Monday, March 26, 2012

The EU crises

I haven't posted so much lately about the euro and the depression and related political crises in Europe. It's not because I'm any less worried. It's mainly because nothing essential has changed.

There has been some immediate relief, with the European Central Bank (ECB) providing additional cheap credit to banks to help them support the sovereign debt market among EU members. This is a short-term, backdoor way of doing what the ECB should be doing as part of its ongoing mission, acting as a buyer of last resort for EU member bonds.

But it's a short-term measure. And the destructive hold of Angienomics, the austerity policies demanded by German Chancellor Angela Merkel that focus on driving down workers' salaries, rolling back workers' rights and promoting financial and industrial deregulation, still has firm hold in the EU countries.

RT reports on Spanish protests against Angienomics in Complain in Spain: New wave of anger over austerity hits cities Youtube date 03/12/2012:

The YouTube post includes this summary:

Anger has flared up in Spain once again, as thousands flooded the streets to protest against tough government cuts and the recently passed new labor laws. Spanish unions staged mass rallies in 60 cities.

Spain's jobless rate is the highest in the Eurozone, with almost half of its young population unemployed. ...

Paul Ames summarizes the current state of economics affairs there in The end of the euro crisis? Global Post 03/21/2012:

The immediate risk of catastrophe has receded, but the euro zone is far from finding its way out of the woods — and the big bad wolf of currency collapse is still lurking among the trees. ...

Portugal might still be forced into a Greek-style default. Greece could still backslide after its impending elections. The frontrunner in France’s presidential election wants to pick apart new rules on fiscal discipline.

Soaring oil prices may still drag the euro zone recession down to unsustainable levels, and southern Europe’s inability to generate growth could vanquish all efforts to stem those countries’ rising debt. ...

"Greece's debt situation is as unsustainable as ever; so is Portugal's; so is the European banking sector's and so is Spain's," the influential Financial Times commentator Wolfgang Munchau wrote Monday. "The worst, I fear, is yet to come."

Southern Europe's moribund growth is rooted in the long-term decline of competitiveness in countries like Italy, Spain and Portugal. Reforms to free up labor markets, cut business costs and slash red tape could pay off in the long term. But right now, austerity measures to bring budgets down are compounding the no-growth problem.

Greece's economy is set to contract for the fifth successive year with a 4.4 percent drop in 2012. Portugal's will drop by 3 percent, Italy's by 1.3 percent and Spain's by 1 percent.
Although Spain isn't yet receiving any kind of bailout, the EU (read: Merkel) is insisting on even more severe budget cuts in Spain than those imposed on Greece, Ireland and Portugal. (Claudi Pérez, Bruselas impone a España más recortes que a Grecia, Portugal e Irlanda El País 26.03.2012) This is madness. A madness driven by Angie's total dedication to "ordoliberalism", which means the continual weakening of organized labor, drastic reductions in salaries and public services, massive privatization and deregulation, and general subservience of democratic government to the One Percent. As Pérez puts it in his report:

No hay en la historia económica contemporánea un ajuste semejante; en los últimos años, lo más parecido se ha producido en Grecia, Portugal e Irlanda. Con consecuencias devastadoras: Grecia está hundida en una depresión; Portugal va camino del segundo rescate, e Irlanda, que parecía estar en una situación algo mejor, puede tener problemas para devolver sus préstamos al BCE. España está ante un endiablado cruce de caminos: el abultado déficit obliga a poner en marcha los recortes, y a su vez eso agravará el precario estado de salud de la economía.

[There is no similar adjustment in contemporary economic history [to that currently demanded by the EU of Spain]; in recent years, the most similar have occurred in Greece, Portugal and Ireland. With devastating consequences: Greece was hounded into a depression; Portugal is one the road to a second rescue, and Ireland, which seemed to be in a somewhat better position, could have problem repaying its loans to the ECB. Spain is indubitably at a crossroads: the bulging deficit requires putting the cuts into effect, and at the same time this will aggravate the precarious state of the economy's health.]
When will the economic death march end? One small positive sign in Spain is that the conservative government elected in November experienced a setback in Sunday's local elections in Andalusia and Asturias, where the ruling Partido Popular (PP) of Prime Minister Mariano Rajoy fell far below its performance in the November elections. Carlos E. Cué reports (Desolación en el entorno de Rajoy ante el tropiezo en Andalucía y Asturias El País 26.03.2012) characterizes the results for the PP in Andalusia as "desolation", those in Asturias as "catastrophic". The PP tried to put the best face on it, but there seems to be a general assumption (and a plausible one) that Rajoy's extreme austerity measures taken in obedience to Angie's demands were responsible for the poor performance Sunday.

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