This is what the Republicans are doing to the U.S.
msnbc.msn.com
By John W. Schoen, Senior
Oct. 5, 2011
The medicine being used to cure the financial contagion spreading throughout Europe is killing the patient.
For nearly two years, the richer countries of the region have pressed harder for spending cuts and tax hikes from poorer countries like Greece, already struggling under a crushing debt accumulated when the global economy was booming.
Those measures have sent the entire euro zone sliding into recession, pushing Greece’s neighbors closer to default and European banks that are holding that shaky debt closer to insolvency.
Now, after years of debate and multiple failed efforts, the downward spiral may be impossible to break. By not acting quickly, Europe may have missed its chance to cure the disease, according to Mohamed A. El-Erian, CEO of PIMCO, one of the world's largest bond funds.
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Since July, European Union leaders have been working out details of a broad plan to force tax increases and budget cuts on Greece in return for the latest $11 billion payment that would head off the country defaulting on its debt. Without that aid, Athens is expected to run out of cash in a few weeks.
Greek officials said this week that they would not meet the targets imposed as part of the deal, throwing the entire bailout plan into doubt. While its European benefactors argue that Greece simply needs to try harder, austerity measures already have sent the country’s economy into a deep recession.
“The capacity of the Greek people to pay taxes is really, believe me, exhausted,” said Petros Doukas, a former Greek deputy finance minister. “People like myself are paying taxes out of our savings and by selling our assets. We’re not paying taxes by generating new income, unfortunately. And that’s a very, very dire development.”
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