Monday 28 March 2011
Nowotny's Austrian Economics
So using this cover, what have the European Politicians done? Oh, dear, not a lot. The Portuguese have refused to pass an austerity budget last Friday and now last night the well-known ECB bank member has given a rather unfortunate interview of Austrian television. In it he said 2 main things, firstly that Portugal should accept a bail out as soon as possible and secondly that Greece's ability to keep funding itself (with European loans!) will be on a knife edge for the next 4 years. He also slipped in that Austria's inflation at 2.7% was much to high to be sustained; like a good Austiran should.
Now there are bigger problems in the world than ranting ECB members. However, the passing of time has not really led to any steps forward being taken by Germany. Germany is in an interesting political mood, feeling strong enough not to join in attacking Qaddafi and also not wanting to cave into demands for a European debt union.
The trouble is, with the outer Eurozone countries failing in the heat, there is only a choice between more meaningful bail out (i.e. on terms that actually help the stricken countries), a debt restructure (which will hurt EU zone banks) or a shock as these countries leave the Euro and devalue.
None of these meals is very appetising, but worse is that no decision is being made about which one to choose.