The Euro Crisis
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…… ”
Our friend Thomas Palley has also recently posted on the Euro crisis.
Palley’s article is bang on, so is this a sign of that potentially the austerity medicine could actually kill the patient?
Or am I correct in figuring that given Merkel and now the tories in the UK, and the Spanish announcement today of austerity cuts, that we are just at the beginning of a new political cycle. Neo-cons come in to straighten our neo-con problems and only make them worse, so finally liberals make it back into power after a few years of bad economics. However I am pretty sure those are not neo-cons in spain.
I meant to say, is this a sign that the mainstream may start to realize that the austerity measures being imposed as medicine, actually will kill the patient.
In all truth, this sound so amazingly familiar to the ’30s.
Maybe not the depth of pain, (although that is easy for me to say as I still have a bit of security- I think!?)
However, I do believe this Euro crisis will go down in history as the next stage in this crisis.
financial crisis- bail out of trillions- which caused industrial crisis- which cost trillions to stimulate (remember how everybody became a Keynsian for a 90 days when it was fashionable)- which caused an acceleration in public deficits and debt- which results in austerity and an attack on working people who rely on public services.
So where to next-
– government austerity results in more downward pressure amidst political unrest, economies start tanking again, credit market start freezing because of the paranoia on sovereign debt and economic slowdown, we head towards the abyss again- more bailouts, more stimulus….. new governments elected- the question is what kind of political movements will form within this economic- cultural quagmire of a political process – is you can answer that then my blog buddies we will have the answer to the future.
However- maybe somewhere, somehow, we will come out of economic caves and discover fire and all this goes away.
I doubt it though, as that would be too costly to those with a lot to lose.
pt