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13.03.2017

"The trap for the eurozone: the collapse or default"

Focusing on the problems that the European Union can bring with the UK, the leading analysts of the EU were distracted from monitoring the "health" of the eurozone, and when some of them decided to return to monitoring the "patient", it turned out that he was "more dead than alive".

"The countries that use the single currency, rose to his full height prospect of tragedy - says the Spanish information and analytical publication El Economista. - The euro zone itself into a trap from which escape is impossible, not announcing the full default ".

When the project of creating a group of European states was developed, which will use one coin for all of them, it was assumed that there might be some difficulties in the functioning of the association, because the countries wished for a different level of economic development, experts say. However, there was a hope for the European Central Bank, whose function was to extinguish the outbursts and falls of the euro's quotations, as well as to maintain inflation at the optimal level, which would allow a quick return of money from the trade sphere to the industrial one, but without overheating the consumer market.

Even in 90-ies of the last century, it was clear that the value of the single currency in each country will have its own, but the ideologues of a single coin believed that the difference will be able to neutralize a simple calculation of value of the euro in relation to this or that national currency. However, these estimates of proportions have remained a purely technical operation: the euro in many countries today and is unequal in value. According to the calculations of economists in Germany, it is undervalued by 15% ($ here is actually worth € 0,79, the US market is - 0,94 €). In France, Greece and the euro, on the contrary, it overvalued 6%.

A year after the start of walking € began imbalance in countries such as Portugal, Ireland, Greece and Spain, who have dramatically began to grow the national debt (the four states in the European Union of economists even received unofficial nickname of the PIGS - the abbreviation was formed by the first letters of the names of countries in English, arranged in that order they gave the word "pig", speaking very precise characterization of the behavior of the four).

Each of these countries during the crisis, there was a danger of collapse of financial and banking system. Solve the problem could be in two ways - either to take huge loans from the "troika" (the ECB, the IMF, the European Commission), or to leave the eurozone. However, both of these options are in fact just a delay of death, according to specialists from the French corporate bank Natixis.

In the first case there is a sharp increase in public debt, which is required to return to "tighten the belt" economies of the debtor countries. Economic austerity has never contributed to the development of production - all earned money goes to pay debts and interest thereon, development funds receive crumbs, so that the acceleration of the development and the marked increase in GDP can not speak.

The second case can be called eurozone shot yourself in the foot - leaving debtors actually become borrowers who will never be able to return their loans. That will only add to problems for those who remain in the area.

All four of the above-mentioned countries have chosen the first way and now quarterly their economic ministers report about tenths of a percentage of GDP growth achieved in the trimester. In order to achieve these tenths, the governments of "pigs" have to be re-credited, decreasing the deductions for medicine, education and social welfare at the same time - as a result of this whole cycle, the public debt continues to grow and in most cases outstrips the GDP growth rate. So all the exclamation marks in the newspapers after "we increased the volume of our domestic gross product by 2%" are only suitable to create a good face in a bad game. Having encouraged the population with replicas, like "that testifies: the country has come out of the crisis", which do not correspond to reality.

While the attention of the ECB was entirely focused on the PIGS, we crept up two more problems: read off scale debts with almost complete halt of economic growth in France and Italy. The external debt of the first is about to touch a mark 100% of GDP, the second - more than 130%.

"Today, the ways in which we can try to razrulit problems of the eurozone, called no longer two, but three - note Natixis experts - fiscal devaluation, internal devaluation and debtors leaving the euro. And none of these three paths is not a salvation for her. "

Fiscal devaluation, the essence of which is to reduce the level of allocations by enterprises to social funds, on the one hand, can release a certain amount of funds in order to invest them in the development of the economy, with the aim that by increasing GDP begin faster repayment of debts. However, a strong decrease in deductions will reduce the reserves of social funds to zero and for the maintenance of, for example, pensioners, the state will again have to resort to a loan. And further - all in a circle. France, according to economists' calculations, it will be necessary to reduce contributions to social funds by 10%, Italy - to 13%. Than it will turn back, it is possible to present easily if to recollect an infinite influx of immigrants who choose these countries (plus Germany) for themselves because of high benefits on which "aliens" quite humming can quite live.

Internal devaluation means reducing wage. This reduces the purchasing power of the population, which eventually leads to the stagnation of the market and a decrease in production. This situation, in addition to the negative economic, brings also the possibility of a social explosion. That is, the internal devaluation can be seen as a short-term reprieve for the euro area of ​​impact and nothing more.

Output is the most notorious debtors from the eurozone would mean a de facto impossibility of repayment of loans, increase the deficit and, in the end, the collapse of the eurozone, believe financial analysts.

"It remains a universal default, after the announcement of which member states of the euro area sit at the negotiating table and agree to start a new life with a clean slate, crossed out completely or nearly completely existing debts. In another way, "- makes El Economista conclusions.

A source: A REGNUM

Author: Vladimir Dobrynin

Tags: Eurozone Economy, Research, EU Debt, Europe

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