The euro crisis has had a devastating impact especially on the peripheral eurozone countries (Greece, Portugal, Ireland, Spain, Italy and Cyprus), producing massive unemployment and increasing substantially the debt-to-GDP ratio, mainly thanks to the austerity policies that were implemented in the midst of an economic recession as part of the bailout plans (Italy excluded).And he recommends basic macroeconomic policies as the immediate treatment: "What Europe's economies need are fiscal policies that can stimulate real growth and generate jobs. Large-scale direct stimulus spending by governments will boost the real economy by increasing aggregate demand and will help to cause wages to rise."
GDP in Spain, Portugal, Ireland, and Italy is on the average 7 percent below the pre-crisis levels; Greece's GDP is nearly 25 percent below its pre-crisis peak. The official unemployment rates in the peripheral countries are stratospherically high, indicating that there is no recovery. In Greece the official unemployment rate is 26 percent while in Spain it is close to 24 percent. In Portugal it is 13.3 percent, in Italy 12.6 percent, and in Ireland (the country with the highest net migration level in Europe) at over 10 percent.
Greek Finance Minister Yanis Varoufakis did a new blog post today Of Greeks and Germans: Re-imagining our shared future 03/20/2015. He gives this helpful historical sketch of the EU/German (so-called) bailout:
I opposed the 2010 and 2012 ‘bailout’ loans from German and other European taxpayers because:His post also has a couple of nudge-nudge, wink-wink references to the recent days in which a good part of the German quality press made fools of themselves over a clip from a comedy/satire video that was doctored to make it look like he was flipping the bird to Germany. (Which honestly wouldn't have bothered me if he had!) For instance, he writes:
- the new loans represented not a bailout for Greece but a cynical transfer of losses from the books of the private banks to the weak shoulders of the weakest of Greek citizens. (How many of Europe’s taxpayers, who footed these loans, know that more than 90% of the €240 billion borrowed by Greece went to financial institutions, not to the Greek state or its citizens?)
- it was obvious that, at a time Greece could not repay its existing loans, the austerity conditions for giving Greece the new loans would crush Greek nominal incomes, making our debt even less sustainable
- the ‘bailout’ burden would, sooner or later, weigh down German and other European taxpayers once the weaker Greeks buckled under their mountainous debts (as moneyed Greeks had already shifted their deposits to Frankfurt, London etc.)
- misleading peoples and Parliaments by presenting a bank bailout as an act of ‘solidarity to Greece’ would turn Germans against Greeks, Greeks against Germans and, eventually, Europe against itself.
What should we do now, in 2015, that Greece remains in crisis and our people, the Greeks and the Germans, have, regrettably but also predictably, descended into a mutual ‘blame game’?
First, we should work towards ending the toxic ‘blame game’ and the moralising finger-pointing which benefit only the enemies of Europe.
Secondly, we need to focus on our joint interest: On how to grow and to reform Greece rapidly, so that the Greek state can best repay debts it should never have taken on while looking after its citizens as a modern European state ought to do. [my emphasis]