In our December 17, 2010, article entitled The European Debt Tragedy: It’s not just Greek anymore we discussed the momentous events unfolding in several European Union member states and the implications of continued turmoil in the region. Since publishing that article, events have confirmed our conclusions. Based on the effects of austerity, continued economic weakness, and political upheaval, we find very little has changed. Europe remains mired in an ongoing internal struggle over the nature and extent of government cutbacks, political discourse has become increasingly polarized, and the outlook for economic growth is bleak. What little has changed has done so for the worse, and is only compounded by the recent social uprisings in the Middle East which have created additional inflationary pressures emanating from higher oil prices. Our view of Europe’s prospects in the coming years remains negative.
In our December article, we noted growing European debt burdens have threatened the stability of the monetary union in the following ways:
1.
Austerity as a policy for debt reduction creates a spending vacuum, a void which will be difficult for the private sector to fill in the coming years. Government spending, which citizens have come to rely upon, will not be as available as the cost of financing rockets up.
2.
Depressed lending environments; banks weakened by the real estate and consumer debt markets collapse, ... Log in to view full article.
