Monday, 30 July 2012

Politicians who deliver deficits should be quarantined

Here are some interesting thoughts from Oystein Stray Spetalen, Norway's perhaps most well-known investor, on the causes of the eurozone crisis and how to address it (translated from
Quarantine the politicians for 15 years if they do not deliver

Politicians dare not address the real causes of the euro crisis, according to Investor Oystein Stray Spetalen. He proposes a simple but drastic solution to the problem.

- Much is written about the causes of the financial crisis in the euro area, but basically it is very simple, says Øystein Stray Spetalen. He believes that the real reason behind the problems of the euro countries are budget deficits. So the politicians for years have spent more money than the state receives in revenue. Now, the investor believes that there must be vigorous measures against the politicians who spend too much money.- They have spent too much money on welfare benefits that are not covered. Revenue is not in proportion to the cost. To correct this, they try to manipulate the market to bring down interest rates. But the market can see that the underlying problems are not solved, says the investor.

Do not dare take the necessary cuts
Rather than make the right decisions Spetalen believe that the politicians choose the easiest way to get re-elected.

- The politicians do not dare to fix these problems, which will require such strong cuts, as they will not be re-elected. Therefore, we are in a vicious circle where in symbiosis with the capital markets they try to manipulate the markets, says the well-known investor.

In countries such as Greece, Spain, France and Italy, proposed government budget cuts led to widespread protests and demonstrations in the streets.

Should be banned

Spetalen says there exists a good solution:

- Politicians should be banned from delivering budget deficits in government finances. All politicians in Europe that fail to deliver a balanced budget should be removed from politics and be quarantined for 15 years. It might help, he says laconically.

Spetalen also adds that these politicians probably would not get any comet career in business.

- Had these politicians worked in business and delivered the deficits they do, they would have been fired long ago, says the investor.

Spetalen is definetely on to something here, but it's likely politicians are afraid to cut costs and balance budgets for other reasons than simply to get re-elected:  it's hard work, it requires more from the ones keeping their jobs and its unpleasant - the easy way out is to do nothing or to increase the size of the government/state further to avoid internal conflicts at the expense of tax payers in the private sector. More work for the same amount of money is not a path most politicians are likely to pursue. Go to for the full article in Norwegian.

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