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EUROPEAN CRISIS Deepens – Via Meadia

August 18, 2011

 

European Crisis Deepens

August 18, 2011

The bad news just keeps coming. Coming close on the recent revelation that economic growth is slowing faster than expected in France and Germany, British labor figures have disappointed forecasters and it seems that Greece is heading for yet another recession despite optimistic predictions to the contrary.

A familiar pattern is emerging here. European leaders attempt to paper over the problems afflicting their economies with unconvincing and half-baked measures and rosy forecasts about the future. Markets initially respond briskly when European leaders emerge from a huddle with a new “fix”; disillusionment sets in within a few days as the limits of the agreements become clear.

Over time, this approach loses credibility.  New communiques are greeted with slacker and shorter rallies.  Meanwhile, the underlying problems are getting worse, not improving.

The entirely predictable recession in Greece, for example, means that the Greeks are headed for yet another failure to meet the tough fiscal targets imposed by the EU.  Greece’s problems are severe, but Greece is very small.  Europe’s comprehensive failure after countless iterations to get Greece right suggests pretty strongly that it will be unable to manage bigger and more complicated problems in places like Italy, Belgium and Spain.

Breaking this cycle is going to require a more serious commitment to bold steps — perhaps like those proposed today by leading Euro Federalist Mark Leonard – towards overhauling a European system that is quite clearly broken. As Leonard notes, the only way out of the current crisis is both political and economic reform.

via European Crisis Deepens | Via Meadia.

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