In order to get themselves out of recession, European countries (and America) need to put more money in the pockets of ordinary folks, who will spend all of it, ASAP, thereby generating the demand that will prompt business expansion and the hiring we so badly need. However, this kind of government spending (in order to create jobs and provide adequate amounts of unemployment insurance, and thus enough consumer spending) requires growing government indebtedness, as Paul Krugman and other economists have made perfectly clear. (Click here to read source article.)
The problem, however, is that this kind of growing indebtedness exposes these countries (at least the ones in Europe) to predatory raids by banksters of the kind that operate at companies like Goldman Sachs, who, with naked short selling (more info on this), essentially bet that these countries will be pushed towards default on their loans, thereby making it all the more likely that they will be forced (by way of "structural adjustment programs") to submit to riot-producing strictures (as in Greece) imposed by the IMF and World Bank. And of course such riots might well also be followed by the leaders of those countries being voted out of office. Obviously, therefore, the leaders of these countries are reluctant to have their countries take on this extra debt, even if it is the only way to provide the jobs their country so badly needs. To reiterate, the dileamma is that without taking on this additional debt, there is no way to produce the jobs that will cut crippling levels of unemployment.
What makes this even worse was pointed out by professor Ismael Hossein-zadeh in a recent article:
"External sovereign debt, as well as occasional default on such debt, is not unprecedented. What is rather unique in the case of the current global sovereign debt crisis is that it is largely private debt billed as public debt (i.e. debt that was accumulated by financial speculators and, then, offloaded onto governments, to be paid by taxpayers as national debt). Having thus bailed out the insolvent banksters, many governments have now become insolvent or nearly insolvent themselves, and are asking the public to skimp on their bread and groceries in order to service the debt that should not be their responsibility.
After transferring trillions of dollars of bad debt or toxic assets from the books of financial speculators to those of governments, global financial moguls, their representatives in the State apparatus and corporate media are now blaming social spending (in effect, the people) as responsible for debt and deficit!"
The all too frequent grumbling about "out of control government spending" reflects the insidious strategy of blaming victims for the crimes of the perpetrators! It also reflects the fact that the powerful financial interests that received trillions of taxpayers' dollars, which saved them from bankruptcy, are now dictating debt-collecting strategies through which governments can recoup those dollars from taxpayers. In effect, governments and multilateral institutions such as the IMF are acting as bailiffs or tax collectors on behalf of banksters and their financial wizards.
Not only is this unfair (it is, indeed, tantamount to robbery, and therefore criminal), it is also recessionary as it can increase unemployment and undermine economic growth. It is reminiscent of President Herbert Hoover's notorious economic policy of cutting spending during a recession, a contractionary fiscal policy that is bound to worsen the recession. It is, indeed, a recipe for a vicious circle of debt and depression: as spending is cut to pay debt, the economy and (therefore) tax revenues will shrink, which will then increase debt and deficit, and call for yet more spending cuts!
Spending on national infrastructure, both physical (such as roads and schools) and social infrastructure (such as health and education) is key to long-term socioeconomic development. Cutting public spending to pay for the sins of Wall Street gamblers is bound to undermine the long-term health of a society in terms of productivity enhancement and sustained growth.