Euro crisis

When the European Union presents its economic forecasts, it often does not receive much public attention. Granted, one could argue that with the head of the IMF spending his week in a New York jail cell it’s understandable.

However, the EU’s latest figures are so extraordinary they should have generated more headlines. Not only do they demonstrate that Europe’s debt crisis is far from over. They are also a damning indictment of Europe’s crisis management so far.

The European rescue package will do little to make Portugal more attractive to its young generation. They only have to watch the news from Greece to see their own future. Overly indebted, unable to fund itself at reasonable interest rates in capital markets, the government will become dependent on funds from the European rescue funds almost indefinitely.

You would think that the transformation of the European Union into a transfer union, the extension of the rescue facility for the continent’s fragile currency by a few hundred billion dollars, and new policy dictates to struggling economies like Greece would be of some interest to the wider public.

ast week’s unexpected resignation of Bundesbank president Axel Weber sent shockwaves through the German government. It reignites the debate about the best way to deal with the euro crisis, the policies of the European Central Bank (ECB) and Germany’s role within European Monetary Union. It also poses questions about an institution that was once regarded as the best central bank in the world.

Европа е континент в криза. Финансовите проблеми на много европейски държави станаха очевидни, когато през май 2010 г. Гърция едва се спаси от фалит. Оттогава се появиха много неприятни данни за държавните финанси в Европа, които оказват натиск върху единната европейска валута – еврото.

Other European countries could learn a thing or two from both Estonia’s previous economic reforms and its tough but successful austerity policies. If Europe became a bit more like its latest eurozone member, everyone would be a winner. But does this sound even remotely likely?

I am sure readers will agree with me that 2011 will be another cracker of a year for Europe. Stable political leadership, sound economic management and monetary steadiness will once again prevail. Given this altogether positive outlook, my chances of being wrong have now been reduced dramatically to just about three in four. And if there is one thing that I am slightly more confident about than this forecast, it is that on the 25th of December 2011 it will be Christmas once again.

The economic imbalances within Europe have become too great, particularly regarding productivity differences. In order to correct them, it would be desirable for some countries to be able to devalue their own currencies. Instead of trying to keep such nations within the monetary corset of the euro at all costs, the EU should allow them to depart. None of these sensible options were even on the table at the Brussels summit.