First Greece was granted a bailout by the European Union and the International Monetary Fund (IMF). Now Ireland has been granted a massive bailout totaling $113 billion. Soon Portugal, Spain and Italy may line up to escape their dire financial straits. When will the perpetual bailouts end?
Bloomberg News details the worries circulating around Spain and Portugal’s financial states:
Investor concern has shifted to Spain and Portugal since yesterday, when European governments sought to bolster the euro by giving Ireland an 85 billion-euro ($113 billion) aid package and diluting proposals that would have forced bondholders to bear some costs of future bailouts.
“It is quite likely that Portugal will be next in line for a financial assistance,” Roubini said today in Prague at a conference of chief executive officers sponsored by ING Groep NV. “The big elephant in the room is not Portugal but, of course, it’s Spain. There is not enough official money to bailout Spain if trouble occurs.”
The United States must send a message resisting domino-effect world bailouts. Although our friends overseas may believe the financial policies of the U.S. Treasury Secretary Tim Geithner, Federal Reserve Chairman Ben Bernanke, President Obama, Leader Harry Reid and Speaker Nancy Pelosi represent the views of our entire country. Fortunately, the bailout mentality isn’t backed by most of the American people. Instead, Americans have called for fiscal restraint from their own government and I extend the same call to our allies.
Countries like Greece and Ireland demonstrated irresponsible behavior as they spent like there were no consequences. Now, by the IMF agreeing to financially back Greece and Ireland, it is moving into dangerous territory itself. The IMF is removing the moral hazard from countries that find themselves swimming in debt with no way out.
What is true for individuals, families, small businesses, townships, cities, counties, states must also be true for countries; create a balanced budget and don’t spend more than you take in.
George Washington in his farewell address advised the young nation to resist foreign entanglements. He was referring to military engagements, but common sense tells us to apply that sound advice to the incessant calls for monetary bailouts. The United States, as a member of the IMF, is tangled into the European mess with first Greece and now Ireland. It is in our best interests as a sovereign nation to not bear the burden of these countries’ reckless spending habits. Market discipline drives private economic decisions. Likewise, tough love demonstrated by the United States to our international allies will also send a message before more bailouts are doled out.