Clouds of Recession Gather Over Northern Europe
A gloomy forecast for the sales of a German automaker portends the possible spread of Southern Europe's economic crisis to other parts of the continent -- and the world.
A gloomy forecast for the sales of a German automaker portends the possible spread of Southern Europe’s economic crisis to other parts of the continent — and the world.
“The E.U. has made Europe a much more cohesive economy, which is good when things are going up,” said Carl B. Weinberg, chief economist of High Frequency Economics in Valhalla, N.Y. “But when things are going down the multiplier is very strong. An outgoing tide lowers all ships.”
The problem comes when demand in global markets for Germany’s export products declines due to recession in those countries. Perhaps the spread of the crisis will tempt leaders in areas as yet unaffected by the crisis to abandon the austerity policies that are maintaining, deepening and spreading the European recession.
In Germany there are few overt signs of crisis. Unemployment stands at 5.4 percent, compared with an average of 10.9 percent across Europe. Together, Germany and the other 26 nations of the European Union represent the world’s second-largest economy. As a bloc it is the single largest trading partner with the United States. Further delay in Europe’s recovery, caused by a German recession, would seriously inhibit growth in the United States, Asia and Latin America.
— Posted by Alexander Reed Kelly.
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The region’s overall economic weakness as well as slowing demand in China and other big markets for German exports of consumer products, cars and sophisticated machine tools, industrial robots and construction equipment are finally taking their toll.
Just one more consecutive quarter of shrinking economic output and Germany would officially enter a recession. The same is true of Belgium, France, Luxembourg, Austria, even Sweden and Finland. The Netherlands has already suffered two quarters of declining gross domestic product.
… The problem for the rest of Europe is that any hope for recovery is pinned on a robust German economy. Companies in Spain and Italy have depended on German demand to compensate for a collapse in consumer spending in their own countries.
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Ironically, the very New Deal legacy that austerians work to euthanize in the U.S. is the chief thing that has prevented the country's economy from completely crashing.
Investment in what experts call "real inputs" -- structures and machines that enable and boost future output and productivity -- is one way an economy grows over time. No wonder, then, that an economic crisis occurred just decades after the share of national income going to investment began declining during the start of the neoliberal era, around 1980, UMass-Amherst professor Gerald Friedman writes in Dollars & Sense.
Money today is simply a legal agreement between parties. Nothing backs it but “the full faith and credit of the United States.” The United States could issue its credit directly to fund its own budget, just as our forebears did in the American colonies and as Abraham Lincoln did in the Civil War.
The Nobel Prize-winning economist and public advocate is at the top of every liberal’s wish list for President Obama’s second-term Cabinet appointments.
The marginally growing U.S. economy reduced speed in the second quarter of the year after months of lackluster job creation, threatening the financial well-being of ordinary Americans and deepening the challenge for President Obama’s re-election campaign.
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