Thursday, 12 April 2012
History shows that the Euro crisis isn't going to go away
So now it's Spain that's on the rack. As predicted here many, many times, the Euro crisis just keeps rolling on (and on). The bad news just won't give up - despite a period of eerie calm that actually made a bit less sense than the arm-waving, sell-everything panic. Italian growth has also been revised down, and Portuguese banks' debt upwards. With even bankers calling for less austerity, Europe's crazy obsession with cuts and balanced budgets continues to steamroller social services, standards of living - and even take despairing citizens' lives.
Spain's painful descent into economic crisis is just another example of what the German government's insistence on a so-called Fiscal Union (and the strength of a tiny minority of austerity economists) really means. Essentially, it's this: Germany is highly efficient, very well trained, good at manufacturing and an export success. Everyone else has to be as well - despite long-standing differences in culture, economic structure and differential productivity that will take many decades to smooth out (if that feat is even possible, which I doubt). Those decades will see southern Europeans forced to fit into ever-tighter corsets that will cause pain - but little gain. In a situation where these countries have little credit to invest, or to splurge on any short- to medium-term relief, hundreds of millions of Europeans are going to find that they are a lot poorer over the next ten years.
It'll be a slow motion crisis, then. A long-running wound, which occasionally seems like it's healing, and then bursts out and flares up again. Rather like this week, actually.
And we shouldn't be surprised. The US didn't fully recover from the Wall Street Crash and the Great Depression until at least the Second World War. Britain's own interminable sterling crises went on for thirty years - bursting out in 1947, 1949, 1956, 1961, 1964-68 (over and over again), 1972-73 and 1976. The South American and African debt crises rumbled all the way through from the 1970s to the 2000s - and the echoes continue to reverberate.
I'd get used to headlines about 'crisis' if I were you.