Thursday, June 21, 2012
Eurozone crisis is a virus right through the entire system, knock on effect could threaten 144,000 Scots jobs, EU needs 27 country default
The Euro zone is in crisis, the Greeks have formed a government but it doesn’t solve their problems.
The problem in Europe is debt, it stands at the head of the queue, before banks not lending.
The solution for Greece to rebuild is a total Greek default and to leave the Euro to sort matter out.
In the short term that will be painful but then any option will be painful.
You can’t grow your way out of debt by taking on more debt.
The virus in Europe isn’t contained to just Greece or Spain or France or Portugal, it has gone through the entre system.
That means the entire system needs reset.
27 countries, total default, there is no point in doing this piecemeal.
The effect will be painful, but better now than later.
Anyway, there isn’t a good solution or a radical solution on the table at present which means the collapse will be later.
When the collapse does come, it will be on the back of social unrest which will sweep right across the entire EU.
A Euro zone break-up would also trigger a deep recession in Scotland.
The extent and magnitude is reckoned by many to be on a par with the financial crisis of 2008 and there is no light to the end of that tunnel.
Unless they adopt George Laird radical thinking and go for total default.
The Fraser of Allander Institute at Strathclyde University says when the collapse happens it could result in the economy shrinking by about 5%.
I would say that is a conservative estimate.
If the economy does shrink by 5%, 150,000 will be out of a job and left high and dry.
Brian Ashcroft, professor of economics at Strathclyde University, said:
"The probability that the whole of the eurozone will break up is not high, but it's certainly possible."
I have to agree but everything will be done maintain the status quo, then like the Berlin wall, one night it will completely collapse.
And like the Berlin wall, it will be ordinary people who will lead the way.
In Greece, there is a new government as Antonis Samaras vowed to "give hope" to the Greek people after being sworn in as prime minister yesterday.
He is a caretaker, but he doesn’t know he is a caretaker.
His centre-right New Democracy party has forged a coalition with the left-wing Pasok and the smaller Democratic Left, ending weeks of political uncertainty.
The pressure of that coalition will burst because total default is necessary, and we can expect the far right and the far left to polarise the country.
When people are eating out of bins, and there is no future, there comes a point when people say enough is enough.
That will usher in a new era in European politics.
It isn't just a financial crisis that Europe is in, it is also a political crisis, a government cannot serve two masters, the people and the banks.
Banks don’t elect politicians, people do, and there will come a tipping point when someone stands up and shows leadership that will be too forceful to ignore.
And that day is coming in Europe.
The Euro zone will be reset financially and politically.
Debt growth is the killer of stability.
The Campaign for Human Rights at Glasgow University