Magic money well, maybe?

MARTIN VAN BEYNEN
Last updated 10:08 19/05/2012

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Martin van Beynen

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OPINION: In the early years of our marriage, my wife and I had a bit of sorting out to do, especially about money.

In our relationship I was the Germany of our economic alliance and Mrs VB was Greece. This non-alignment of financial priorities was more fundamental than a mere meanness with money on my part, as those fond of stereotyping might be thinking. It went as deep as what sort of beverages we should have in the fridge.

Mrs VB also needed to be told that when the money ran out, the money ran out. There was no magic money well where you could dip your ladle and get some more. I had to stress we were not too big to fail like the banks who owned our mortgage and disabuse her of the notion that the International Monetary Fund was there to help distressed individuals.

Like Greece, Mrs VB was not above using money as a weapon. If she was angry with me she would go out and spend or threaten to withdraw from the currency.

However, over the years our economic attitudes have got closer together so now Mrs VB can more fairly be likened to Italy and I have probably moved nearer to a country like France, although I like to keep one foot on each side of the Franco-German border.

I always thought national economies could only succeed if they were run along the same lines as a successful household. Events in Europe have certainly undermined that bedrock position. Is there in fact a magic money well out there? One which Greece, Spain and Italy will apparently be lining up at, to fill their coffers so they can keep public services going and pay pensions and public servants.

As the world watches the financial delinquents of Europe toss out governments implementing austerity programmes, it becomes clear the concept of the magic money well has taken hold.

France has tipped out Sarkozy for the kinder face of Francois Hollande and Greece this week failed, after the umpteenth attempt, to form a government to deal with its ever worsening crisis. In the Netherlands, the government was brought down by the populist Geert Wilders over cuts to services to the elderly.

Across Europe the mood is set against austerity and for a nebulous alternative which some call growth. There was me thinking that when you run out of money and can't borrow more you have to reduce your spending to match your income.

I didn't realise you actually had a choice. I didn't realise you could reject fiscal constraint and opt for the magic money well.

I get the impression New Zealanders have yet to be truly tested on whether they believe fiscal responsibility should be preferred to the magic well. How we will react when called upon to make similar sacrifices for the sake of more balanced budgets is still an open question?

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It's possible the dress shops and cafes in central Wellington are less populated, but I have yet to see a policy which is causing widespread hurt, although it's early days. We have seen the Government move on our diplomats, change the repayment rate of student loans and raise the prescription charge.

These may be worth a couple of hundred million and but such tinkering doesn't appear to be the radical reform we are told is needed.

Would New Zealanders simply go quietly as services are cut, workplaces closed or downsized and charges are raised? Would we chuck out governments when we don't like the medicine said to be for our own good?

In response to the crisis in Europe, radical parties trumpeting scorn for the establishment have tasted electoral success. In Greece, the far-Left Syriza party is making the running and in France the National Front under Marine Le Pen has gained real influence after the recent election. Even in Germany a defeat by Angela Merkel's conservatives in state elections is said to show widespread disenchantment with cutbacks and layoffs. Joke parties have also been elected as voters spurn the tried and failed.

In New Zealand we already have NZ First so we can already tick off the joke party option. But could we see the rapid rise of people like Hone "champion of the poor" Harawira and Sue "determinedly working class" Bradford, who would no doubt soak the rich by raising taxes, scrap asset sales and double public spending?

I like to think, we, like the Irish, would suck up what needs to be done without too much bellyaching.

In the meantime Mrs VB and I are watching the European situation very closely. It will tell us, we hope, who was right. Mrs VB is wondering whether she should have stuck to her guns with her Greek attitude to money and, although my position is looking increasingly shaky, I've still got my money on German hard work and frugality.

However, in the light of recent events, I'm getting ready to concede. The magic money well might really exist and I have unnecessarily condemned my family to a regime of austerity and productivity for zilch.

- The Press

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