Jose Manuel Barroso, president of the European Commission, has hit the panic button. As the Eurozone debt crisis worsened, he remained among the most optimistic of EU officials, repeating his faith in the ability of the myriad of rescue packages to prevent further contagion from affecting larger European economies. But no longer.
Barroso has issued a clear warning to the policymakers in Europe that has a strong note of dire panic. He no longer pretends that the debt-financed rescue stratagems cobbled together by the inept politicians of the European Community are safeguarding larger economies such as Spain and Italy being exposed to the rapidly metastasizing debt crisis. He admits with brutal frankness that the markets “remain to be convinced that we are taking appropriate steps to resolve the crisis.”
The panicky communication from the European Commission president has sparked a wave of frantic selling among stock markets across the globe, while leading gold to ascend to ever higher prices. Is the handwriting on the wall? It is becoming ever more obvious, even to the formerly sanguine politicians, that the global economic crisis never ended, and that its current phase, the sovereign debt crisis, is getting more dangerous, while the inept policymakers run out of options.
global economic crisis
When the European Commission released its forecast for 2009 and 2010 on economic “growth” in the eurozone, the dismal projections were no surprise. According to the Commission, eurozone economies collectively will contract by 1.9 % in 2009 and grow by an anemic 0.4 % in 2010. Even these seemingly pathetic figures are almost certainly highly optimistic. A senior economist at Bank of America, Gilles Moec, for example, projects that the 16 nations that use the euro currency will see their economies shrink by 2.6 %. during 2009. As for 2010, I think the European Commission was inhaling some potent weed to see any growth potential for 2010.
The negative growth in the eurozone affirms that that this pivotal region in the global economy is deep in recession, with already high rates of unemployment about to surge to a level that will threaten the social and political cohesion of western and central Europe. Quite clearly, the eurozone, along with the rest of the planet, will not be immune from the man-made catastrophe that is the Global Economic Crisis.
What about the rest of Europe? Here the news is at least as bad, and in many instances worse than the eurozone. The economy of the UK is imploding, its banks technically insolvent, according to a recent and authoritative report. Russia is being shattered economically by the collapse in commodity prices, especially petroleum, its primary generator of hard currency. The Ukraine and Baltic nations are possibly in even deeper trouble, while even little Iceland has not been spared, as it risks being the first victim of the Global Economic Crisis to fall into national bankruptcy.
The global economic disaster ripping apart the world began in the United States, where it continues to accelerate in its destructive impact. However, now that Europe is being ripped apart by the global financial and economic tsunami, we are now entering what economists refer to as a negative feedback loop. As the U.S. and Europe feed upon each other’s economic decline, the tentacles of this destructive recessionary octopus will increasingly strangle the other major economic engines on the planet, namely China, Japan and Southeast Asia. The sobering conclusion is that the worst is yet to come, but almost certainly will.
global economic crisis