Germany as the Next World Superpower

Europe Faces a New Crisis

January 19, 2011

The Voice of Russia - The European Union is facing a new phase of the economic crisis. This depressing forecast was made by a report on the World Economic Situation and Prospects-2011 presented by the United Nations Conference on Trade and Development. Our commentary is by Yevgeny Kryshkin.

Despite the fact that the EU has taken tough austerity measures and is planning to cut the budget deficit, it is risking another economic recession. This opinion was expressed by the authors of the report. They emphasize that a repeated recession in the EU countries and stagnation in the U.S. and Japan may trigger another wave of a global economic crisis.

This pessimistic assessment is based on the state of affairs in the economies of Greece, Ireland, Portugal and Spain, the four countries that were most affected. Greece and Ireland managed to avert a collapse of their financial systems. However, this required incredible joint efforts by all EU member states. Ireland alone received 85 billion euro and with serious risks. Stabilization loans from the International Monetary Fund and the EU are being used to cover budget deficits and support banks. Nevertheless, neither Ireland nor Greece has solved the problems that they faced last year. Here is an opinion from an expert at the Institute of Europe, Vladislav Belov.

“The situation is developing according to the prior scenario. Greece, Spain, Portugal and Ireland have taken austerity measures to reduce the budget deficit through cutting government spending, the salaries of public servants and social expenses, and increasing taxes. At the same time, France and Germany are making attempts to consolidate their efforts. However, the problem has not been solved yet. As before, there is a danger of default, as far as the Euro-zone goes,” Vladislav Belov said.

This is confirmed by several moves. A few days ago, the Fitch international rating agency downgraded Greece. According to the agency, despite significant progress Greece has made as far as its economy and finances go, its huge debt makes the country’s solvency extremely vulnerable to upheavals.

The U.S., the world’s leading economy, is facing growing difficulties. Late last week, its state debt reached a record 14 trillion dollars as a result of its budget deficit. Consequently, the pressing task before Congress is to increase permissible state debt levels or cut expenses. Understandably, it’s impossible to fight - just such a bubble by printing money alone. Sooner or later, it will burst as it happened before. According to experts, this time the consequences may be irreversible and beyond those of the 2008-2009 crisis. At the same time, attempts to cut expenses will make overcoming the recession more difficult.