Europe is in turmoil! The Euro as cracking at the seams. The markets went nuts yesterday. Spain managed to sell its bonds today but at higher and higher interest rates. Moody’s changed its rating for Germany, Holland and Luxembourg to “negative” from “stable”. Naturally little Wolfie foamed at the mouth at this. (Not unlike Papandreou before him and Guindos now).
No! He says. We have a very stable economy! We remain the anchor of Europe! (I don’t suppose he has much seafaring prowess, or else he hasn’t realised that his anchor is now in such deep water that it is no longer of any use.) Our good friend the walrus Juncker also pipes up with mumbles of how strong Europe really is and how everyone is committed to the Euro and all that verbal, meaningless, hot air that has become second nature to all the Euro apparatchicks from Merkel to Rompuy (I take them in order of impotence… I mean importance!)
Yesterday’s cocky remark by that sinking-in-the-polls politician, Rossler that a Grexit does not inspire terror any more, has been roundly refuted by all quarters. A Grexit, those who do happen to know a little more about economics than the German and Eurocrat leadership appear to, state that a Grexit at this point would be disastrous and would lead to a rush away from ALL Euros, German ones too, and the inevitable dissolution of this imperfect currency.
Which brings us to the continued unbelievable idiocy of the troika in Greece again. What is the object of the exercise? To reduce the country’s debt/GDP ratio. How do they insist on doing this? Simple. Ratchet up the austerity even further. Suck at least another 15 or so billion OUT of the economy, slash all that is left of wages and pensions. Now, Greece is not only in its fifth year of recession, but its recession is forecast, for this year, to be something over 7%!!!
And since we all know how good these people are at forecasts, no one will be at all surprised if this year’s recession hits 12%. In any case, Greece is in a full blown depression. The troika’s imposition will only make a bad situation much much worse.
Which means, Greece’s GDP already in free fall, will be slashed savagely, which means, well yes! The debt to GDP ratio will rise exponentially!
How can intelligent people insist on policy which only looks at one side of the equation, debt, and takes measures that exacerbates the other side of the equation, GDP, and obviously, precisely because of that, only results in an increase in debt too!
Answer: Intelligent people? Where in Europe can you see one intelligent person?
Unfortunately the Euro will collapse, not because of profligate Greece (or Portugal, Ireland, Spain etc) nor because of a badly designed currency in the first place, nor the imbalances inherent in the system when crisis strikes, nor anything like that. All of which could have been addressed and fixed in time. Had anyone in power had the inclination, and perhaps above all the sense to do so.