This article cherry picks facts positive to his thesis and completely ignores those that show the true direction of the eurocrisis. He starts by attempting to persuade the reader that France is actually in good shape:
The relatively robust growth during the third quarter was a fitting example that France is often more resilient than forecasters and commentators generally acknowledge.
When the numbers do not agree with your conclusion, glide over them by description rather than telling the reader what they are. “Relatively robust growth” was an anemic 0.2% in the 3rd quarter after falling 0.1% in the 2nd quarter.
France also sports a 10.2% unemployment rate that has been increasing steadily from a low of 9.5% achieved in the 3rd quarter of 2011.
The French fiscal condition is deteriorating in line with its economic performance. The country optimistically claims that it will run a 5.2% deficit to GDP for 2012, which is worse than Italy’s 3.9%.
France’s budget gross budget position has been worsening faster than Italy’s having increased 35% to 16% since 2008. Perhaps, we should change the PIIGS to the F-PIIGS. I leave it to you to decide what the “F” stands for.
The author is very excited about internal devaluations making labor cheaper in the periphery, but he relies on poor data. He writes,
This year, unit labour costs will increase by 3 per cent in Germany, and fall by 8 per cent in Greece, according to a senior European official. An 11 per cent adjustment is a big deal. Spain, too, is adjusting.
The “senior European official” must be Jean Claude “When it gets serious, you have to lie” Juncker, because the numbers are fabricated. My independent research did indeed discover that Germany’s labor costs have risen about 3% in the past year, but both Greece’s and Spain’s have increased, too. Check my work here
if you like.
Even if these labor costs have adjusted over the past year, these countries are still very uncompetitive compared to Germany because a chasm separates them. Where would you open a new factory if you had your choice, Germany or Greece?
With all this bad news, the author tells us we do not have to worry about the rise of right wing extremism in Europe because the Netherlands just elected a centrist government in September. The relatively prosperous Dutch can tell us little about the situation in depression scarred Greece.
The neo-Fascist Golden Dawn party is polling in second place with 20% of the vote. It uses a strategy of delivering social services to people in the absence of an impotent central government, not unlike Hezbollah in the Middle East, and it is working. What is even more troubling is that the police and military are significantly represented in the party.
The author is correct about the German constitutional court. This body will rubber stamp the politicians’ crisis fighting plans. If the judges did not allow Germany to participate, this action could cause a significant, adverse market event for which they do not want to be responsible.
I also agree with him regarding Greek aid. The eurozone will continue to give just enough money to Greece to avoid a Grexit or default and not a pfennig more. A few billion euro is a cheap price to pay to maintain the status quo, no matter the misery of the Greek people.
In addition to these things we should worry about, one needs to be added. The eurozone is very weak though stable at the moment, but it has reached a state where one unforeseen event could precipitate a market crisis leading to a disaster worse than the GFC.
By dumping more and more liquidity into an insolvent system, the ECB has covered problems rather than solving them. When things really do begin to turn, it will be just like waking up after a one night stand— it will get ugly fast. Not every problem can be solved by cranking up the printing press.