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29 June 2012

Posted by DMC on 30 June 2012 in Diary |

An early call first thing to my stepfather, Richard wishing him a very happy birthday. Paul Richard hasn’t really got to grips with the video call on Skype, so after two or three attempts we settled for the good old-fashioned telephone! Anyway, good health, happiness and a long life to Richard. He is a star, caring for my 95 year-old mother, who we hope will twinkle for a few years yet.

As important piece of international news. The EU leaders have agreed to use the Eurozone bailout fund to directly support struggling banks. An apparent concession by Germany to Spain and Italy. This decision inevitably raises the question of finding a solution to the economic and financial problems in the Eurozone. I paraphrase from Laurence Knight’s excellent summary-Eurozone’s long reform wish list-in the BBC business news on the Internet. I thoroughly recommend those of you who are interested to read the whole article for yourself. However, the following, summarises the position simply for those of us who are not economists and cannot fully understand the dilemma facing the European leaders.

Knight says that the answer is easy and suggests comparing it with the large, and much better functioning, single currency areas in the United States. Europe’s real problem, is that almost all of the solutions are far from politically palatable.

‘The Eurozone’s root problem is that the southern European economies have become fundamentally uncompetitive – wages rose too quickly during the boom years, which led them to import a lot more than they exported and borrow the difference.

The southern economies excessive debts, persistent un- competitiveness and resulting need to continue borrowing – along with Germany’s reluctance to give them money – is what has driven the financial panic that has made it much harder for southern European governments and banks to borrow from the markets.

What’s more the seizing up of European financial markets – not to mention the collective determination of Europe’s governments to cut spending, and the European Central Banks focus on price stability – is threatening to push the entire continent into a long and deep recession, something that would merely compound the debt problems.

So, if the Eurozone were to look at the US model for inspiration in its hour of need, what sort of changes – economic, financial and, ultimately, political-might need to be considered.?’

The article then goes on to suggest what these changes might need to be but I have only chosen to set out the problem rather than suggested solutions, so those of us who are inevitably bound in to the outcome of this problem have a better understanding of what it is.

I will just give one more quote from Laurence Knight’s article where he says,’ in the long run, a US style federal budget may be needed to cover the cost of recessions, so that individual governments don’t risk going bust when there national economies get into trouble.’

Paul ‘the computer’ came to babysit for three hours after lunch, so Alice could get out and go about business, shopping, going to the bank etc. Paul is very good, having been told by ‘her in-doors’ that he was not to over stress me by letting me talk too much, he was content to sit working on my other laptop whilst I enjoyed watching the one-day cricket match against Australia, which I had desperately wanted to go to myself. England had a great start to this series winning his first ODI (one-day international), over the five, by 15 runs Eoin Morgan was the man of the match with a splendid knock of 89 not out. It was a perfect day at Lord’s after one late morning shower and I could not help envying all my old pals sitting in our own special spot which we have occupied now for over 30 years.

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