Europe is in denial about its debt.
Standard and Poor's recent warning about U.S. debt is a good opportunity to flog a book review I wrote about several nations staggering under unsustainable debt loads. It's also a good opportunity to highlight this analysis from Bobby Duffy, on Europe's attitude toward its sovereign debt problems:
In fact, earlier last year there were a number of countries that we could call "debt deniers", which have high levels of public debt - but were relatively unlikely to think that action on this was needed, such as France, Portugal and Italy. But by the end of 2010, each had come into line and high public debt countries now widely say they accept the need for action - for example, 75 per cent in France and 84 per cent in Italy.So is this a sign that we're ready to take our medicine, that we realise we've been living beyond our collective means and need drastic measures? That would be an understandable shift in opinion, as the consequences in Greece, Ireland and now Portugal have caught the public's attention across Europe.
While we may see a fundamental shift in opinion in those countries actually requiring bailouts, it would be wrong to conclude that this will result in long-term sea-change in attitudes across Europe. For a concern about debt to stick, people will need to see that reducing it works.
The big problem facing most debt-strapped nations today is that the very steps required to pare back their deficits and rein in their debts tend to depress economic growth, which they also very much need to help balance the books. That said, there are some things that countries deep in debt shouldn't be wasting their money on - things like this.
(AP Photo)
