Mystery Economic Theater 2010:

[system7]

Even Mrs. Duffy of Rochdale knows about the Debt! But what to do? :huh:

Things are not looking too good as the Eurozone tries to stop contagion spreading beyond the small Greek and Portuguese economies to Spain:
http://www.telegraph.co.uk/finance/financetopics/financialcrisis/7716530/EU-imposes-wage-cuts-on-Spanish-Protectorate-calls-for-budget-primacy-over-sovereign-parliaments.html


Premier Jose Luis Zapatero told a stunned nation that public sector pay will be reduced by 5pc this year and frozen in 2011. "We must make an extraordinary effort," he said.

Pension rises will be shelved. The country’s €2,500 baby bonus will be cancelled. Aid to the regions will be slashed and infrastructure projects will be put on ice. Mr Zapatero’s own monthly pay will fall 15pc to €6,515.

Mariano Rajoy, the conservative opposition leader, said years of ostrich-like denial by the Zapatero team had reduced the country to an EU "protectorate".

Commission president Jose Barroso unveiled plans for EU control over national budgets, including an incendiary demand that Brussels should vet budgets before their first reading in Westminster, the Bundestag, and other parliaments. Current account deficits and credit growth will be monitored. Brussels can imposing sanctions on states that let booms run out of control. "We must get to the root of the problems," he said.

Such a plan would greatly improve the working of the EMU system, but it would also entail a drastic erosion of sovereignty. The intrusive surveillance is a wake-up call for states that have tended to view the euro as a free lunch.

Spain’s wage cuts amount to an "internal devaluation" within EMU. Stephen Lewis from Monument Securities said the EU is pushing a clutch of countries into contractionary policies at the same time. These will feed on each other, creating a deflation bias across the region akin to the 'Gold Bloc’ in the 1930s.

"It is not a viable policy. Weakening demand will cause the tax base to shrink. If the population could see light at the end of the tunnel, they might put up with it, but there is no light: it is a long dark passage leading nowhere," he said.

The EU cites the Irish austerity plan as a model, but Ireland has an open economy with a dynamic export sector, and may be sui generis (Ed: Unique...LOL). In any case, Ireland’s nominal GDP has fallen 18.6pc, without a commensurate fall in debt. Ireland is not yet safely out of its debt-deflation trap.

I really don't think anyone knows if this is going to work! :rolleye:

[waba]

i wonder how many countries would stay in the euro if that proposal of vetting budgets is passed. Perhaps the major players, Germany and France, as they have always been proponents....but it is a massive encroachment on sovereignty. who would need a national government then!!

[system7]

The "Shock and Awe" 720Bn Euro bailout is largely financed by Germany, somewhat unwillingly, it seems. The deal is they buy up the Junk Bonds of Greece, Spain and so on. This leaves Banks free to reinvest in Stock Markets, Gold etc. Genius. :D

The fear is that this boost quickly evaporates, leaving Germany with a whole heap of useless bonds and a pile of debt. And the Banks just carry on as usual. Thanks very much, they are probably saying. :banana:

I expect quite a few Governments, including Germany, are trying to work out how you leave the Euro. :huh:

[waba]

hopefully one day the world wilol have a single currency, stopping problematic speculation, deliberate devaluation etc....although that will probably be at a time when everyone lives in harmony and wears poppies in their hair.


understandably Germany is unwilling to finance it. that sum is just a bit less than our entire national debt. its like having the pay the rent for a 'friend' when they have wasted all their money on booze and so are too skint to pay for it themselves. seeing as we cant sort these problems out on a personal level, how people thoguht they could on a continental level is beyond me.

[system7]

In fact some of Europe's richest and least indebted economies are outside the EU, so I really don't see Economic Union and the Euro as being the answer to everything.

Certainly, the EU is gambling that the PIIGS accept massive deflation and budgetary discipline to make this work within the Euro. Which is against their nature.

It does look like the die is cast for deflation now. David Cameron has announced a 5% cut and freeze on Ministers salaries to get us used to the idea. Time to stock up on Baked Beans, I reckon. :rolleye:

[Mr. Lime]

In fact some of Europe's richest and least indebted economies are outside the EU, so I really don't see Economic Union and the Euro as being the answer to everything.

Certainly, the EU is gambling that the PIIGS accept massive deflation and budgetary discipline to make this work within the Euro. Which is against their nature.

It does look like the die is cast for deflation now. David Cameron has announced a 5% cut and freeze on Ministers salaries to get us used to the idea. Time to stock up on Baked Beans, I reckon. :rolleye:

Beans beans their good your heart, the more you eat the more you.....


Hmmmm where was i?

[system7]

Hmmmm where was i?
Er, sadly nowhere near on topic. I rather regret the reference to Baked Beans. :mad:

Still, #5 posts without spam was some sort of record... :rolleye:

OK, Mervyn King, our own Governor of the Bank of England says the Euro bailout has bought us a window to sort out the Deficit.
http://news.bbc.co.uk/1/hi/business/8677235.stm

So here's the plan if I follow all this. We deflate/tax/cut pretty **** quick, but not so much as to send the economy and tax revenues down a hole. Otherwise we are in a debt-deflation hole like the Irish. Or looking like it can never be paid back at all, as in Greece. :cool:

[waba]

yup, u pretty much got it. worryingly there will be a very fine balance, which will be near impossible to see at the time, seeing as economic regulators such as interest rates take at least 18 months to take effect.
the high street surprisingly is posting decent figures, so its seems like the public are not toooo worried...
but then, at the same time its always good to be optimistic - talking up the economy has a surprising effect :D the new government's positive influence on markets may just build up some momentum!

and well done mr lime :S

[system7]

Ah, well. Here's our dream economic team to sort out this mess. Chancellor George Osborne (Con.) and Business Secretary Vince Cable (Lib Dem.). David Cameron has said he thinks Vince is a star! :thumbs:

http://img237.imageshack.us/img237/5760/georgeosborneandvince00.jpg (http://img237.imageshack.us/i/georgeosborneandvince00.jpg/)

Amongst the 101 Reasons to Love our Tory Government, The Guardian lists:


4 Only one of them is George Osborne.

5 George Osborne could fall under a truck tomorrow.

6 Vince Cable might push him.

Quite funny really! :D

[waba]

im am happy with the balance of government.....lets see if this coalition can make our economy as strong as the german coalition did to theirs.