Europe Has No Exit

Robert Samuelson - May 3, 2013

WASHINGTON -- For most Americans, Europe is out of sight and out of mind. We figure that the worst of its debt crisis has passed. Italy has a new government. To mute social unrest, some countries are slightly relaxing austerity policies. The European Central Bank (ECB) has stabilized the bond market for weak debtor countries. Despite problems, Europe is muddling through.

Be skeptical -- very skeptical.

That's the main take-away from a talk the other day by economist Hans-Werner Sinn at the Peterson Institute, one of Washington's leading think tanks. Sinn, head of the German think tank Ifo Institute for Economic Research, is a controversial figure in Europe. He's been a regular critic of Europe's responses to the crisis and has gotten into public tiffs with, among others, multi-billionaire George Soros. Sinn doubts that the worst has passed. (Reflecting Europe's economic weakness, the ECB Thursday cut its main interest rate to 0.5 percent.)   The basic problem, he argued, is that years of easy credit lowered unemployment and raised inflation in debtor countries. As a result, they lost competitiveness, especially compared to Germany. From 1995 to 2008, he noted, prices rose 9 percent in Germany, 40 percent in Italy, 56 percent in Spain and 67 percent in Greece.  To Read More.....

My Take - And of course ....it must be Germany's fault.  There is an old story about the sighted man being king in the land of the blind.  That's false....why?  Because the blind gang up on him and kill him.