"Austerity austerity and yet more austerity reminds me of medieval medicine". Blood-letting often made the patient even sicker. The response was more blood-letting until the patient nearly died. "What's happening in Europe is a mutual suicide pact".
Austerity is needed when an economy is booming
the destructive monetary muddle caused by the Continent’s premature adoption of a single currency.
In Southern Europe there is a human tragedy of half the young men and women ages 18 to 24 facing a jobless future. The austerity program imposed by Brussels and their German masters have social implications that are unsustainable and worsening daily. The cut backs and constraints are depressing all sectors of the economy and the lid is finally coming off with political voices as well as thousands in the streets shouting "We aren't going to take it anymore"
The Chancellor of Germany, Angela Merkel is demanding that in return for German financial support her southern neighbours must undertake severe austerity measures including wage cuts and layoffs in the public sector, reductions in social benefits and the sale of public assets. While Japan, China, the US and Britain have devalued their currencies to maintain a competitive edge, Brussels in the meantime to serve its German masters has maintained its head in the clouds with the euro soaring from 0.9 to the US dollar in 2000 to 1.36 today, thus grossly overpriced and undermining Europe's competitiveness (with the possible exception of Germany's automotive and machine tool industries) . To quote George Soros; "If Germany left, the euro would depreciate," he said. "and the debtor countries would regain their competitiveness. Their debt would diminish in real terms and, if they issued euro-bonds, the threat of default would disappear. Their debt would suddenly become sustainable and Europe would escape the looming depression." If Brussels maintains an overpriced euro in response to German demands then this simply carves Europe in two leaving the economies of France, Ireland Greece, Italy, Portugal, Spain and Cyprus unable to compete internationally, with excessive unemployment and failing economies. More than half of German exports are to these European neighbours so it follows that in order to preserve this vital market for the German economy and to receive its largess to prop up their banks, the public must accept a continuation of the impossible suffering they are now facing.
Now let me as a layman try to figure out the logic in all this. If Germany left the Euro they would return to the mark. Consensus of German economists is that the value of the mark would soar and German export market to its European neighbours would collapse. The alternative then is to stick with the euro. The euro is overpriced so what can Brussels so about it? Obviously it needs to introduce policies to reduce the euro to a competitive level. Politically can it be done? The Germans will scream but there is overwhelming evidence that their manufacturers have used their money to line the pockets of politicians of southern nations who would otherwise support devaluation. Read this article from the New York Times that outlines the corrupt practices principally of Germany but also of France, Russia and Sweden flooding money into Greece to buy their politicians in order to sell them items they can ill-afford and neither need nor want, such as defective submarines and many tanks. Add to this aggressively competing casino banking tactics and the management of systems to enable large businesses and wealthy depositors to escape taxation through tax havens. There is a prevailing mood among the people of bewilderment, betrayal, anger and sadness and this is being expressed by a loss of confidence in their politicians, bankers and the European Union, and in some countries near revolt and the formation of divisive extremist movements.
Brussels will inevitably be faced in the near future with the choice of either supporting Germany with an overpriced euro or accepting it's devaluation. If the Germans have their way the emphasis in Brussels will be on keeping the euro high and for their southern neighbours a continuation of austerity measures and selling off public assets to the highest bidder (after all the Germans, Chinese and Gulf States have deep pockets) plus downsizing to reduce costs rather than investing in measures for recovery. It can only lead to the breakup of the European Union and a serious economic depression worldwide. As long as the cheats and compliant politicians don't suffer for their crimes the downward spiral will continue and the billionaires will remain secure in their gated communities and on their yachts. The latest fiasco in Cyprus is an example of what is happening; only the public will lose.
A devaluation of the over-priced euro and none of this fall-out need happen.