European recovery is a sweet fairy tale
Don’t say I did not tell you previously. The Brussels blob’s delusional campaigning during the European Parliament elections; the repeated mantra that Europe was now en route to accelerating growth, remains as large a fable as anything penned by the Grimm Brothers.
Europe remains rooted in, at best, a long stagnation. While some nations have bounced from horrible recessionary lows, overall the Eurozone economy is static - at precisely the time when a recovery ought to be gaining ground. The German “powerhouse” actually shrank by 0.2 percent, as did Italy, further emphasizing the death of the dolce vita.
Meanwhile French spin doctors did their best to put a gloss on their dismal economic outlook by trumpeting “stable GDP” of late! (Economies, like children are hard-wired for growth).
Germany will probably bounce back given the inherent power of its engineering export industries but at the same time, news in revisions that it apparently dropped into a double dip last year does not encourage confidence.
Likewise, the weak Merkel coalition’s suicidal approach to energy policy, allied with retirement age decreases despite a demographic time bomb as pensioners explode in number, are just two reasons to ponder whether the German economy can single-handedly support the weight of the eurozone’s problems.
Then again the Germans have been leading the latest program to “cut off Europe’s nose to spite its face” sanctions against Russian (separate from lavish payments to Ukraine for Brussels AgitProp) will cost EU nations 0.2-0.4 percent of GDP per annum before tit for tat food restrictions bite. The latter have already fuelled eurozone deflation by trimming food prices, so the outlook may yet be worse. (Quite how the EU can subsidize farmers for their losses given the straitened EU situation remains a curious sidebar of this self-inflicted blow).
Meanwhile, France, led by Francois Hollande who presides not so much over a cabinet as a delusional student Marxist drinking group in embittered middle age, is in the forefront of abandoning austerity. True the EU’s daft proclivities have meant that increasing austerity has led many nations into a dizzying downward spiral but at the same time, that simply underpins the failure of the Euro – EU nations which can’t or won’t undertake structural reform to compete in the modern age, must have a devaluation lever to let their prices fall to a level where they are competitive.
The implicit retention of the Euro displays a stubborn obsession to retain a flawed currency with all the deliberate impoverishment of the citizens this entails. Besides, abandoning austerity means borrowing more money and France’s credit looks dismal given its parlous economic state driven by decades of spendthrift government.
The stubborn economic illiteracy of the political classes is evident across the eurozone with national governments’ refusal to adopt structural reforms which is now deeply affecting investment. France has made it clear the government does not understand that growth drives from the private sector. After vilifying entrepreneurs, the Elysee is seeking to mend bridges it burnt with employers albeit by creating daft, bureaucratic, centrally planned schemes, which consequently demonstrate the government chasm in appreciating the private sector in the first place.
Addicts going “cold turkey” are always a huge problem and the drug of government spending and protectionist legislation helped maintain a mirage of prosperity for the initial decades after World War 2. However, in truth the rest of the world has been growing appreciably faster than Europe since the 1970’s. Nowadays that gap is accelerating as the world expands and Europe stagnates in both outright and relative terms.
Of course Brussels has a clear plan: more Europe. More blankets of regulation will only kill small business and lead to a greater socialist corporatist mess than Brussels has cultivated already.
Europe cannot afford to stand still while the rest of the world is increasing citizen prosperity. With stagnation comes an inability to weather shocks. Thus the EU endangers world economic growth as a vast wealthy developed bloc slips further into torpor.
Even attempts to promote innovation are failing as Brussels pumps money from the center to the accomplished form fillers and not the genuinely innovative entrepreneurs fuelling the new economy. Europe needs a reboot - but Brussels is reluctant to upgrade to version 2.0 despite the clear failure of EU version 1.
Meanwhile the notion that the euro crisis has been solved is laughable. The volcano lies dormant. It will erupt again.
The statements, views and opinions expressed in this column are solely those of the author and do not necessarily represent those of RT.