The day after tomorrow- A commentary on Europe's economic future
A recent report by 17 leading economists concluded that Europe is sleepwalking into a economic disaster. To prevent the extent of the catastrophe, there needs to be a restructuring of how the EU handles its crisis management.
The problem regarding the EU rescue packages and bailout funds is that these cost-cutting programmes exacerbate recession in the affected countries. This absence of economic dynamics causes a vicious cycle with a lack of consumer spending and productivity. Opinions are deeply divided regarding the contingency of bailouts for countries such as Greece.
If the bailouts proceed in such a rapid manner, it could happen that the "giver" countries might eventually not be able to provide any more financial support and need money injections themselves- a situation where the doctor turns into the patient.
The rating agency Moody's has forecast a negative outlook for Germany's credit rating, based on evidence that the process described above has already begun. This leads to an impression of a never-ending tragedy in which Euro members fall like dominos ending in an eventual collapse of the monetary union. All of Europe and its trading partners are going to have to cooperate and find a solution that does not rely entirely on incomprehensible amounts of debt.
The rating agency Moody is stating a negative outlook for Germany's credit rating, based on evidence that the above described process is already ongoing. This leads to an impression of a never-ending tragedy in which Euro members fall like dominos with an eventual collapse of the monetary union. The only way to solve this situation is a solution where the whole of Europe and its trading partners effectively cooperate and find a solution not based on unimaginable amounts of debt.