“Europe’s top job-creator only two years ago, Spain now has the region’s highest unemployment rate, at just over 20 percent, and is the slowest of the major economies to emerge from the global recession. Meanwhile, the ratings agency dealt a blow to state efforts to shore up confidence in its finances by cutting the country’s rating one notch from AAA to AA plus”
These days we’re seeing a great pressure on the European Union, the European Council, the European Commission and European Central Bank and countries within this union like the countries of Greece, Portugal, Spain and Ireland, to impose policies austerity, reducing deficits and debt, and lowering wages in order to leave the Great Recession that the eurozone is suffering. The great error of this strategy is that it is wrong to assume that the problem is with the Eurozone countries and the supposed idea that they created their own wastefulness and lack of fiscal discipline, but these so called facts are simply not true. Nor is there a waste of public spending in those countries (all their public employment spending is the lowest in the EU-15); nor are their wages extravagant (well below the average EU-15, regardless of the level of with productivity).
The great secret, hidden or ignored by the mass media, is that the problem of the euro zone is not in the periphery but at the center: in Germany. The German economy has been in very bad shape for several years. Their wages have not increased over the past fifteen years — a result of low-wage anti-union measures taken by the governments of Gerhard Schroeder reform-including the famous 2010 – and Angela Merkel, who were also facilitated by the wide availability of workers from the former East Germany and immigrants from Eastern Europe. During the last fifteen years, investments have been low (lower than in the peripheral countries), economic growth very slow (much slower than the peripheral countries) and unemployment has been growing. In fact, productivity growth has been lower than in most peripheral countries except Spain.
When economies like Greece, Spain and Portugal spend money, they buy cars, appliances, electronics, pharmaceuticals, weapons produced by larger manufacturing companies, and these actually support the global market. When these countries cut back on “buying” guess who is going to get hurt. An example of the above is the following link regarding pharmaceuticals and chemicals in the European Union market.
“The heavily indebted Greek government has cut the prices of medicines by 25pc. However, Leo Pharma has suspended the sale of two of its drugs because it claims that the price reductions will lead to job losses in Europe.”
When the European South countries are not able to absorb products from the large manufacturing centres of the North (especially Germany and France), the producing countries will have to start laying off workers due to reduced demand. These economies are not particularly strong due to the last banking recession, and they will have to face just another one. Now, if any country of the European South defaults on their debt held by the banks of the North, this is going to hit home even harder.
In reality, nothing Spain does will matter in the end. The mounting debt over appropriations coupled with the decline in value over the Euro plus the collapse in the tourist trade and further collapse of the housing market where unsustainable prices (sound familiar) will accelerate the pullout at substantial loss by foreigners (READ: British). All of these things will put Spain on the chopping block by the IMF and Germany, further eroding the fragile European Union. Indeed, the end (of the EU) is near and Portugal is not too far behind them, as well as Italy will take Ireland in a TKO double take-down soon thereafter. Landslides in November will not help much and then, as it was in the beginning, France, England and Germany will stand alone. Poland will emerge a winner which puts them in danger of whats left of the Russian Bear and of course, what started it all in the first place at the beginning of the last century.
Spain is the casualty of their corrupted socialist government. They did the same thing they are trying to do here, they gave citizenship and welfare to every analphabets coming from the Americas, while denying citizenship for those intellectually qualified that were ready to invest and help the economy. Their reasoning? ti get votes; for they knew that these analphabets were sure prey by giving them the opportunity, while those that knew better were going to be against them. Their social security checks are already coming for less than they were supposed to receive, but not the Unions; they (public sector unions) are holding the public hostage so their salaries benefits will be protected.
“A rumor that Spain will ask for 280 billion euros of aid money in order to deal with its debt is running in the past few hours in trade rooms. This is what’s bringing down the Euro.”
It appears that bailing out Greece wil not be enough to save the European community as Spain is another country which has joined the list of riskier investments since its credit ratings were lowered earlier this year.
According to Israel’s Globes, Germany will not be able to back Spain on such a big request, more than two and half times the size of the Greek plan. So, the Euro’s fate is to fall. Due to the Greek debt issues and riots, the Spanish debt problems have escaped the eyes of many analysts, despite its 20% unemployment rate.. Contrary to Greece, Spain is already at the heart of Europe and its huge debt is a danger to the whole Euro zone. Germany was reluctant to help Greece, and cannot aid Spain.
Greece urged to give up euro
THE Greek government has been advised by British economists to leave the euro and default on its €300 billion (£255 billion) debt to save its economy.
The Centre for Economics and Business Research (CEBR), a London-based consultancy, has warned Greek ministers they will be unable to escape their debt trap without devaluing their own currency to boost exports. The only way this can happen is if Greece returns to its own currency.
Greek politicians have played down the prospect of abandoning the euro, which could lead to the break-up of the single currency.
Speaking from Athens yesterday, Doug McWilliams, chief executive of the CEBR, said: “Leaving the euro would mean the new currency will fall by a minimum of 15%. But as the national debt is valued in euros, this would raise the debt from its current level of 120% of GDP to 140% overnight.