The Eurozone countries are in crisis as unemployment rises,and deficit grows. The IMF head Lagarde pictured above has been making rounds to collect funds to build a “firewall” against the ongoing debt crisis. The IMF chief was the former finance minister of France under Sarkozy who negotiated the pro-austerity “fiscal compact” with Merkel of Germany.
The 17 countries of the Eurozone (EMU) are locked in a union where Germany is dominant and the PIIGS of Portugal Ireland Italy Greece and Spain are facing shrinking economies with rising debt and unemployment. Bad blood is being felt among the PIIGS as Italy and Spain leaders have engaged in a war of words.
Spain and Italy spar over who is to blame for the fresh Eurozone crisis which saw borrowing costs rise in both countries. The Italian Prime Minister Mario Monti, claimed that Spain was to blame for the sell-off on markets last week, due to Spain not meeting its budget deficit targets. tated that the eurozone crisis will dampen global growth this year. This analysis has come on the heels of recent spike in bond yields in Spain and Italy. Last week and for first two days of this week worldwide markets were done as investors engaged in stock sell offs on Eurozone debt fears.
As one Commenter on guardian blog states “The euro created transparency so you could see how a widget made in Germany was produced more efficiently than one made in, say, Greece or Spain. Now it is clear that Greece, Italy, Spain, Portugal and Ireland have serious structural problems with their economies. It is the euro that has exposed these.
These countries should never have been allowed to become members of the currency union on the terms they were given. These terms were fudged because politicians wanted the euro to be a success and it would have been politically difficult not to let in such countries, despite the fact that they had basket-case economies. The only surprise has been how long it has taken for these issues to be exposed.” guardian.co.uk
The much vaunted “Fiscal compact” which was pushed by Angela Merkel the Chancellor of Germany and championed by the French President Sarkozy is under attack. The socialist Hollande of France who is expected to win the May 6 Presidential run-off has promise to re-open the pact with Merkel.
The Dutch government fell as the far-right coalition rebelled against austerity. Austerity protest are continuing in Greece and Spain which have unemployment rates pass 24%. The double-dip recession in the UK which is also under austerity has addedammunition to those economists who oppose austerity during recessions.