The American economist points to the ongoing economic difficulties for Spain and Greece, which are still in recession, and the absence of signs that would allow them to exit from it. Stiglitz believes that the purchase program of Treasury bonds implemented by the European Central Bank can only be a temporary solution since the ECB requires austerity conditions for its financing. According to Stiglitz this conditionality will only have the effect of aggravating the state of the sick.
I agree with Stiglitz's diagnosis. The eurozone could not solve its structural problems. Even I can assert that European managers don't have an agreed-upon strategy. The basic problem is the absence of a growth perspective. The divergence between North and South regarding economic fundamentals persist and the only cure proposed for the moment is the pursuit of austerity and painful reforms. Let's first look at the table below summarizing the state of the divergence in the eurozone.
2013 forecasts of the main economic indicators for some eurozone countries (%)
Source: OECD, Bloomberg
* The figures in the brackets are the late estimations for 2012
Since ECB President Mario Draghi declared that “the euro is irreversible” and since he started the purchase of sovereign bonds without limit, a certain calm occurred in financial markets.
Unfortunately, these kinds of events are quite likely. General elections will be held in
This is not sure at all. Alexis Papachelas, a columnist for the Ekathimerini newspaper, recently expressed very well the political risk regarding the chances of the austerity plan. He finalized his article of Dec. 29, 2012 with this conclusion: “The fact is that we need to rebuild the country from its foundations. The present coalition government cannot do this because on the one hand it is being pulled down by hands within its own parties and on the other it is faced with an opposition whose only demand is that everything stops.”
As it was the case last year, this year we will also be obliged to follow the European saga, holding our breath.