As you can see from the linked article from the L.A. Times, the IMF (International Monetary Fund) has projected that countries in Southern Europe are bordering upon recession, if not already in one,, Countries to the North, major trading partners of the South, might also be dragged-down into one, as well. And, this could spread to the U.S. and other nations Worldwide.

Austerity, the previously prescribed solution, is where a country’s government cuts spending, with the hope that the reduced outflow will help balance its budget. With a weak economy, however, oftentimes the government is one of the only functioning sectors of the economy. The other two, Consumers and Businesses, generally reduce spending in slow times. And, the multiplier effect of reduced spending just leads to further lay-offs. So, as the government contracts, the national debt doesn’t decline; but, rather, tax revenue does. Thus, the National Debt generally grows.

Germany and the countries to the North, which have run relatively conservative economies, in both good times and bad, have literally become the bankers for the countries to the South (A/K/A “Club Med”)–especially Germany. German Chancellor Angela Merkel seems to agree with some of her colleagues, elsewhere in the EuroZone, that they should back-off on the austerity demands; however, that would jeopardize her party’s position in the coming Fall Election.

So, the continuing saga of the EuroZone Debt Crisis, which started in February of 2010, continues on. The question is: For how long?

NOTE: Let’s hope the so-called Deficit-Hawks in Washington are watching.



  1. #1 by maxcat06 on April 27, 2013 - 11:19 PM

    They might be watching, but every one of them is afraid of being “primaryied”.

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