Samuel Johnson’s droll remark – “when a man knows he is to be hanged
in a fortnight, it concentrates his mind wonderfully” – could have
applied to the euro zone before the European Central Bank (ECB) launched
its save-Europe mission.
Between 2009 and mid-2012, European economies were unravelling at an alarming pace. Three of them – Greece, Ireland, Spain – were kept alive by international bailouts; a fourth, Spain, received a backdoor bailout in the form of a bank rescue. The governments of those countries went into panic mode. Banking systems were propped up and overhauled, budgets were cut with alacrity, market and labour reforms were put in place.
The widespread strikes, demonstrations and riots from Athens to Barcelona were grim evidence of the pain suffered by everyone.
Today, the vaunted euro zone “recovery” is not worthy of the name. Fresh data released this week put Italy back into recession, with back-to-back quarterly contractions. France is flat-lining and in danger of slipping back into recession, too. German industrial production is on the wane, suggesting that the country’s second quarter will show no growth.
The International Monetary Fund predicted last month that the 28-country euro zone would grow by a mere 1.1 per cent this year. With Italy back in recession and disinflation threatening to turn into outright deflation – the euro zone’s July inflation figure was only 0.4 per cent – all bets are off for an economic rebound that will create jobs and bring down crushing national debt levels. On Thursday, after the ECB’s rate-setting meeting, Mr. Draghi said the recovery remained “weak, fragile and uneven.”
What went wrong? To be fair to Mr. Draghi, the poor man has used every monthly policy meeting since 2012 as a platform to beg governments not to give up on austerity and economic reforms. It hasn’t worked.
Read more: Draghi’s EU bond bailout kindness ends up biting him - The Globe and Mail
Between 2009 and mid-2012, European economies were unravelling at an alarming pace. Three of them – Greece, Ireland, Spain – were kept alive by international bailouts; a fourth, Spain, received a backdoor bailout in the form of a bank rescue. The governments of those countries went into panic mode. Banking systems were propped up and overhauled, budgets were cut with alacrity, market and labour reforms were put in place.
The widespread strikes, demonstrations and riots from Athens to Barcelona were grim evidence of the pain suffered by everyone.
Today, the vaunted euro zone “recovery” is not worthy of the name. Fresh data released this week put Italy back into recession, with back-to-back quarterly contractions. France is flat-lining and in danger of slipping back into recession, too. German industrial production is on the wane, suggesting that the country’s second quarter will show no growth.
The International Monetary Fund predicted last month that the 28-country euro zone would grow by a mere 1.1 per cent this year. With Italy back in recession and disinflation threatening to turn into outright deflation – the euro zone’s July inflation figure was only 0.4 per cent – all bets are off for an economic rebound that will create jobs and bring down crushing national debt levels. On Thursday, after the ECB’s rate-setting meeting, Mr. Draghi said the recovery remained “weak, fragile and uneven.”
What went wrong? To be fair to Mr. Draghi, the poor man has used every monthly policy meeting since 2012 as a platform to beg governments not to give up on austerity and economic reforms. It hasn’t worked.
Read more: Draghi’s EU bond bailout kindness ends up biting him - The Globe and Mail
