“The Eurozone has gone through a huge crisis. I believe that this crisis is now almost over.”
-Mario Monti
Speaking at a conference in Tokyo today, Mario Monti spoke of economic sentiment rising within the Eurozone. He cited Greece’s second aid package, improvements to the Spanish austerity drive, and his own progress since taking the helm in Italy.
Monti stuck up for the poorer performing Mediterranean countries and took a dig at the Eurozone’s profligate parent states: France and Germany. “The Story goes back to 2003, the still almost infant life of the euro… It was in fact Germany and France that were loose concerning the public deficits and debts.” He went on to suggest that when France and Germany avoided sanctions as their debt-to-GDP deficits soared past the 3% barrier level, the Eurozone’s founding fathers were in fact paving the way towards future excess deficits all over the 17-nation bloc.
Monti’s optimism seems a little bit naive however, as only this morning, Italian 10-year bond yields rose to a monthly high above 5.11%. There are also major concerns that Portugal will need a second bailout package in 2012, which could take a heavy toll on the Eurozone’s capacity to return to growth. The threat of contagion still looms large and it has been widely documented that any aid offered to Spain, could end up being mirrored towards Italy – an economy considered too large to bail out. And on top of all this, extensive research has shown that Greece’s second bailout package could merely be a precursor to a costlier third tranche of aid.
The situation in Greece is still, to put it short, dire. Bank runs have taken the total of private deposits in Greek banks down to a five-year low of €170.1 billion; this either signals that investors are sending their funds on flights to safety, to combat a potential collapse of the Greek banking sector; or it shows that record levels of unemployment and wage cuts have left Greek citizens with no choice but to live off their savings. Both scenarios are bad.
A recent survey has shown that around 1.5 million young Greeks, many of whom possess degrees and masters certificates, are considering urban to rural migration. The mass exodus will see many young people lose out on earnings, but they hope to achieve a better quality of life even if it means taking a veritable trip back through time. But as production prices rise and tax hikes increase it is becoming harder to make a living, even as an experienced farmer.
So do these evacuated city dwellers have any hope of turning manure into gold? Will it be enough to bazooka the Greek economy out of the mire it currently resides in? Could this combat the need for a third bailout deal? Is the Eurozone debt crisis “now almost over”?
… I don’t think so.
