And just to underline the point (Please get the message!)

Yesterday’s post noted that Europe’s slide was not causing leaders to back away from austerity policies — even as they pushed Europe’s weaker states further into depression.  Here are some bits from yesterday’s data (all from the Financial Times)

Ireland has cut its growth forecasts for 2012, from 1.3% to 0.7% for the year, with government debt expected to peak (they hope) at 123% of GDP in 2013 (that’s a recovery?)

Unemployment in Spain has reached 25% (50% of those under 25); and S&P has limited Spain’s credit to BBB+.

Hedge funds are betting against the Euro.

I find it interesting that I can obtain a 10 year home-equity loan for only half the interest rates paid by the Spanish or Italian governments when they issue 10-year bonds. (!!)

Yet the Dutch lame-duck government has approved an austerity budget compliant with the Brussels agreement, and Spain has retreated from its plans to depart from the Brussels budget discipline goals; Spain’s economy minister says he intends to RAISE the VAT tax next year to increase state revenues.

And oh yes — the growth in the U.S. that was supposed to help pull the world and Europe out of its tailspin?  First results for Q1 are that U.S. growth also disappointed, falling to 2.2% at an annual rate.

Sadly, it looks like it will take more pain in Spain and elsewhere in Europe before we see any change in policy.

Scariest of all is the rising strength of extreme left and right wing parties throughout Europe.  In Greece, which has suffered the worst pain so far, the nearly neo-Nazi Golden Dawn party (slogan — Greece for the Greeks and all immigrants out!) has surged to 5% in the polls and is expected to gain seats in parliament in the next election later this year.

Where will this end?

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About jackgoldstone

Hazel Professor of Public Policy at George Mason University
This entry was posted in The Global Economy. Bookmark the permalink.

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