SATYAJIT DAS Y LA CRISIS EUROPEA DE DEUDA
The failure of the LTRO to decisively solve European problems is unsurprising. Confidential analyses prepared by European Union officials and distributed to ministers meeting at the Copenhagen meeting in March 2012 concluded that the Euro 1 trillion in loans was a “reprieve”, rather than a solution.
Rather than take the time afforded to move on other fronts, European leaders reverted to type. Spanish Finance Minister Luis de Guindos opined that: “We are convinced that Spain will no longer be a problem, especially for the Spanish, but also for the European Union”. It was eerily reminiscent of his predecessor Elena Salgado who almost exactly one year earlier on 11 April 2011 said: “I do not see any risk of contagion. We are totally out of this”. The optimism was echoed by French President Nicolas Sarkozy who was confident that the Euro-Zone had “turned the page”. Italian Prime Minster Mario Monti stated that the “financial aspect” of the crisis had ended.
The European debt crisis is not over. Fundamental problems – debt levels, trade imbalances, problems of the banking sectors, required structural reforms, employment and economic growth – remain.
Beyond the German favoured remedy of asphyxiating austerity to either cure or kill the patient, Europe is rapidly running out of ideas and time to deal with the issues. As the real economy stalls and debt problems continue, the most likely policy actions may come from the ECB – an interest rate cut to near zero and further liquidity support, perhaps even full-scale quantitative easing. Bailout funds may be channelled to recapitalise Spanish banks, as a means of helping Spain without resort to a full-blown bailout package.
It is doubtful whether any of these steps will work.
European politicians and citizens want a quick return to a period Spaniards now refer to as cuando pensábamos que éramos ricos which translates to “when we thought we were rich”. Official policies and action are focused on deferring rather than dealing with the problem. Unfortunately, that means the inevitability of meeting the same problem somewhere down the road.
John Maynard Keynes observed in The Economic Consequences of the Peace that each action designed to bring closure to one crisis sows the seeds of greater economic, political and social problems. Europe is living the truth of that statement one day at a time.