Spain is being made to return to competitiveness through so-called internal
devaluation. Wages are falling to offset their rapid appreciation relative to
those in core Europe during the years leading up to the crisis. It would help
Spain if inflation—and thus labor costs—were rising faster in core Europe,
reducing the amount of domestic deflation needed. But that’s not
happening—indeed core inflation is running below rates around the euro zone’s
troubled fringe, in part because of austerity-related tax increases in the
latter. Without German acceptance of higher inflation, Spain is looking at more of
the same. More wage cuts, more unemployment, more contraction.
The country is already into its second recession since the financial crisis
and forecasters have been paring back growth expectations for the coming year.
Official unemployment makes up around a quarter of the potential labor force and
continues to rise. Even ignoring that the data are probably distorted upward by
overly generous employment protections that give firms strong incentives to use
unreported workers, the jobless rate is unsustainably high. Social and political
strife is already common. Even where economic measures have improved, the turnaround isn’t all
positive. For example, Spain has managed to turn its current-account deficit
into a surplus, but only because domestic demand and thus imports have
collapsed. The ratings agencies don’t tell us anything we don’t know. Their downgrades
have little or no significant bond-market impact. But they’re still relevant
because they confirm an increasingly gloomy outlook.
6 comments:
Greek democracy is very fragile. The memory of the colonels is still vivid in my mind. The shadow of Franco has not left Spain. The EU risks undoing what little it has achieved in bringing stability to the European spere by the approach it has taken to the EZ crisis. .... There is no question that Greece is the architect of its own downfall. The same is true of all member states now in crisis. Greece is a corrupt society viewed from western eyes though, taken in context, it is just another eastern European country. The problem is how to reform this society without destroying it in the process. It would have been summarily ejected had this been feasible and/or deemed sensible by the EU elite. However, this is now all irrelevant.
Procrastination by all has brought the country to breaking point. We have passed the point of no return in Greece and disintegration is now inevitable. The consequences are impossible to fathom..... Sometimes political ambition is just not enough. One can only hope that Greece doesn't get a penny more. They took everything that they were loaned and just took it. All the current debt is notional anyway, the only way in which any of it will ever be repaid is if someone else lends Greece an even larger amount, with the difference going into the Swiss bank accounts of the Greeks. These divisions and difficulties for the creditors plays right into Greek hands. They will exploit it to the max to ensure that they get and continue to get the biggest payout from the EU and the IMF and anyone else foolish enough to lend them a bean.
The single market was the jewel in the crown of the common market which is what the UK and several others signed up for. Whenever the single market is mentioned now it is as some sort of consolation prize tacked onto all the other destructive mechanisms of the EU behemoth.
I always thought that the German s, of recent date, were competent engineers and disciplined financial managers of their economy, yet they seem to be ignoring what is going on around them.
Van the Man and his cohorts are slithering round the German economy looking for ways to lever their hard earned cash out of their grip. Endless methods of subterfuge and dubious schemes are offered, all in the name of the great Euro dream, yet, when analyzed, none do anything other than attempt to steal their treasure. As I said elsewhere, the Euro is an endless vortex of despair, and the sooner gravity sucks it down the pan, the better.
In all the years that it has existid, it has been contentious, mistrusted and devious, and now it looks as if it is moving on to fraudulent
Van Rompuy with Barroso, a former member of the Lisbon Communist Party, are acting like convicted arsonists deceitfully conning their way into asking for more matches to set Europe ablaze. Their political and fiscal venture for integration has failed. The British people demand an 'IN/OUT Referendum now.
In a small village in Ireland they all owed each other money. A German tourist came and gave the hotel owner 100 Euros deposit to pay for a room. The hotel owner ran to the butcher and paid his 100 Euro bill. The butcher ran to the pub and paid his 100 euro bill. The pub owner paid one of his customers for services rendered, a lady of dubious morals. The lady of loose morals ran to the hotel and paid the owner for money owed for use of his rooms. The German tourist decided to go somewhere else and asked for his deposit to be returned, and so it was. This is how bailouts work !! All debts where paid in the village and all went on about their business. ))
Awarding the Nobel Peace Prize to the European Union could easily be described as out-of-character for the continent’s most eurosceptic nation and one of the few countries in Europe that does not actually belong to the 27-nation bloc.
But that might be because the five-member Norwegian Nobel Committee, which decides on the peace prize each year, was missing its in-house eurosceptic this week due to illness. With a less stringent replacement, the remaining members of the group – who have been musing an EU award for some time – saw their chance.
The in-house europhobe in question, Aagot Valle, joined the committee in 2009 with a pledge that she would never allow the peace prize to be awarded to the European Union.
If Valle had been present, she would certainly have vetoed the motion, French Nobel expert Jacob Antoine told Le Monde.fr on Friday.
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