BRUSSELS — After weeks of uncertainty that revived fears about the foundations of the euro, European leaders on Thursday clinched a new rescue plan for Greece that could push the country into default on some of its debt for a short period but would give Europe’s bailout fund sweeping new powers to shore up struggling economies...And of course the money sentence:
More significant, the euro zone leaders gave wide-ranging new powers to the bailout fund, the European Financial Stability Facility, by allowing it to buy government bonds on the secondary market and to help recapitalize banks where necessary.
That would effectively turn it into a prototype European version of the International Monetary Fund. The bailout fund would even be able to help shore up countries that had not requested a rescue.
Germany rejected such ideas only months ago...
Diplomats said that going forward with the proposals would require a change in the fund’s rules, which in turn would require approval by national parliaments.
Of course, not even Germany can survive its own demographics in the next 40 years barring fundamental government reform.
In his book titled The Collapse of Complex Societies, Tainter argues that complex societies collapse because devolving becomes impossible. Those layers of bureaucracy and stratification of professionals and regulation become such an inflexible warren that unwinding them becomes impossible. Like large firms, orderly downsizing is impossible. The bureaucracy and overhead has devoured all marginal value. Collapse eventually becomes the only possible avenue to simplify.
In that sense, it is not just spending that must be reduced, but the miles of paper of regulation that prevents flexibility and protects activity that does not add value. The debt is just the measurement of the real problem, and regressive policy changes to social nets in order to 'save' them only feathers over the fundamental problem.