Wednesday, November 30, 2011

Europe: Death By Asfixiation (Or Heart Attack First?)

Ambrose Evan-Pritchard today, on Europe's upcoming lost decade, a la Japan

Citigroup's guru Willem Buiter has more or less condemned the eurozone to death by asphyxiation (if it doesn't die of a heart attack first).

In his global forecast for generalized Götterdämmerung in 2012, the Dutch Meister said Euroland will remain in recession for the next two years, contracting by 1.2pc next year and again by 0.2pc in 2013.

Heaven knows what that will do to the South. Dr Buiter said the chance of a euro break-up is low (of course, of course). He assumes that the ECB will blink, acting at the 11th hour as lender-of-last-resort. Well, it had better blink fast.

If his figures are correct, I find it it very hard to see how the eurozone can hold together. Club Med will be in even deeper depression. The debt trajectory will be even worse.

Be that as it may, the Meister and his team said the eurozone will not regain its 2008 level of output until 2016. The overall picture for both EMU-land and Britain will be "similar to, or below" Japan's Lost Decade in the 1990s (though with much higher unemployment than in Japan).

So there we have it. The Japanese handled their mess rather well in retrospect".

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