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Comment by nikanj | Hacker News Reader

Because they have to constantly bail out southern Europe.

This is about private debt. Maybe read the article before spouting prejudiced misinformation next time.

High taxes allow the government to keep debt low but contributes to private debt.

Why would it? One could easily argue the opposite, because high taxes usually means high social safety and thus lower risk for personal finance catastrophes.

Edit: I looked it up, there is no correlation between high taxes and personal debt: Look at this table and spot low tax countries like Ireland or the US, compared to high tax countries like Germany: https://tradingeconomics.com/country-list/private-debt-to-gd...

(1) There are too many confounding variables to draw that conclusion from that data.

(2) Raise your taxes by 30%, do you have more money or less? Less. And the government has more.

Clearly there are more factors, but there would be no way for the government to keep its spending up without borrowing, without getting money in the form of taxes.

1: Suddenly there are confounding factors? Why didn't that stop you from claiming the correlation in the first place?

2: This isn't how taxes work. High-tax countries essentially do collective purchases with that money, which usually means lower cost per individual for services like education, healthcare, pensions and so on.

Ireland is only considered a low tax rate for companies. Personal taxes are quite high actually.

> 40% over €34,550 for single, €42,800 for married taxpayers.

>Plus USC(Universal Social Charge)4.5% on income up to €50,170 and 8% on balance.

>Social insurance 4%

Not to mention out VAT is higher than Germany's also..

The article is about household debt. Nordic households aren't bailing out southern Europe.

First, Nordic households are taxpayers, not a third party just watching the EU giving someone's elses money to yet someone else.

Second, European middle class is already pretty juiced. Total level of taxation is pretty high and real estate is becoming unbearably expensive. This is a huge problem; with some exceptions (Germany), Europeans think of themselves as middle class when they own at least one home or apartment, and this used to be well possible until at least 2015. But a combination of overregulation (not enough being built) and cheap capital is killing this dream.

Individual home ownership is not a good metric for the state of the middle classes, and the exception Germany illustrates it well: With renter-friendly regulations and high shares of public or semi-public (cooperatives etc.) ownership of homes, there often is no need to own housing, neither for financial nor for security reasons. In fact the rising home ownership rates in Germany are a symptom of the detoriating situation of the market, leading to more gentrification and rising rents in many regions.

The EU is though and the EU gets its money from its member states who in turn take it from its people in the form of taxation. The Nordic countries are major contributors to the EU and have high taxes.

Sad to see the crap brexit-generated misinformation spreading.

Direct and indirect contributions to EU coffers are minimal as % of state expenditure, particularly once you look at the outsized returns in the wider economy. When German banks lend money to Greece to buy their tanks, public debt exposition grows in theory but in practice German coffers win twice. That's why Northern European countries are the big winners of the Common Market. If you have an issue with how this dynamic allocates the resulting "loot", you should take it up with Northern European leaders who allow most of the returns to stay in the private sector.

The Nordic private debt has nothing to do with the EU; I'm not sure about Iceland and the Danish territories in the Atlantic, but Denmark, Finland, Norway and Sweden have fairly insane housing markets in the urban areas, and the current record-low interest rates are just pouring the proverbial petrol onto the fire at the moment.

A few generations ago, many people paid of their mortgage within 15 years of buying property. Now, it's usually 30-40 years due to the rapidly inflating prices. It's obvious, to me at least, that this contributes to higher private debt.

Please read when I said again because you are replying to something I did not say.

Norway is not in the EU, so clearly that hasn't anything to do with the stats.

Isn't Norway in the EEA, hence has to contribute to the fund regardless?

Norway follows the EU regulations without right to vote on them and has access to common market (but not the customs union). It contributes only to EU programs it elected to participate in: largely security, humanitarian and educational.

I said Nordic, not Norway. Also the EU isn't actually something you are either a member of, or not. There are many treaties and Norway is a signatory to many of them. As a result, Norway does in fact contribute to the EU.

I said Norway because it's a Nordic country which is not a EU member, and serves as a counterexample to your statement.

It in fact does not contribute to the EU programs it didn't elect to willingly, that's one of the perks of EEA.

https://www.regjeringen.no/en/topics/european-policy/Norways...

Interesting. Could you expand on that?

It has nothing to do with the article but in general the people of northern Europe feel like they constantly need to help the struggling economies in the south finans their government budgets. Recently the EU borrowed money collectively for the first time to help coutries like Italy. Italy can not borrow at the same low rates as Germany, or Denmark, but if the EU borrow the money on behalf of Italy then they can piggy back on the excellent credit rating of northen Europe.

There’s a grown sense that the southern economies should be allowed to collaps and just deal with their own mess. This is completely ignoring any knock of effect on the rest of the EU and centered on a rather outdate world view, assuming the the economies of the individual EU coutries are completely disconnected.

The EU's model essentially assumes that everyone should be a net exporter, which is clearly insane.

It makes no sense at all to expect Portugal or Croatia to compete with the German industrial establishment. It would take massive infrastructure investment to make that even remotely plausible, even if it was a good idea - which it isn't.

The reality is that the Southern countries are best suited for tourism, leisure, and agriculture, not industry, and so will never be competitive with FR, NL, and DE on those terms.

But there are plenty of mid/long term opportunities for developing Internet and bio/med businesses and related primary research.

The EU could do more to encourage those. (It's making some effort, but more is always possible.)

>>"It makes no sense at all to expect Portugal or Croatia to compete with the German industrial establishment. It would take massive infrastructure investment to make that even remotely plausible, [..]"

What would be necessary for competing with Germany, state investment and some protectionism of new industries, is forbidden inside the framework of the common market and the Euro anyway.

The last thing a net exporter country want is real competition, and the more desirable thing they want is a not-borders market with a not de-valuable currency.

It's funny (actually sad) how so many people think that it's, the less industrialized countries in the Euro, who have the better part of the deal.

You are right, but there is also the issue that a lot of the South Europe countries have structural problems (corruption, bureaucracy, poor infrastructure) that they seem to be unable or unwilling to address. This is also a factor that's holding them back.

There is such unhealthy paternalism in northern European countries based so exclusively on economics that I even find it amusing. Later, we are surprised by the statistics that speak of life expectancy or quality of life and in that case we dont remember southern Europe. And yes, as a citizen of Southern Europe I am constantly feeling insulted.

Italy was perfectly fine before the 2008 crisis, and Italy's current position would certainly be better without the EU's austerity nonsense post 2008. There just is no intrinsically Italian "mess".

Italy had constantly shrinking debt to gdp ratio since the early 90s, right up to 2008: https://tradingeconomics.com/italy/government-debt-to-gdp

Another interpretation is that Italy historically had run its economy on the basis of periodically devaluing the currency to maintain international competitiveness. Not the "correct" way to do things but it worked for them.

Joining the Euro stopped Italy from devaluing but they didn't change the way they ran their economy (for good reasons - doing so would have been very very hard) to avoid the need to devalue coming again; and 2008 was the first time this bit them.

Keep in mind Italy joined the Euro in 2002, and still managed to steadily reduce debt until the crisis.

Full agreement on the importance of the possibility of devaluation, though.

> EU's austerity nonsense post 2008

Can you elaborate? My country (Poland) was in the EU at the time and I didn't notice any "austerity nonsense". Was it related to the eurozone somehow? (we don't have euro in Poland).

I mean things like "Stability and Growth Pact", which Poland simply ignored post 2008, which probably is the reason you didn't notice: Poland breached the deficit/GDP rule from 2008-2014, while Italy only did from 2009-2011.[0] Poland also missed the MTO for every year since 2005 (same as Italy).

The only core difference is that Poland had a lower absolute debt ratio than Italy when entering the crisis. The relative rises in debt in Poland post 2008 were higher than those of Italy.[1] Polands debt to gdp ratio rose 21.5% from 2007 to 2012, and Italy's ratio rose 20.5% during the same period.

[0] https://en.wikipedia.org/wiki/Stability_and_Growth_Pact#Memb...

[1] https://tradingeconomics.com/poland/government-debt-to-gdp

No offence intended, BTW! It's hard to speak about things like these without threads devolving into us-vs-them debates.

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