EU, a message for Australia: The EU has been one step behind since the GFC. They responded to the GFC by borrowing and injecting money into their economies. Unfortunately they continued with this policy for too long and amassed debt. The then wisdom said reduce spending and invoke austerity measures. This flattened the struggling economies and has left them now with a deflationary trend. The EU has to face up to its central problem. Monetary union does not work without fiscal union. One currency has been beneficial to the larger economies such as Germany and France, to the detriment of the smaller less flexible economies, Spain and Greece. The upcoming Greek election may see Greece secede from the EU, an economically wise move. Greece can then reinstate and devalue the drachma encouraging tourism and exports. Should Greece succeed other nations will follow. For Australia the message is clear, continued austerity is not wise. The major banks foresee continued low interest rates as a means of encouraging investment. The government has to fix the budget without stomping on economic growth, which is precarious at best. Measures must provide the stimulus needed to encourage investment, jobs and tax revenue, whilst paring back uneconomic and superfluous spending. smh.au/business/the-economy/falling-prices-are-not-benign-for-europe-20150108-12k2xb.html
Posted on: Thu, 08 Jan 2015 05:50:37 +0000
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