Southern European countries are trapped in an overvalued currency and suffocated by low competitiveness, a situation that will lead to the break-up of the euro bloc, according to Societe Generale SA’s top-ranked strategist Albert Edwards.
The problem for countries including Portugal, Spain and Greece “is that years of inappropriately low interest rates resulted in overheating and rapid inflation,” London-based Edwards wrote in a report today. Even if governments “could slash their fiscal deficits, the lack of competitiveness within the euro zone needs years of relative (and probably given the outlook elsewhere, absolute) deflation. Any help given to Greece merely delays the inevitable break-up of the euro zone.”
Zero Hedge has some even more doomsday predictions, all due to GDP to debt ratios, including the United States.
But, buyer beware, they are using the insane financial oligarchy derivatives bail out to blast Keynesian economics. Nowhere in the theory I've read on Keynes does it state one should run a nation into sovereign default to enable corporate welfare or a glorified global gambling casino with the checkbook to pay off bad debts being Joe Q. Public's.
Also buyer beware, competitiveness is usually code word for global labor arbitrage. Somewhere I don't think selling one's middle class into abject poverty is what economics in the national interest is all about....or even necessary.
If you're wondering what a Euro Zone is, that's the currency union, details here and involved monetary policy surrounding the common currency, the Euro. It involves 16 countries and shouldn't be confused to the European Union.