Weak European Economy Skulking Under Ukraine Crisis Cover
With continuing focus on the crisis in Ukraine, news that the European economy continues to whither remains quiet and off the radar. But if you look, you'll find the news leaking here and there:
Politicians' promises, made over decades, designed to keep them in power, may finally be coming back to not only bite them but perhaps to leave a permanent open wound, as the distance they can kick the can down the rode seems to weaken with each round of can-kicking, especially after the 2007-2008 economic collapse in the West revealed the extent and depth of the shortfall of money compared to promised benefits.
And let's not forget that in our intertwined world economy, bad news in Europe can only exacerbate the credit crisis haunting China: China's biggest customer is the EU. What happens if Europeans' buying of Chinese goods continues to decline? How will the debt pyramid that overshadows the Chinese economy be fed with declining revenues. Given the recent drop in the value of the Yuan relative to the dollar and the Euro, it would seem the Chinese government sees the ominous pattern developing and is desperately trying to lower the cost of their exports to attract the declining purchasing power of Europeans, whose unemployment rates average over 10%, including the over 50% unemployment amongst its younger workers. There's just less available to pay for those goods. If demand for China's good were to drop too much, the Chinese economy would surely drop even more than it already has.
Is a vicious cycle now in place for China and Europe? And is it just a matter of time before that cycle spills over to the U.S.?
2014, a year that so many economists predicted would see strengthening economies in the U.S. and across the world, hasn't gotten off to the kind of start that assures the eventuality of such predictions. Despite the U.S. stock market's rebound in February, we should remain vigilant and watch for any continued signs of slackening economic activity. Combine these with the growing political tensions and the year holds the promise of growing fireworks beyond the current crisis in Ukraine.
(Reuters) - The European Commission put Italy on Wednesday on its watch list because of the country's very high public debt and weak competitiveness and warned France that will miss agreed budget deficit reduction targets unless it takes action.It seems the only country that's not either still in recession or hovering close to it is Germany. What happened to all the happy talk about Italy and Spain only a few months ago? It seems it was just that: talk. Now the reality of high debt and low economic activity rises to the surface again. Nothing has really changed for Europe. Their socialist arrangements continue to drain the life out of economic activity, as government promises to workers' pensions, universal health care and other social welfare benefits command an ever growing percentage of each workers production, with fewer and fewer younger workers to pay the taxes needed to fund these promised benefits. (In case you've forgotten, Europeans are not only not replacing themselves, but in many instances, their populations either have started or will soon start to decline. They're not having children or only having one or two - not enough to keep a culture and society strong and growing.)
Politicians' promises, made over decades, designed to keep them in power, may finally be coming back to not only bite them but perhaps to leave a permanent open wound, as the distance they can kick the can down the rode seems to weaken with each round of can-kicking, especially after the 2007-2008 economic collapse in the West revealed the extent and depth of the shortfall of money compared to promised benefits.
And let's not forget that in our intertwined world economy, bad news in Europe can only exacerbate the credit crisis haunting China: China's biggest customer is the EU. What happens if Europeans' buying of Chinese goods continues to decline? How will the debt pyramid that overshadows the Chinese economy be fed with declining revenues. Given the recent drop in the value of the Yuan relative to the dollar and the Euro, it would seem the Chinese government sees the ominous pattern developing and is desperately trying to lower the cost of their exports to attract the declining purchasing power of Europeans, whose unemployment rates average over 10%, including the over 50% unemployment amongst its younger workers. There's just less available to pay for those goods. If demand for China's good were to drop too much, the Chinese economy would surely drop even more than it already has.
Is a vicious cycle now in place for China and Europe? And is it just a matter of time before that cycle spills over to the U.S.?
2014, a year that so many economists predicted would see strengthening economies in the U.S. and across the world, hasn't gotten off to the kind of start that assures the eventuality of such predictions. Despite the U.S. stock market's rebound in February, we should remain vigilant and watch for any continued signs of slackening economic activity. Combine these with the growing political tensions and the year holds the promise of growing fireworks beyond the current crisis in Ukraine.
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