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Eurozone crisis - 8 March

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Greece: The potato revolt

Staff, counterfire

Greece's potato revolt reaches Thessaloniki as farmers bypass the supermarkets and sell direct to the public.

With incomes plummeting and retail prices rising the idea for farmers to sell their produce directly to the Greek public has proved to be an unexpected success.

Producers from the northern region of Nevrokopi sold 35 tonnes to city dwellers eager to buy potatoes at less than a third of the supermarket prices.

For the farmers it is a chance to sell potatoes at a reasonable price rather than be forced to accept merchants's offers than did not even cover the cost of production.

In the wake of the successful experiment other producers of fruit, vegetables and dairy products are considering following the potato farmers lead.

(5 March 2012)
Will this sort of forced relocalization spread as economic contraction worsens around the world? -KS




The Eurozone youth of today

Lisa Pollac, the Financial Times
Increasing unemployment disproportionately affects the young. While policymakers have been pre-occupied with sovereign and financial crises, the generation with no actual experience of holding down a job just had to wait. For how long will this spectre haunt economies?

Using statistics from the European Union Labour Force Survey for January 2012 (but November 2011 for Greece), the UBS Global Macro Team gives us the following headline unemployment rates in a note released earlier this week:

Eurozone unemployment at 10.7 per cent, up from 9.5 per cent a year ago.
Greece’s rate is 19.9 percent, up from 14.1 per cent a year ago.
Eurozone youth unemployment (16-24 years old) 21.6 per cent.
But, compare and contrast a few youth unemployment rates for specific countries:

Germany 7.8 per cent, Austria 8.9, The Netherlands 9.0, Spain 49.9, Greece 48.1.
In other words, the average masks the monumental size of the problem in some countries, particularly on the periphery of Europe...
(8 March)



Spanish revolt brews as national economic rearmament begins in Europe

Ambrose Evans-Pritchard, The Telegraph
Spain's new prime minister has looked into the abyss and recoiled.

Though he swept into office as an apostle of orthodoxy, Mariano Rajoy has since delved into Madrid’s ghastly accounts and concluded that it would be "suicidal" to try to slash the budget deficit from 8pc of GDP to 4.4pc of GDP this year, as demanded by Europe's fiscal Calvinists.

Such a policy would require a further €40bn or €50bn of cuts and accelerate the downward spiral already underway, beyond the 1.7pc contraction expected this year by the International Monetary Fund.

The unemployment rate would rise to well over 25pc with six million out of work by the end of the year, equivalent to 30pc under the old definition used in the last jobless crisis in the early 1990s.

A study by BBVA of 173 cases of fiscal squeezes in OECD countries over the last thirty years concluded that demands on Spain are almost unprecedented. They found only four such cases, and three were offset by devaluations. The fourth was Ireland in 2009. The country crashed into slump, culminating in a 54pc fall in Dublin house prices.

There is near unanimity across the political spectrum that drastic pro-cyclical tightening at this stage is unwarranted and dangerous. Josep Borrell, ex-president of the European Parliament and the voice of Spain's pro-European establishment, said such debt-deflation risks pushing the banking system over the edge. "To cut the deficit almost four points in one year would be a true depressionary shock for an anaemic economy, made worse by the requirement for banks to mark their real estate losses to market prices."...
(25 February 2012)



PUNK ECONOMICS – LESSON 2

David MacWilliams, blog
Punk Economics is a new way looking at the economy based on the central idea that what is important is not complicated and what is complicated is never important.

Lesson 2: The ECB’s massive cash for trash scheme – bailing out banks with your money explained.

(24 February)

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