The White House phone bill might be ticking sharply north this month because, lo and behold, it turns out there are more politicians in desperate need of President Obama’s perpetual insistence to “act boldly.” On the heels of reports that he cajoled German Chancellor Angela Merkel into forsaking her voters and bailing out Greece comes this breathless update: Obama is twisting arms in Spain!
Spain is one of the “PIGS” countries, a group of economic basket cases including Portugal, Ireland, Greece, and Spain. Like the others, Spain is suffering from extreme budget deficits caused by rampant government spending to prop up unsustainable social welfare programs. Obama called to convey some tough love:
Mr Obama’s call yesterday to Mr Zapatero added an American voice to European pressure on Spain.
Mr Zapatero has so far shied away from structural reforms opposed by trade unions but is now facing new calls from EU leaders to slash spending again and tackle his country’s economic crisis.
If it’s true that Obama is urging Spain to cut spending, then three cheers for fiscal sanity! Unfortunately, there are no indications that approach is being seriously considered on this side of the pond. As proof, the Obama Administration is holding out a curious example for Europeans to follow: the Bush era’s Troubled Asset Relief Program (TARP).
American officials urged that Mr Sarkozy and Mrs Merkel recall the U.S. lesson of 2008-2009 when the Bush administration persuaded a reluctant Congress to approve a massive $700 billion Troubled Asset Relief Program.
While politically unpopular, the U.S. rescue plan convinced markets that authorities were serious about keeping banks afloat.
Or it convinced those who play in the markets that the American government wasn’t serious about letting the invisible hand apply the rules of risk and reward to credit default swaps. If anything, TARP is a monument to the kind of taxpayer funded subsidy for bad behavior that should be avoided by other countries because it socializes the risk yet personalizes the reward.
If European leaders want to speed the decline in trust for economic “experts” by all means, TARP away – just don’t whine when China buys chunks of real estate for pennies on the Euro.
H/T: Daily Mail (UK)