Europe – update (3)

It is time for another update on Europe’s precarious position. So what has happened since my last post on the issue:

was published in December 2012? The demise of the Eurozone economy continues to accelerate:

The eurozone recession deepened in the final three months of 2012, official figures show. The economy of the 17 nations in the euro shrank by 0.6% in the fourth quarter, which was worse than forecast. It is the sharpest contraction since the beginning of 2009 and marks the first time the region failed to grow in any quarter during a calendar year. It followed news that the economies of Germany, France and Italy had all shrunk by more than expected. (…) Carsten Brzeski from ING said: “These are horrible numbers, it’s a widespread contraction, which does not match this positive picture of stabilisation and positive contagion.”

So, much as predicted by da-boss, the Europe continues on its path to economical oblivion. However, if one were to believe the same article:

The outlook [for German economy] is very promising. The chances that the economy will return to growth at the beginning of this year are very good.

The outlook may be promising but outlooks cannot trump the reality which in this case is very grim. Europe is in a death spiral; demographically, economically and socially. The politicians will talk things up for as long as possible so they can keep milking the system before it goes belly up for good. In the scheme of things it does not matter a great deal because the die has already been cast. As outlined in my post on sovereign debt:

any borrowing in a democratic country is bound to spin out of control and, eventually, lead to a default. Considering that, for example, France last balanced its budget in 1974:


the surprising thing is that this collective fiscal irresponsibility took almost 40 years to blow up in everyone’s face. At the risk of repeating myself – Europe is on its knees because for more than a generation the politicians have been making pre-election promises which could only be delivered through borrowing overseas and the general populace kept electing them. This is the vicious circle of democracy and the reason it is a flawed system.

The most exposed European countries are currently going through a social upheaval which will produce some wild political swings before bringing to power the populist left. In Spain a mayor of a small Andalusian city has organised and led gangs of unionists to raid the local supermarkets and steal goods from them:

I could write the script for what happens if this sort of lawlessness is allowed to continue. The supermarket outlets will close down in politically unstable regions of the country. Food shortages will ensue and crime will sky-rocket. Maoists and Trockists from all over Europe will converge on the trouble spots. Unless the central government intervenes, armed gangs will move on larger urban centres to rob and rampage. Spain went through the episodes of organised anarchist violence in 1934 and 1936, when General Franco managed to restore public order. I am afraid that the Spain of 2013 does not have a leader of his caliber so the future is looking turbulent.

At the same time Italy also seems to be going through political fits. There is no clear winner of the recent elections and, if anything, there appears to be a swing to the right with Berlusconi back in the picture:

I believe that this will not last and in the new elections (to be called in a matter of months) voters will overwhelmingly choose the populist left. There is also a chance that the left will grant themselves dictatorial powers, although my gut feel is that this will not happen until the economy has imploded. The takeover will be done to “prevent chaos and restore social fairness” – you know the drill.

In the meantime the UK, on the periphery of Eurozone, has copped some collateral and had its credit rating cut by a notch:

following France’s downgrade in November 2012. The credit rating cuts for the EU countries are so predictable they should not qualify as news.

Europe – update (4)


3 Responses to “Europe – update (3)”

  1. Nick Says:

    Could you please tell your readers what happened to Iceland? I heard about their “silent revolution” — a referendum where the people of the country rejected to pay their external debt created by private banks and passed the new Constitution with direct democracy.

  2. da-boss Says:

    I think they refused to refund the money which was lost by the Brits investing in the Iceland banks. Hey, why do you not research it and write a guest post? Seriously!

  3. Nick Says:

    Sorry, my friend, I can’t accept your generous invitation at this stage, although it’s an honour for me. First, I am too shy and your level of writing is too high; second, I just have no time. So, let me just enjoy my reading and give short comments.

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