That’s how Ambrose Evans-Pritchard opens his latest essay in the Telegraph. He goes on:
The long-awaited recovery has failed to take wing. Debt ratios across southern Europe are rising at an accelerating pace. Political consent for extreme austerity is breaking down in almost every EMU crisis state. And now the US Federal Reserve has inflicted a full-blown credit shock for good measure.
None of Euroland’s key actors seems willing to admit that the current strategy is untenable. They hope to paper over the cracks until the German elections in September, as if that is going to make any difference.
A leaked report from the European Commission confirms that Greece will miss its austerity targets yet again by a wide margin. It alleges that Greece lacks the “willingness and capacity” to collect taxes. In fact, Athens is missing targets because the economy is still in freefall and that is because of austerity overkill. The Greek think-tank IOBE expects GDP to fall 5pc this year. It has told journalists privately that the final figure may be -7pc. The Greek stabilisation is a mirage.
Italy’s slow crisis is again flaring up. Its debt trajectory has punched through the danger line over the past two years. The country’s €2.1 trillion (£1.8 trillion) debt – 129pc of GDP – may already be beyond the point of no return for a country without its own currency.
. . .
The International Monetary Fund has just slashed its growth forecast for Italy this year to -1.8pc. The accumulated fall in Italian output since 2007 will reach 10pc. This is a depression. Yet how is the country supposed to get out of this trap with its currency overvalued by 20pc to 30pc within EMU?
Spain’s crisis has a new twist. The ruling Partido Popular is caught in a slush-fund scandal of such gravity that it cannot plausibly brazen out the allegations any longer, let alone rally the nation behind another year of scorched-earth cuts. El Mundo says a “pre-revolutionary” mood is taking hold.
. . .
Portugal is slipping away. Professor João Ferreira do Amaral’s book – Why We Should Leave The Euro – has been a bestseller for months. He accuses Brussels of serving as an enforcer for Germany and the creditor powers.
Like Greece before it, Portugal is chasing its tail in a downward spiral. Economic contraction of 3pc a year is eroding the tax base, causing Lisbon to miss deficit targets … Vitor Gaspar … blames the fainthearted for refusing to slash with greater vigour. Needless to say, he still refuses to accept that a strategy of wage cuts and deflation in a country with total debt of 370pc of GDP was always likely to fail.
. . .
All this is happening just as tapering talk by the Fed sends shockwaves through credit markets, pushing up borrowing costs by 70 basis points across Europe.
There’s more at the link.
Just a few weeks ago I wrote that ‘The economic death spiral worsens‘. That’s what you’re seeing in action in southern Europe right now. The powers that be have desperately tried to ‘kick the can down the road‘ again, and again, and again . . . but they never seem willing to pick it up and deal with it, once and for all. That’s going to come back to haunt them in due course. Furthermore, when it does, because of our exposure to European debt and other fiscal issues, it’s going to clobber the USA as well.
Einstein defined insanity as “doing the same thing over and over again and expecting different results”. By that definition, European monetary authorities – and the Fed over here – are insane; and their policies can only result in fiscal and economic insanity and meltdown in the long run.