EMU policies are pushing Southern Europe into systemic political crisis
Let us assume for the sake of argument that Europe succeeds in containing the immediate EMU debt crisis, with help from Asia, and that Germany’s fractious coalition actually agrees to a bail-out fund big enough to make any difference.
By Ambrose Evans-Pritchard
16 Jan 2011
What does this achieve, other than allowing banks to buy time by offloading liabilities onto European and Chinese taxpayers?
The 30pc gap in labour competitiveness that has built up between Germany and Club Med since the eurozone currencies were locked together in perpetuity will remain.
Greece, Portugal, Spain, and Ireland will stay trapped in structural depression through this year, and well into next, rotating from a liquidity crisis to a chronic political and social crisis that exposes the inability of elected governments to counter 1930s job wastage. Unemployment is 28pc in Andalucia, and 30pc in Cadiz.
There is an awful possibility – or probability — that German über-growth will increase the pain for peripheral Europe before it offers a meaningful lifeline to Club Med through trade stimulus.
The central assumption of EU policy is that a rising economic tide will ultimately lift all boats. It is a fatal self-deception. A rising tide in Germany is precisely what risks shattering weaker vessels.