Eurozone crisis: democracy trumps austerity but will the euro survive?

By Larry Elliott – For two years, Europe has been force-fed a diet of unrelenting austerity. The crisis began in the private sector – in over-leveraged banks and wild financial speculation – but such was its impact on consumer spending, investment and trade that governments have seen their public finances dive deep into the red. Spending cuts have been imposed, pensions have been made less generous, and taxes have gone up. The policy has been an economic disaster. Growth has collapsed, unemployment has soared and – unsurprisingly – budget deficits have been much bigger than forecast. Election results from France and Greece show that it has also been a political disaster: voters have decisively rejected Euro-sadism and made it clear they want their politicians to chart a different course. Democracy has trumped austerity.

In the fantasy world of policymakers in Brussels, the eurozone would fast-track to full fiscal union, but there is no realistic chance of this happening any time soon. more> http://tinyurl.com/6srwlqq

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Financial crisis could turn the tide against unrestricted capital flows

By Heather Stewart – Away from Brussels, one element at least of the neoliberal canon – the idea that capital must be allowed to flow unchecked around the world – is coming under sustained attack.

The theory says that free capital flows allow savings to be directed – by the invisible hand of the financial markets – to wherever they will be most profitably employed. In this way, savers get a better return on their nest egg, while underdeveloped economies receive the financial leg-up they need. And as firms from one country take over those of another, they bring much-needed expertise as well as help new ideas to be adopted rapidly worldwide.

Except that isn’t what’s been happening: instead, for the past decade and more, savings have been pouring uphill from poor countries to rich. more> http://tinyurl.com/8yw5b3s

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2011: ‘Annus horribilis’ or ‘annus mirabilis’?

By Ana-Maria Tolbaru, Georgi Gotev – Flicking through the images of 2011, it is hard not to feel a seismic shift: Once-invincible Arab regimes brought down, Japan’s earthquake and ensuing nuclear disaster, another eye-popping chapter written in Europe‘s debt and currency history.

“We cannot know which phase of the crisis we are in,” Brussels political analyst Janis Emmanouildis said. “Are we maybe still in the middle? Are we in the beginning of the end leading to Armageddon? Or are we in the beginning of the end in the sense that we are accomplishing step-by-step elements that will take us out of the crisis?” more> http://is.gd/nrrcYR

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EU summit: le crunch

Editorial – David Cameron went to Brussels promising to safeguard the City, when financial regulation is not remotely on the agenda. Angela Merkel joined him with a plan that avoids the real issues. Each is convinced they are playing clever national politics. In fact, both are playing poor European ones.

There is only one direction of travel for British Eurosceptics. They can pull Britain further away from the core Europe that is being created, but they can not simultaneously exert more influence over it. It’s nothing to do with economics or politics. It’s physics. more> http://tinyurl.com/bojreuj

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Euro zone failure could be vast geopolitical shock

By Peter Apps – Any euro zone failure would send shock waves around the globe, shifting the balance of geopolitical power and perhaps prompting a fundamental reassessment of what the world’s future might look like.

Suddenly, pundits, policymakers and other observers find themselves questioning one of their most fundamental assumptions — that an increasingly united Europe would be a key player in a newly multipolar world. more> http://tinyurl.com/d3eone5

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