Paul Krugman, Laureate of the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2008 at a press conference at the Royal Swedish Academy of Sciences in Stockholm (Photo credit: Wikipedia)
The outlook for the Summer is increasingly worrying ahead of the September election in Germany.
Nobel prize winning, liberal, economist, Paul Krugman, in his NYT blog, has graciously accepted that he has overwhelmingly won the academic economic case against austerity; worryingly, he seems to question whether it will make any difference (to politicians and their sponsors who are following their own agenda).
In Europe, we are seeing France flex her muscles looking for special treatment and less austerity. Meanwhile, as Germany stubbornly sticks to austerity for the rest of Europe and modest growth for Germany, there are increasing questions whether a crisis will erupt before the German election. The Financial Times speculates that German policy will be forced to bend rather than meet France head to head on the barricades. Sadly, it will be too late for the millions of economic casualties across Southern Europe in Greece, Italy, Spain, Portugal and most recently Cyprus.
Yesterday, I picked up on an important recent research research study in Europe, reported in the Guardian, highlighting that trust in Europe’s politicians has reached a record low. I questioned:
Traditionally, ordinary peoples’ views have not mattered much to the political classes that have formulated EU policy. Now there is such a backlash that perhaps the political classes themselves feel threatened? Perhaps, there will still be a place for democracy in formulating EU policy?
I received a thoughtful and worrying response from John Gelmini who argued:
The views of ordinary people will only count when the economic situation and lack of jobs for young people hits crisis point and people take to the streets.
The UK is building towards a damaging general strike probably for the summer and Southern Europe could go in the same direction.
As it is, a German view of Europe is prevailing because they are exporting sufficiently to be able to apply austerity elsewhere and be gentle to themselves.
The UK with its flat-lining economy, zero exports, moribund banking sector and constant austerity is a pressure cooker ready to explode, particularly when the estimated 350,000 Bulgarians and Romanians come looking for work.
Personally, I see Europe’s leaders failing to tackle the continent’s growing economic problems and sclerosis. What they are clearly looking for is a Vietnam style war to get their economies moving and to enable them to seize the mineral wealth of Africa.
Surely, political leaders will increasingly press for reflation, at risk of modest inflation, rather than risk riots or perhaps even war as an outcome?
Is it time for a second Marshall Plan in Europe?
What do you think are the likely scenarios for the Summer?