Secular Café: Eurozone problems

Secular Café For serious discussion of politics, political news, policy, political theory and economics and events happening round the world

Eurozone problems May 1st 2013, 16:35 No good news http://www.telegraph.co.uk/finance/f...ds-closer.html Quote: David Owen, from Jefferies Fixed Income, said the mix of falling inflation and an ageing population risks pulling the eurozone into a "liquidity trap" where the self-correcting mechanisms of the economy break down. "This looks strikingly similar to Japan 15 or so years ago," he said. Mr Owen said the ECB cannot just "sit back and do nothing this week" at its meeting on Thursday, and may ultimately have to launch full-blown quantitative easing. Most analysts expect the ECB to cut rates a quarter point to 0.5pc but there is broad consent that this will do little to alleviate the credit crunch for smaller firms in Spain, Italy and Portugal, where borrowing costs are two to three times higher than costs for North European rivals... ...Mr Christensen said the ECB may delay rate cuts this week to offset the retreat from fiscal austerity in Italy, Spain, France and the Netherlands, deeming their job to hold the feet of recalcitrant governments to the fire. "No doubt the Bundesbank is screaming about this," he said. Italy became the latest country to rebel against EMU policy regime this week when the new premier Enrico Letta lashed out at "death by austerity" and vowed to revoke a string of tax rises. Mr Letta flew to Berlin on Tuesday to explain the country's U-turn to German Chancellor Angela Merkel. She took a cautious line at the joint press conference, saying Italy had made "considerable" strides to reform its economy, but also said that "every country must play its part" in restoring order to the eurozone. The greater rift is with Paris, after the French Socialist Party lashed out at the Chancellor in a vituperative attack, blaming the deep social and economic crisis in Europe on the "selfish intransigence of Mrs Merkel, who thinks of nothing but the deposits of German savers, the trade balance recorded by Berlin and her electoral future"... ...The Free Democrat Party (FDP) in Mrs Merkel's coalition has fanned the flames with a counter-attack, deriding France as a basket case with an economy in deep decline. It accused Paris of clinging to a coddled welfare model with a state sector near 56pc of GDP that is unfit for the rising challenge from China, India and the emerging world.

You are receiving this email because you subscribed to this feed at blogtrottr.com. If you no longer wish to receive these emails, you can unsubscribe from this feed, or manage all your subscriptions