Just A Band-Aid Again! But Some Recognition of Need for More!

The EU Summit was not a success if the main goal was to put in place a long-term and effective capacity to deal with the current economic and financial and political crisis. However, another Band-Aid did relieve the two most endangered states, namely Spain and Italy in helping them achieve hopefully lower interest rates on their debts.  But it also came at the cost of continued austerity imposed by the creditor nations, particularly Germany.

We shall see further summits in the coming months and years as measures to prevent a tailspin down in economic activity following the austerity requirements.

The problem is it does not solve the problem of moving towards the necessary growth trajectory which is truly the only solution.  More of the same austerity imposed on Spain and Italy will likely only lead to greater deflation and hardship on their citizens and for that matter impose harm on all of Europe, including Germany and possibly the US. That is hardly a solution one can see as benign.

There is a fig leaf of an investment fund, but as noted earlier, it is largely only old money and is insignificant to re-boost the economies of the sick partners.

In time the markets will likely acknowledge and punish this when the Euro Zone economics fall further and unemployment grows….as it must if the austerity requirement imposed already and new ones kick in fully.  A recipe for disaster!

A lot of economists and some governments are still making the point that a new direction is needed. But as I have noted earlier it will be at a larger cost.

We welcome your comments!

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