Re: Logicalman

Note sure exactly what France's situation is, but the US deficits and debt are pretty moderate. The deficit has been shrinking and is likely to come in < 1% GDP this FY, with a balanced budget entirely possible by 2009.  The Debt:GDP ratio is a manageable 64% and declining, as the nominal GDP continues to grow faster than debt. Not a bad situation. The numbers LOOK big, see, because the Economy is big.


Debt/GDP ratio

loikll writes "The [US] Debt:GDP ratio is a manageable 64%". Note that the US measures debt differently than France and most (all?) EU members. France uses the commonsense measure of money actually owed by the French government. This method is refered to by the US Treasury as "debt held by the public", and, by this measure, the US national debt is "only" 37% GDP. French national debt, by this measure, is about 70% GDP.

The US, and some other nations, have a method of assuming future costs due to state pensions and other intergenerational programs and often call this debt. For example, when social security takes in $200 billion more in a given year than it pays out, the US Treasury states that the US national debt INCREASED by $200 billion, writes an IOU to itself for $200 billion, sticks this in a filing cabinet, and calls it the social security trust fund.

There are decent reasons for using either accounting method, but the numbers that come out are radically different, so you need to know which one is being used. There's no serious doubt that France has MUCH higher relative pension liabilities than the US; it's just not accounted for in the budget.

The Maastrict Treaty specifies an upper limit on debt of 60% GDP. Some EU nations were given waivers on this part of the treaty (over the objections of the bankers) because they were so deeply in debt they had no hope of coming close to this number any time soon, and it was considered too embarrassing not to let them into the eurozone anyway. Belgium, at over 90% debt/GDP, was given a waiver. Several EU nations that were not given waivers, including France, have since violated the treaty.

The point for Brussels Journals readers shouldn't be to gawk at how big the debts of the US and France are. Rather, it should be to realize how much higher Belgium's debt load is. They needed a special waiver to be let into the eurozone.

How to handle the debt is the real underlying issue behind Belgium's current crisis. It's, also, the most important issue for Flemish separatists to face. How much of the Belgian national debt will an independent Flanders assume?

Shrinking deficit

At least the U.S. budget deficit is shrinking.  From M. Fillon's comments, I must assume the same is not true of France's budget deficit.

@ Frank Lee

The deficit in France is disastrous and extremely difficult to correct because of the very rigid labour laws.
Sarkozy knows it but as soon as he dares mentioning the word :"change", or he touches the "rights" of the labourforce the unions are up in arms. In France the unions have huge amounts of money in the big corporation's union councils which the union bosses use at their discretion. The biggest union council treasury is at "Electricité de France" the electicity monopoly of the french state.

@ logicalman

The present financial difficulties of the US have nothing to do with Bush.

Those difficulties started in the 1930's and were re-engineered under most democratic presidents. Roosevelt and WWII, Truman with Korea, Vietnam with Kennedy etc. etc.

Bush father charged the expenses of the first Gulf war to the saudis and the kuwaitis and nearly bankrupted them in the process.

The massive amount of dollars, legal, illegal, black and fake in the worldmarkets makes for an enormous and uncontrollable problem and for a long time the foreign investments in the US have compensated the outflow of dollars but this cannot continue.

I am sure that we will see more heavy corrections of the financial markets but it's ridiculous to blame it on Bush. If you want to blame somebody, blame it on the american consumer and on the free trade. It will take some time before "cheap China" will not be cheap anymore, but meanwhile the american economy can react through creativity and innovation after a period of weak economic performance which will last a few years. From that moment on again free trade will be a blessing.

good beginning

Realize the problem is a good beginning. Bushies don't seem to care for USA's similar problems as long as they enrich their class/group.