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Dutch Government Falls Due to Spreading Financial Crisis

Posted by Steve Markowitz on April 24, 2012

The sovereign debt crisis of Europe started in the smaller countries with most attention focused on Greece during the past two years.  It has since spread to the so-called PIIGS, Portugal, Ireland, Italy, Greece, and Spain.  Unfortunately, contagion is becoming an epidemic.

There are currently only four AAA rated European, in Germany, Finland, Luxembourg and The Netherlands.  However, even these countries are not immune to the growing sovereign debt problems.

The Wall Street Journal reported yesterday that the government of The Netherlands’ fell when it’s centrist Prime Minister Mark Rutte and cabinet resigned.  The resignation were caused by the government’s inability to agree to cutting its budget deficit from its current rate of 6% of GDP to 3%.

The Netherlands has been Germany’s strongest ally when it comes to the austerity Germany believes is required to address Europe’s debt problems.  The fall of Rutte’s government will at best strain this relationship.  This is not dissimilar what is unfolding in France where President Sarkozy is trailing in the polls.  He too has been an ally of Germany’s fiscal policies.

The word “austerity” is a ruse coined to mask the real issues behind the sovereign debt crisis unfolding in Europe.  At stake are the huge social benefits that Progressive governments promised their citizens over the decades.  Instead of paying for these benefits as they were incurred, governments worldwide borrowed funds to hide the true cost of these programs.  The source of the credit is drying up as lenders, i.e. bondholders realize the governments cannot pay their promised obligations.

This is not a dispute between capitalist and socialist or between rich and poor.  The issue is one of greed, plain and simple.  While interested parties on all sides will hide behind some supposedly nobler goal, at the end of the day it merely boils down to wanting the other guy to pay the bill.

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