Tuesday, April 16, 2013

The course of the euro crisis and its ugly results so far

Paul Krugman does a quick review of the course of the euro crisis in Europe in Brief 04/15/2013. He recalls the flow of capital from the wealthier northern countries to the southern "periphery" nations like Greece and Spain. Then there was the collapse that followed, with the speculative attacks on national bonds. Then came the hammer of the austerity policies insisted upon by German Chancellor Angela "Frau Fritz" Merkel. There were a couple of close calls where the euro seemed on the verge of imminent collapse that quick fixes by EU and the ECB were able to stave off.

But the austerity remains. And it's a killer:

The problem was greatly exacerbated, however, when the combination of slumping revenues and the prospect of protracted economic weakness led to large budget deficits and concerns about solvency, even in countries like Spain that entered the crisis with budget surpluses and low debt. There was panic in the bond market — and as a condition for aid, the European core demanded harsh austerity programs.

Austerity, in turn, led to much deeper slumps in the periphery — and because peripheral austerity was not offset by expansion in the core, the result was in fact a slump for the European economy as a whole. One consequence has been
that austerity is failing even on its own terms: key measures like debt/GDP ratios have gotten worse, not better.

I mean, it's really a killer. Dawn Foster reports in From heart attacks to maternal care: the human cost of austerity in Greece Open Democracy 04/12/2013 on how Frau Fritz' austerity squeeze if affecting people's access to health care in Greece:

Studying 22,093 patients admitted to Kalamata’s General Hospital, researchers noted a distinct spike when comparing pre-crisis and crisis periods, especially amongst women. Pre-crisis (January 2004-December 2007) Kalamata recorded 841 heart attacks, compared to 1,084 between January 2008 and December 2011, an overall increase of 29%. In women, heart attacks rose by 39.2%, with acute myocardial infarctions spiking by 51%.

Dr Emannouil Makaris, presenting his findings at a research talk at the American College of Cardiology’s annual meeting, noted the particularly high increase in women was likely to be down to joblessness, and economic and domestic burdens: “Greek women have a higher unemployment rate than men, they are responsible for child care, and they also work outside the home - a formula for stress. Unemployment is a stressful event and stress is connected with heart disease, but other issues also come with financial difficulties. In these times a lot of people do not have money to buy medications or go to their primary care doctor. The cost to society is high.” Throughout the crisis, unemployment rates for women in Greece have been far higher than for men of similar ages. Amongst economically active women, the unemployment rate currently stands at 29.3%, whereas for Greek men, the figure is 24.3%.

Amongst young women, the unemployment rate is even higher, at 65% - and that's a conservative estimate, not adjusting for those putting off seeking employment by continuing education, or the diaspora, who've emigrated to seek employment elsewhere.
Maternity care has also suffered, as well as access to medicines:

After months of stalling negotiations over unpaid bills, the German pharmaceuticals group Merck halted supplies of cancer drug Erbitux to publicly owned Greek hospitals. This fuelled concerns that many other drug supplies would follow suit, as many pharmacies reported huge difficulties in gaining supplies of commonly prescribed drugs in large cities such as Athens and Thessaloniki. The Red Cross reported they were to gradually halve their supplies of blood to Greece by 2020 after delays in state payments, and state doctors across Greece reported they were owed back pay of 130 million euros with Thessaloniki doctors refusing to treat any patients other than emergency cases until they were paid.
There's quite a bit of whining in the German press about people in Greece and other places making mean caricatures of German officials, like this one of her and her Finance Minister Wolfgang Schäuble from Yannis Ioannou 04/15/2013. It's kind of a "why do they hate us?" kind of phenomenon:

Krugman concludes his post on the euro crisis by saying:

And European officials remain in deep denial about the fundamentals of the situation. They continue to define the problem as one of fiscal profligacy, which is only part of the story even for Greece, and none of the story elsewhere. They keep declaring success for austerity and internal devaluation, using any excuse at hand: a spurious surge in measured Irish productivity becomes evidence that internal devaluation is working, the decline in bond yields following ECB intervention is proclaimed as a vindication of austerity.

So that’s where we are. And it's hard to envisage a happy ending.
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