Wednesday, April 22, 2009

More Gloom and Doom

An article in today's New York Times takes a look at Spain's depressing economic state of rising unemployment and falling consumer prices as it relates to the global market.  The whole article is well-worth a read, but these two paragraphs in particular, I think, catch the current situation and what lies ahead for the future.
The trends have unnerved even well-established businesses. “There is such a huge lack of confidence in the politicians, in the European Union and in the banks,” said Arturo Virosque, 79, president of Valencia’s chamber of commerce and the owner of a local logistics company. Ticking off crises going back to the Spanish Civil War in his youth, he said, “this is different. It’s like an illness.”
After price cuts by competitors, Mr. Virosque’s company reduced charges for storage and transportation, and slashed its work force to about 170, from 250. “The worst thing is that we have to cut the young people,” he said, because higher severance makes it too expensive to fire older workers.
And the cure?
When Spain had its own currency, the peseta, the central bank could have simply devalued it, or cut interest rates to zero. But that is not an option in the era of the euro, when monetary policy is controlled from the European Central Bank’s headquarters in Frankfurt, said Santiago Carbó, a professor of economics at the University of Granada.“If we enter into a deflationary period, we won’t have the monetary tools to sort it out,” Mr. Carbó said.

Very depressing stuff indeed, and it makes me wonder how longer before there's the beginning of a movement to re-examine the Maastricht Treaty and why there hasn't been more public outrage at the state of economy.

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