Crisis-hit Cyprus could be headed for a much worse recession than initially anticipated when international creditors agreed to prop up its economy, the IMF has announced in a 47-page report released today. Helena Smith writes:
Forecasting that the island’s output will shrink by at least 9% in 2013 (and perhaps even more) the IMF said Cyprus faced “unusually high” macro-economic risks if it did not adhere to the stringent terms of the €13bn bailout it has signed with the EU, ECB and IMF.
“Should these risks materialize, additional financing measures may be needed to preserve debt sustainability,” it said, predicting that the tiny nation’s debt load would hit 126% of gross domestic product in 2015 before falling to 105% of GDP by 2020.
Despite having already agreed to draconian belt-tightening measures – including highly controversial capital capitals – it was likely that Nicosia would be required to further slash GDP by 4.7% a year (the equivalent of €900m worth of budget cuts) over 2015 to 2018 to secure the island’s long-term primary budget surplus, said the IMF.
With the ink on the loan agreement barely dry, the report has unleashed fury among politicians on the island with the anti-austerity main opposition Akel party not only slamming the bailout deal but questioning if the government had read it before it signed up to the agreement.
Akel cadres say the IMF assessment will embolden those now openly asking if it would not be better for the beleaguered island to exit the eurozone than apply such tough conditions.
Submitted by Michael Snyder of The Economic Collapse blog,
When is the economic collapse going to happen? Just open up your eyes and take a look around the globe. The next wave of the economic collapse may not have reached Wall Street yet, but it is already deeply affecting billions of lives all over the planet. Much of Europe has already descended into a deep economic depression, very disturbing economic data is coming out of the second and third largest economies on the globe (China and Japan), and in most of the world economic inequality is growing even though 80 percent of the global population already lives on less than $10 a day. Just because the Dow has been setting brand new all-time records lately does not mean that everything is okay. Remember, a bubble is always the biggest right before it bursts. The next major wave of the economic collapse is already sweeping across Europe and Asia and it is going to devastate the United States as well. I hope that you are ready.
The following are 10 scenes from the economic collapse that is sweeping across the planet…
#1 27 Percent Unemployment/60 Percent Youth Unemployment In Greece
The economic depression in Europe just continues to get worse with each passing month. According to the Daily Mail, the unemployment rate in Greece has nearly tripled since 2009… >> Read More
The eurozone debt crisis and its economic fallout have sharply reduced French support for the EU, with 77 per cent believing European economic integration has been bad for France’s economy, according to a survey.
The study by the Pew Research Centre found that only 41 per cent of French respondents had a favourable opinion of the EU, down from 60 per cent in 2012. Even in eurosceptic Britain, more people (43 per cent) have a favourable view.
“No European country is becoming more dispirited and disillusioned faster than France,” concludes the Pew study, which polled some 8,000 respondent in eight EU countries.
The poll also captured the widening chasm between Germany and France in terms of support for greater integration. >> Read More
THE Group of Seven top economies is committed to “nurturing” world economic recovery, British finance minister George Osborne said on Saturday following a meeting of the international body that also pledged to further slash countries’ huge public deficits.
“Overall, our discussions over the past two days have reaffirmed that there are still many challenges to securing sustainable global recovery, and we can’t take it for granted,” he said.
“But we are committed as the advanced economies in playing our part in nurturing that recovery and ensuring a lasting recovery so that we have prosperity in all our countries.”
The chancellor of the exchequer was speaking after a two-day informal meeting of G7 finance ministers and central bankers aimed at striking a balance between supporting fragile economic recovery and slashing government debts. >> Read More
As G-7 leaders gather in London this weekend, investors will be looking for clues on how the world community plans to address the on-going sovereign debt crisis, sluggish economic growth, and exchange rates—the usual issues that have topped the agenda of G-7 and G-20 meetings in the last two years.
Two policies are on the table.
The first policy, supported by Germany and France, is to stick with austerity, which imposes fiscal discipline on heavily indebted countries—deflating the asset bubbles that preceded the financial crisis.
The problem with this policy is that it is depressing economic growth, and requires a great deal of financing from the IMF. >> Read More
- Signals Merkel Would Have To Govern With Center-Left Parties
BERLIN (MNI) – Less than five months ahead of Germany’s national elections, an opinion poll released Tuesday showed Chancellor Angela Merkel’s center-right CDU/CSU-FDP coalition still being without a parliamentary majority to continue governing.
In the survey by the INSA institute, combined support for Merkel’s center-right CDU/CSU bloc and the free-market orientated FDP stood at 42%, down one percentage point from the previous survey.
The other parties currently represented in parliament – the center-left SPD, the ecological Greens and the post-communist Left party – were credited with 48%, also down one point. >> Read More
Paul Krugman has just passed the landmark 1 million followers on Twitter. Not bad for an academic economist, albeit one with a Nobel prize under his arm, a prominent position at Princeton University, and a New York Times blog.
His following is a reward for battling the conventional wisdom thatausterity can foster a recovery. From the moment Lehman Brothers was allowed to crash, it seemed that only Krugman, his compatriot Joseph Stiglitz, another Nobel prizewinner for the liberal cause, and New York professor Nouriel Roubini, who had loudly predicted the crash, consistently confronted the “austerians” in Washington, Brussels and the UK Treasury.
More than four years on, austerity is being questioned as never before, not least because most countries implementing a deficit-reduction policy have failed to grow. Krugman, his blog and comments on Twitter, have become the focal point for objectors worldwide. >> Read More
And there it is folks. The age of austerity is over.
In an interview given on Sunday, French Finance Minister Pierre Moscovici said: “Austerity is over, but we remain serious,” according to Reuters.
The “we remain serious” part seems to refer to the country’s dedication to hit deficit targets. But those targets have been loosened, Moscovici obviously believes that Europe has reached an end of budget cutting for the sake of budget cutting.
There’s been an incredible collapse in the last month of the pro-austerity movement.
The UK has been rebuked by IMF officials. Reinhart and Rogoff have imploded publicly. Niall Ferguson stuck his foot in his mouth equating Keynes’s economic philosophy with his sexual orientation. Bill Gross has blasted the UK. The new Italian Prime Minister has said austerity is over.
The whole facade of trying to stimulate the economy (or even reduce debts) by cutting spending is collapsing.
After last week’s horrible unemployment numbers from Europe, some may be tempted to downplay the monthly US jobs report coming out this Friday. That would be a big mistake. The data will help shed light on four issues that are central to the wellbeing of both America and the global economy.
First, some context.
Almost five years after the global financial crisis began, western economies as a group still struggle to overcome a “new normal” of unusually sluggish growth and persistently high unemployment. The longer this persists, the greater the risk that — rather than serving as a transition to revamped growth and job creation models — the new normal will morph into one or more lost decades with terrible human costs.
Last week’s data from Europe highlight the depth and breadth of the challenges. In countries such as Spain, already alarming unemployment continues to set distressing records. And the previously unthinkable overall rate of 27.2 per cent conceals even greater pain, including 57.2 per cent joblessness among the young. >> Read More