Tuesday, January 04, 2011

Conclusions to AEP's 2011 predictions in the Telegraph

Ambrose Evans-Pritchard's world economic predictions for 2011 are linked here and conclude as follows:

It would be a mercy if the German constitutional court brought this unhappiness to a swift close by ruling in February that Europe’s rescue machinery is a breach of EU treaty law, and therefore of the Grundgesetz. But it cannot happen, can it? A court order forcing Berlin to suspend payments would drive a stake through the heart of German foreign policy, and for that reason the eight judges must recoil, and the law be damned. One presumes.
Alas, there may be no neat solution, no division into two currency blocs with the South keeping the euro and the North launching the euro-plus, no brave decision by Germany to get out, revalue, and let others recover. Instead, there will be month after month of catfights, and flashes of hatred.
The EU will do just enough to prop up the edifice, but too little to restore lasting confidence. The German bloc will not confront the elemental point that either they agree to pay subsidies – not loans – on a scale equal to Versailles reparations, for year after year, or the South {will} stay trapped in slump until electorates blow a fuse.
Norway will sail on serenely.
Happy New Year.



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