A lucid analysis from Andrew Watt, chief economist with the European Trade Union Institute
“Angela Merkel may have got just about everything else wrong, but she was right to tell the German parliament that urgent action is needed to save the euro area, otherwise the future of Europe is at stake. Europe’s reaction to the sovereign debt crisis has been an almost unmitigated disaster – denial, delay and dithering followed by uncoordinated panic reactions that are a mixture of the necessary, the irrelevant and the disastrous. The governments of the largest economic entity in the world have been driven like sheep by the very same financial market actors whom they bailed out just a year ago. This is bad enough. What is worse is that the crisis is far from over. Only in the very short term has a solution been found, a finger has been placed in a dyke whose very foundations must be renewed.
There are other issues as well, but the urgent need is for European policymakers to ‘get real’ about three critical facts relating to the future of the euro area and EU economy. The first is that the austerity policies envisaged for deficit countries simply will not work. The second is that competitive imbalances must be resolved from both sides, not just one. And the third is that the longer-term strategic orientations, the proposed macroeconomic and employment policy guidelines as part of the EU2020 strategy, are completely ill conceived and must be replaced…… ”
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