1. Anonymous says

    Firstly the fact that the fiscal contraction in tandem with export led growth is now policy for the entire EU there will be serious problems. Many of these countries such as the UK and Ireland already have that policy and if the EU effectively blocks that route for a number of countries then they are doomed. Also this policy only works when the rest of the world is running a deficit. But why should they? If they were to do that for a period of time it is only a matter of time before the IMF get involved and after the last asian crisis they promised never again. So where will these deficit nations be? Fiscal balance without destroying the welfare state is only possible with significant write downs, and that is not even being considered.

    1. Edward Harrison says

      Yep, this is economic suicide. The only way to get over this growth hump while still cutting is via credit writedowns and/or a lower currency. There is no way to have growth, even in the medium-term unless you get one of these two because economies cannot make structural adjustments that impact growth except over the long term. Even in Germany, we have seen this.

    2. Oldrich says

      Good point particularly that about “where those import/deficit” countries will be. I have to shake my head in amusement. Suddenly everybody is a big enthusiastic exporter/mercantilist. In my country it is the same. You have got politicians preaching on the merits of exporting. We have discovered the existence of the BRIC countries that are on the rise and that will save the day. Yeah right Mr. Light-speed fast Genius you have discovered them in them in the right moment and of course nobody else (from the competing states) got the same idea. This is what I call a well-planned systematic proactive economic policy. 

      And yes it is very easy in all those new markets to get established. Like for instance this story in FAZ about China and its “fair and impartial” treatment of foreign companies.


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