As 2011 draws to a close let's take a look at the EU financial situation.
The 17 EuroZone countries plus an unknown number of other EU countries, but not the UK, have agreed a new financial treaty. Amongst other things this limits deficits and borrowings. Worryingly, from a democracy perspective, EU bureaucrats will get sight of and review national budgets, of those that sign-up before the sovereign parliaments.
Yes, I know what you are thinking. This borrowing limit was agreed to back at Maastricht when the same countries signed-up to the Stability and Growth Pact. This was intended to keep the Germans on board as they gave up the Bundesbank control of their currency.
Guess who broke the rules first? Yes, you're right - Germany! Who else? Everyone! Though Spain broke the rules least, it is now suffering 20+% unemployment and a trade deficit of more than 4% and its labour costs are more 30% above what they were in 1999, when the Euro started!. France's labour costs are 25% higher and Italy's on a par with Spain.
Good news though is that Germany labour costs have barely moved since 1999! That contributes to a German trade surplus of close to 6%, while France and Italy all endure the consequences of 2-4% deficits, alongside Spain.
Very communitairre!
So 2012?
Maybe Germany needs to leave the Euro (Netherlands also?) so as to allow for a devaluation and reduce the labour costs in the other countries?
Other countries, outside the EuroZone, will start to look at the recently agreed-to 'fiscal accord' and this will likely start to unravel.
If Germany doesn't exit the Euro, then look for Greece to do so maybe also Italy and/or Spain.
Germany, France and the European Central Bank will try for a managed devaluation of the Euro but the markets already scent blood and will be pushing for more and for faster.
Step in the credit rating agencies - and cherished gold-plated ratings are lost. France will be mortified and loudly proclaim an Anglo-Saxon plot but won't look at their own precipitous growth in public and private debt, in the last ten years!
The trigger (s)?
Could be the weather - a cold snap forces people out of their unheated homes, onto the streets in protest. A Greek default - there is only so much they can do and that isn't enough.
Italian indigestion? - brought on by trying to take medicine from a technocrat.
Oh, and a recession in case you thought you could ride-out all of the above.
Have a healthy 2012 - I would normally say prosperous but........
The 17 EuroZone countries plus an unknown number of other EU countries, but not the UK, have agreed a new financial treaty. Amongst other things this limits deficits and borrowings. Worryingly, from a democracy perspective, EU bureaucrats will get sight of and review national budgets, of those that sign-up before the sovereign parliaments.
Yes, I know what you are thinking. This borrowing limit was agreed to back at Maastricht when the same countries signed-up to the Stability and Growth Pact. This was intended to keep the Germans on board as they gave up the Bundesbank control of their currency.
Guess who broke the rules first? Yes, you're right - Germany! Who else? Everyone! Though Spain broke the rules least, it is now suffering 20+% unemployment and a trade deficit of more than 4% and its labour costs are more 30% above what they were in 1999, when the Euro started!. France's labour costs are 25% higher and Italy's on a par with Spain.
Good news though is that Germany labour costs have barely moved since 1999! That contributes to a German trade surplus of close to 6%, while France and Italy all endure the consequences of 2-4% deficits, alongside Spain.
Very communitairre!
So 2012?
Maybe Germany needs to leave the Euro (Netherlands also?) so as to allow for a devaluation and reduce the labour costs in the other countries?
Other countries, outside the EuroZone, will start to look at the recently agreed-to 'fiscal accord' and this will likely start to unravel.
If Germany doesn't exit the Euro, then look for Greece to do so maybe also Italy and/or Spain.
Germany, France and the European Central Bank will try for a managed devaluation of the Euro but the markets already scent blood and will be pushing for more and for faster.
Step in the credit rating agencies - and cherished gold-plated ratings are lost. France will be mortified and loudly proclaim an Anglo-Saxon plot but won't look at their own precipitous growth in public and private debt, in the last ten years!
The trigger (s)?
Could be the weather - a cold snap forces people out of their unheated homes, onto the streets in protest. A Greek default - there is only so much they can do and that isn't enough.
Italian indigestion? - brought on by trying to take medicine from a technocrat.
Oh, and a recession in case you thought you could ride-out all of the above.
Have a healthy 2012 - I would normally say prosperous but........
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