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LATIMES/ Henry Chu/ Interview with Simon Tilford, chief economist for the Center for European Reform/The Merriam-Webster dictionary recently revealed that "austerity" was the most searched word in 2010.
Now more EU nations are asking...how much austerity is too much?
Especially while Germany racks up big trade surpluses but balks at stimulating consumption at home.
In this interview, British economist Simon Tilford ponders the future of the EU and the euro.
LAT: "Is the euro too big to fail?
It's mistaken to believe that it could never happen. The idea it could never happen is part of the reason for the failure of the Eurozone to put forward a coherent strategy for dealing with this. …
There'll be a number of bailouts. We'll see steps taken to try to alleviate some of the pressure on some of the hardest-hit member states. But it won't be enough. Borrowing costs will remain very high, growth will remain very depressed, and we'll see ongoing stagnation and rising political tensions."
AND: Is Germany more a part of the solution or part of the problem?
The problem in Germany is that they don't see the contradiction between condemning other economies for their profligacy and then saying that "we must be allowed to run trade surpluses indefinitely." … They're going to have to do more to stimulate their domestic demand.
What the Germans really want is a Eurozone solution with limited liability. They want the Eurozone to survive, but they don't actually want it to cost them that much. But whatever happens, it's going to cost Germany a lot of money. If we have ongoing stagnation and bailouts, that's going to cost the German taxpayer, because they can lend money to these governments, but these governments are not going to be able to pay it all back. And it'll start eroding Germany's own sovereign credibility."
LATEST UPDATE: 29 DEC. "Economic Pain Awakens Old Arguments."
By Landon Thomas: Many"economists from outside the Continent, issued a warning: the euro was doomed to struggle, they proclaimed, maybe not immediately but certainly before long. Different countries would pursue such different economic policies, they argued, that it would ultimately place an unbearable strain on the currency and some of its members.
Today, many of those predictions — handily dismissed at the time — are coming true."
http://www.nytimes.com/2010/12/29/business/global/29euro.html?_r=1&ref=todayspaper&pagewanted=all
ALSO: While the German economy booms, its workers are uncertain about their futures because the growth has come at their expense from sacrificing wages and benefits for the past decade to make their employers more competitive.
Michael Slackman reports:
http://www.nytimes.com/2010/12/25/world/europe/25germany.html?ref=todayspaper&pagewanted=all
