Thursday, 9 September 2010

Not Out of the Woods

I am often reading or hearing in the news, that the so-called recession is over, that we have been out of it for some time; and then this week I learn that the whole global economy is not out of the woods after all, and it may even be teetering towards a double-dip recession?

When I look around, or speck to others, I soon realise that things are not really in a partially good state, that almost everyone I know is struggling to pay bills or just managing to keep their heads above the water mark, an all too common story of everydayness in Britain.

Two years after a near-meltdown in the world's financial system, with the United States looking sluggish, equity markets lethargic, and Europeans fighting a debt crisis, and so the experts gathered in Italy on Friday last and offered a generally gloomy outlook - especially for the United States and much of the industrialized world. Some of the assembled experts and leaders at the annual Ambrosetti Forum on the shore of Lake Como were somewhat more upbeat: Economist Edwin Truman, a senior fellow of the Peterson Institute for International Economics, predicted "the most likely global outlook is subpar growth, meaning, that’s not measuring up to traditional standards of performance, value, or production.

New figures for the British economy reveal a slowdown in public sector activity leading to increased job losses. This has revived media speculation about a possible “double dip recession” in the near future when the drastic spending cuts announced by the new British coalition government come into force.

Something to look forward to then?”

The latest economic data from the United States, which points towards an ongoing and possibly deepening recession, is once again pushing up the value of the euro against the dollar and will also lead to reduced demand from one of Germany’s most important export partners. The biggest growth region for Germany’s export industries—Asia, and in particular China—have also published figures that reveal a marked cooling off in their economies. As has been the case before in recent history, Germany’s strength—its dynamic industrial base—is increasingly proving to be its Achilles’ heel.

The response of European nations to the deepening economic crisis is inevitably “dog eat dog”. The crisis is not only intensifying the fault lines between Europe and its main international rivals, but is also rapidly fuelling divisions inside Europe itself. This turn towards nationalism and self-interest on the continent will have explosive political consequences.
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