The debt crisis in Europe once again dominated the headlines in 2012. Greece was already tethering on the edge. This was made worse by a deteriorating macro environment in bigger economies such as Italy and Spain. Not surprisingly most of these economies turned to the European Central bank for a bailout. And after much huffing and puffing the ECB complied. But not before some agreement was reached on austerity measures to be implemented. The central bank in Europe has displayed the same lack of imagination as its counterpart in the US. Previous rounds of stimulus measures have not bolstered economies as envisaged. Despite this, both the central banks have continued to print money at the drop of a hat. Meanwhile, sovereign debt has only ballooned, unemployment has remained firm and there is hardly any noticeable growth in the economies. The only thing that these bailout packages are likely to do is raise the chances of higher inflation in the years to come. The ECB is not keen on the Euro splitting up, but the current state of affairs cannot continue for long. Unless the European countries come up with a more meaningful strategy of cutting down debt, a breakup of the Euro seems more likely.
Tuesday, January 1, 2013
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