Issue link: https://read.dmtmag.com/i/73372
holdings of government securities rose almost 60 per- cent. In Spain, weak banks imperiled the government, while in Italy, the risk is that losses on government bonds will imperil the banking system. According to the IMF, Italy's government debt-to-GDP is about 120 per- cent, the second highest in the euro zone aſt er Greece. To complicate things further, Francois Hollande, France's new Socialist president has promised to spend and tax his way out of the crisis. He is leaving French voters with the fantasy that the rich, alone, can pay – taxing them up to 75 percent of their income – and that the working class' hardship will be limited. As a way to stimulate the French economy, the fi rst thing Mr. Hollande did was reverse the retirement age (which his predecessor Mr. Sarkozy worked so hard to increase) from age 62 to 60. Th is kind of policy does not stimu- late the economy as Mr. Hollande seems to believe. It only increases the burden on the government and makes it harder in the future to balance its fi scal defi cit. As a result, France will most likely suff er another sover- eign downgrade in the near future. Germany, the largest and strongest economy in the European Union, is facing huge pressure from other European member nations to share their burden by creating a Euro bond, where Germany, as the biggest economy, would bear the biggest cost. Investors are not worried about Mrs. Angela Merkel's prudent govern- ment, whose predecessor restructured the economy painfully 10 years ago. Th e German government claims the problem is the loss of confi dence in less well-run and unreformed countries. Mrs. Merkel is pushing hard for fi scal austerity in each European member natio n that requires a bailout, and the strong medicine is making the patient weaker, as greater austerity reduces economic activity and creates larger fi scal defi cits. On the other hand, real and deep reforms in their labor markets, retirement age and pensions are needed for most members of the EU to come out of this vicious cycle and permanent malaise. Here in the U.S. we have an opportunity to change course, as we are four months away from a very impor- tant presidential election. Th e Obama administration is doing all it can to maintain and increase government entitlements. Th is populist stance is an easy way to gain votes at the expense of greater cost in the future, something the U.S. no longer can aff ord, as it is already in an unsustainable path with permanent fi scal defi cits in excess of $1 trillion per year. Caterpillar had a good slogan in the '80s and '90s, "Th ere are no simple solu- tions, only intelligent choices." Roger Teran IDA President IDA UNIVERSAL July-August 2012 7 Make Your Plans Now ! Miami, Florida 2-5 October 2012 JW Marriott Marquis Toll-free:1-888-717-8850 Register online: www.idaparts.org 2012 CONVENTION SCHEDULE 2 OCT - TUES Patriot Engineering Facility Tour and Lunch for All Attendees 3 OCT - WED Golf Tournament at Doral Opening Reception 4 OCT - THURS Business Meeting & Seminars Continental Breakfast Board Meeting Ladies Shopping Tour Booth Set Up Costex and Blumaq Tour/Reception 5 OCT - FRI Equipment/Parts Trade Show Continental Breakfast Cocktail Reception Closing Dinner and Dance (more updates to come)