many European countries that were on a roll in recent years now find themselves in a similar situation. They shortened the work week, increased vacation time, improved social conditions, allowed workers to retire and receive pensions at between 55 and 60, and subsidized education. Now they've discovered that their public debt is too high, their credit ratings are going down and their economies are stuck in recession and unemployment. In Spain, unemployment is at 20 percent; among the young it's at 40 percent! So Spain too has to cut its budget by 8 percent and reduce public sector wages by 5 percent.
Greece too is undergoing a severe crisis. It's cutting 14.3 billion euros in social security, health, investments, defense and public sector wages. Ireland is cutting 4 billion euros in social security and public sector wages. And Britain is cutting a huge amount to prevent a downgrade of its credit rating. It's cutting 84 billion pounds over four years, meaning a reduction of 500,000 jobs in the public sector, an average reduction of 19 percent at government offices and a tripling of university tuition to 9,000 pounds a year. Just for your information as a student, Itzik Shmuli.
The Americans, who partied throughout the last decade, now find themselves in a deep crisis. The stock market is falling, unemployment is rising (to 9 percent ) and President Barack Obama, "the national increaser," has been forced to change direction and present a plan for cuts of between $2.1 trillion and $2.4 trillion over 10 years, with the aim of reducing the deficit and lowering the large public debt.
In these countries, the people don't even dream of demanding that the government increase spending. There the people are not only struggling to make ends meet, they can't even make basic monthly payments because wages are being reduced, unemployment is rising and welfare payments are being cut.
Luckily for us, we don't need cuts, for now, because we've acted responsibly in the last 26 years. We've cut government spending, become more efficient, lowered taxes, implemented sweeping reforms and privatized government companies, helping us grow and lower the public debt from 200 percent of GDP in 1985 to 75 percent today. This responsible policy has created growth, lowered unemployment and created conditions in which resources can be channeled to address social problems.
So it's right to listen to the social protest's demands and change budget priorities to fulfill the basic demands. But we should always keep in mind the basic condition: Any solution must be implemented within a framework, without breaching the budget.
For it's clear that the one guy driving against the traffic is crazy, not everybody else.
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