Economic Fundamentals

Euro-Area Unemployment Rate Reaches Record 11.2%: Economy – Bloomberg.

Sovereign debt is repaid by the countries taxpayers. Increasing unemployment means decreasing tax revenues. The ECB can only affect monetary policy. It cannot change the economic fundamentals causing the lack of liquidity in the sovereign debt markets. At the same time, demanding these budget cuts is exacerbating the unemployment problem. Austerity is also reducing government benefits, a portion of which return to treasury in tax receipts.

 

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