ECB « Dr Alf's Blog





#462370009 / gettyimages.com

This is an excellent article from Ambrose Evans-Pritchard, published in the Telegraph. Check it out!

via Dam breaks in Europe as deflation fears wash over ECB rhetoric – Telegraph.

The article, once again, highlights that austerity will not be enough to reverse the Eurozone’s debt crisis. Now the focus is on big players, like France and Italy, where the outlook is increasingly bleak. Because of Germany, the ECB is unable to act like a proper central bank (like the Fed, BoE, BoJ, or even the BoI).

Personally, I would expect to see speculators returning in a big way, probably leading to another Euro crisis. The leaves two residual scenarios:

German reflates; Germany agrees to fiscal flexibility for the likes of France, in exchange for hard reforms; and the ECB introduces full scale QE (quantitative easing); or
Break-up of the Euro, with risk of deep economic depression in many European countries, before recovery after several years of enormous pain.

Either way, politically, the EU must change.

Thoughts?

English: Angela Merkel Deutsch: Angela Merkel (Photo credit: Wikipedia)

In case you missed it, this article in Spiegel is well worth a read. Check it out!

via The Anti-Austerity Camp Is Growing as Merkel Becomes More Isolated – SPIEGEL ONLINE.

Much as I agree that austerity in Europe has been excessive, I fear that Frances’s President Hollande is probably not the best champion.

But the coalition against austerity is growing:

US
France
IMF
European Commission (EC)
ECB
Most mainstream economists, led Nobel Prize winners, Paul Krugman & Joseph Stiglitz

Once upon a time, Angela Merkel called upon the troika of the IMF, ECB and the EC to her defense of austerity.

It is encouraging that the austerity camp is crumbling. But there is still Angela Merkel and her sponsors.

Let me turn this to several open question:

Are we likely to see an orderly climb-down on austerity from Germany, perhaps with strings attached?

What will be the implications for the economies of Southern Europe, like Greece, Cyprus, Spain, Portugal, Italy and France?

Are we likely to see serious infrastructure investment in Southern Europe?

What about jobs for the lost-generation of millennials in Southern Europe?

Thoughts?