Friday, February 1, 2013

The current global economic slowdown cannot be blamed solely on the EU, but the mechanisms and strictures now in play for countries whose traditional strategy when in a crisis was to devalue and rebuild simply do not make sense. It is both unconstitutional and simply applying the most superficial of sticking plaster to imagine that you can put off the inevitable by offering a few well-meant but ultimately short-term guarantees - which are ultimately going to be unacceptable - if continued (which is inevitable) to the various Constitutional Courts in Member States, not to mention against the Lisbon Treaty.
The Eurozone crisis has a lot to do with a bureaucratic, technocratic machinery running aground when the proactive market participants start addressing the various - and major disparities in the economies under the same trading bloc. Rather than create a sensible way out for countries with huge youth unemployment issues, suffering under severe austerity, they are forcing Europeans to carry on unabated.  There is no central tax revenue collection or coherence in this vastly diversified trading area, and sovereign authority is, at best, paid lip service to when countries have to make tough decisions. There is scope for an entrepreneurial and proactive trading bloc, but not on these terms. As countries struggle under the weight of market pressures, the last thing they need is fewer options. Which is exactly what the EU is giving them. Just ask Iceland - now pushing out healthy GDP growth figures after their own economic crisis of a few years ago. The EU is simply not responsive enough to market demands to be a credible single currency zone. And its southern Member states are paying a heavy price for its inflexibility and blindness to proactive. With an ex-Communist in charge - is anyone truly surprised? I still think the EU can be made to work, but fear with the current incumbents that it is too late to wind back the clock and get the trading area to function effectively.

4 comments:

Anonymous said...

Definition of 'Paris Club'

An informal group of creditor nations whose objective is to find workable solutions to payment problems faced by debtor nations. The Paris Club has 19 permanent members, including most of the western European and Scandinavian nations, the United States of America, the United Kingdom and Japan. The Paris Club stresses the informal nature of its existence and deems itself a "non-institution." As an informal group, it has no official statutes and no formal inception date, although its first meeting with a debtor nation was in 1956, with Argentina.

Investopedia explains 'Paris Club'
The members of the Paris Club meet each month in the French capital, except for the months of February and August. These monthly meetings may also include negotiations with one or more debtor countries that have met the Club's pre-conditions for debt negotiation. The main conditions a debtor nation has to meet are that it should have a demonstrated need for debt relief and should be committed to implementing economic reform, which in effect means that it must already have a current program with the International Monetary Fund (IMF) supported by a conditional arrangement.

The Paris Club has five key functioning principles: case by case, consensus, conditionality, solidarity and comparability of treatment.

Anonymous said...

In some cases, members of the Paris Club agree to completely forgive debt, often as part of a plan negotiated with other aid and funding agencies. In 2010, for example, all of Liberia's debt owed to creditors in the Paris Club was forgiven. In other cases, partial debt forgiveness, changes to interest rates, temporary suspension of interest payments, and other relief measures are available. These are carefully discussed by the members, as they do not want to compromise their own financial stability by giving up on collecting debts, but they also want to contribute to global economic stability and peace by preventing developing nations from entering economic crises.

Members of the Paris Club generally break up debtors into a number of categories, on the basis of factors like the total amount of debt being carried, their degree of economic growth, and their historic political volatility. This is used to create a triage approach to make sure that the neediest countries get aid first. Cooperation with international aid organizations can help the Paris Club's efforts go further, by creating a supportive framework for countries trying to emerge from significant foreign debt.

Ideally, the Paris Club aims to be able to collect all debts owed. Being flexible about repayment plans, interest, and other matters increases the chance of being repaid, although it may take longer for countries to fully pay back their debts. One concern is the risk that countries will take on more debt to pay off debt, or will incur debt trying to keep their governments functional while managing loans.

Anonymous said...

Ever since reports of the black hole in Greece's public finances first surfaced in late 2009, the economic story in the eurozone has been dominated by the growing gulf between the crisis-ridden periphery and the better-performing core. No longer.

Figures out on Thursday highlighted another trend that has developed while the focus has been on the single currency's fringes: the growing disparity between Germany and France.

Labour market data from Germany was again impressive. Unemployment has fallen to a 20-year low of 6.8%, not bad for a country that is heavily reliant on exports and thus exposed to the slowdown in the global economy in the second half of 2012. Meanwhile, France reported flat consumer spending in the final three months of 2012, with all the signs pointing to another weak performance in the first quarter of 2013. The jobless rate in France is at a 15-year high and on course to hit 11% later this year.

Make no mistake, neither country is going to have a 2013 to write home about. But should the eurozone crisis flare up again over the coming months, there is a real risk that its second biggest economy will be added to the list of countries where the public finances are deemed unsustainable.

Anonymous said...

1971

The above year is when all our troubles began, the dollar became a fiat currency, no longer backed by gold. Believe it or not, the dollar was only supposed to be taken off the gold standard as a temporary measure to help pay for the Vietnam war. Unfortunately it was never returned to the gold standard and effectively meant the fractional reserve ratio could increase, and my goodness it was increased significantly. Western economies became over leveraged by borrowing too much currency from the future. In a nutshell the monetary system became one almighty giant Ponzi scheme, it benefited the politicians and the corrupt banking elite.

President Obama said in his inauguration speech that the US was on the road to recovery, and then just over a week later the US had a contraction in the fourth quarter. I don't believe the politicians, I think for myself, I tend to get a more balanced viewpoint by watching the alternative media.

There is not a cat in hells chance in a recovery, we are going to enter the greatest depression ever, the fundamentals are truly awful, why?

1. Fiscal cliff issue not resolved
2. Continuation of quantitative easing (85 billion dollars per month including mortgage backed securities)
3. Delaying the debt ceiling issue. It was supposed to be faced at the beginning of March this year, it has been delayed to May of this year. I am convinced that they will raise the debt ceiling again.

Good old can kicking down the road has delayed the depression, only to make it worse when it happens. We can thank ourselves, yes that's right ourselves, because we don't like to hear bad news (the truth), therefore the politicians tell us what we want to hear. They just hope the collapse will happen on someone else's watch.

It's not just France that is in the @!!*