Eurozone crisis live: Global slowdown fears rise | Business | guardian.co.uk

English: A graph showing the economic data fro...

English: A graph showing the economic data from Portugal, Italy, Ireland, Greece, Spain (PIIGS), the United Kingdom, Germany, the EU and the Eurozone for 2009. Data is taken from Eurostat: Most data: http://epp.eurostat.ec.europa.eu/cache/ITY_PUBLIC/2-22042010-BP/EN/2-22042010-BP-EN.PDF GDP growth: http://epp.eurostat.ec.europa.eu/cache/ITY_PUBLIC/2-12022010-BP/EN/2-12022010-BP-EN.PDF Ireland growth (preliminary): http://www.cso.ie/releasespublications/documents/economy/current/qna.pdf (Photo credit: Wikipedia)

The government surplus/deficit of Portugal, It...

The government surplus/deficit of Portugal, Italy, Ireland, Greece, United Kingdom, Spain (PIIGGS) against the Eurozone 2000-2010. Data from Eurostat. (Photo credit: Wikipedia)

This is an excellent blog from the Guardian providing a helicopter perspective of the European minefield. Check it out!

Eurozone crisis live: Global slowdown fears rise | Business | guardian.co.uk.

The article implies that the downside risk may be greater than the upside opportunity. However, this scenario could easily be changed by heavy and coordinated central bank intervention.

What do you think?

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2 responses

  1. You will not be surprised to learn that I feel the sooner the Euro is history the better. To try to create a common currency before getting the political structure in place was a mistake. The mansion Euro was built on foundations of sand – quick sand, at that.

    If the Euro disappears then those countries who want to have a common currency could negotiate some form of political consensus – minimum requirement and agreement to a common financial regime, common taxation and, one assumes, common spending arrangements – followed by a new common currency.

    Otherwise the pain will continue and could (and this is my personal nightmare) breed violence with the possibility of another European war. It was to avoid that possibility that the EEC/EU was formed and, paradoxically, where it could be heading.

    Before dismissing this out of hand, remember the emotional baggage carried forward by the Greeks following WWII and the way in which many Germans despise the southern Europeans.

    Rodney WIllett (although wearing my Think Local hat)

    • Rodney, many thanks for sharing your views – they are always welcome.

      Most people now agree that the Euro is systemically flawed. For it to survive will probably require a mix of :

      1. Political union
      2. Banking union, and
      3. ECB to become a proper centrsl bank with unlimited power, like Fed or BoE, able to issue Eurobonds, and possibly wider powers like the Fed, e.g. with responsibility for employment as well as inflation management

      Personally, I am pro-European but I recognize the extreme cultural diversity of the European nations.

      Unfortunately, there is an enormous transition challenge here – getting from where we are now to where we might want to be, with minimum downside. risk. If Greece leaves the Euro, there will be enormous financial, social and political consequences (like in Argentina) – further, there will be a serious risk of contagion to the rest of Southern Europe. Another scenario is the exit of Southern Europe but again the costs and consequences would probably be potentially disastrous for more than a generation.

      Personally, I am pro-European but favour less bureaucracy. I am still in favour trying to make the Euro work but recognize that emphasis should move from austerity to growth.

      Perhaps, you could clarify how greater Localism might help the EU?

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