Anonymous summary Week 8

Summary November 15, 2013,
Ambrose Evans-Pritchard talks about policy errors in Europe, in "The Telegraph" of October 23, 2013. Evans-Pritchard believes that Europe's deflation crisis is caused by policy errors. In most of Western Europe, total debts have already exceeded 300% of GDP which has caused a deflation crisis. This high percentage increases the risk of runaway debt and also affects the private debt ratios. Looking at the example of Italy, there are two possible solutions, namely paying more than 6% of their total national income towards debts or causing massive unemployment. Moreover, inflation is already dropping close to 0 even though, according to Evans-Pritchard, it would be a temporary way out of the crisis. Letting the inflation drift up causing an increase in wages in Germany, would close the intra-EMU exchange rate gap. However, the European Central Bank is strongly criticized for not being active even though the euro has risen 9% in trade terms this year. There are two possible solutions left: France, Spain, Italy and Club Med Allies should gang up on the ECB's governing council to force the reflation policy or wait for global growth which is not a responsible behavior in the second biggest economy.

 


Summary November 15, 2013,
Ambrose Evans-Pritchard talking about policy errors in Europe, in "The Telegraph" of October 23, 2013. Evans-Pritchard believes that Europe's deflation crisis is caused by policy errors. In most of Western Europe, total debts have already exceeded 300% of GDP resulting in a deflation crisis. This high percentage increases the risk of runaway debt and also affects the private debt ratios. Looking at the example of Italy, there are two possible solutions, namely paying more than 6% of their total national income towards debts or causing massive unemployment. Moreover, inflation is already dropping close to 0 even though, according to Evans-Pritchard, it would be a temporary way out of the crisis. Letting the inflation drift up causing an increase in wages in Germany, would close the intra-EMU exchange rate gap. However, the European Central Bank is strongly criticized for not being active even though the euro has risen 9% in trade terms this year. There are two possible solutions left: The Club Med Allies should gang up on the ECB's governing council to force the reflation policy or wait for global growth which is not a responsible behavior in the second biggest economy.