From Volume 38, Issue 28 of EIR Online, Published July 22, 2011

Global Economic News

Austerity Killing Irish Economy

July 14 (EIRNS)—Ireland's compliance with its Troika of creditor bloodsuckers—the IMF, European Central Bank, and European Commission—is driving the country further into debt as the economy shrinks, while the unholy trio is making huge profits. In response to a parliamentary question by Sinn Fein spokesperson for financial affairs, Dep. Pearse Doherty, the government revealed that the total of EU49 billion in bailout loans from the EU, IMF, Great Britain, Denmark, and Sweden, will turn a profit of more than EU13 billion for Ireland's new creditors.

The Troika has issued a "report card" on Irish compliance with their demands. On July 14, the Irish Independent quoted David Begg, general secretary of the Irish Congress of Trade Unions, saying that Troika members had told him that the austerity and program cuts were not working because Ireland has to borrow more and more. "They are still on the flight path they have always been. All of the evidence of the thing is, it's not working," Begg said.

Doherty added that "the target for public spending cuts and tax increases for budget 2012 is meant to be EU3.6 billion. However, only six months in and the government has revised this figure up to EU4 billion." This will only worsen, he said.

"The cost of these failed policies is being borne by ordinary people. Cuts to Special Needs Assistance, cuts to winter fuel allowance and other social welfare payments, closure of emergency services in rural hospitals, and attacks on wages of low paid workers, are all a direct consequence of this EU/IMF austerity program."

"You can not solve a debt crisis with more debt and you can not end a recession with increased austerity. The domestic economy is still in recession with GNP down 4.3% in the first quarter of this year. Unemployment continues to rise, with 457,948 on the live register. Consumer spending continues to fall, inflation continues to rise, and personal indebtedness continues to rise, pushing more and more people into economic hardship and poverty.... Meanwhile, the government continues to borrow billions of euros at high interest rates to pay off senior unguaranteed bondholders."

Euro Can Be History by Week's End, Says Largest Danish Bank

July 12 (EIRNS)—"If politicians don't act against the crisis in Southern Europe, the euro can be history by the end of the week, warns Danske Bank." This is the headline-kicker of the leading story on the net edition of the major conservative Danish daily Berlingske Tidende. Under the headline, "Europe on the Brink of Collapse," the article says, "The European financial markets are on the brink of collapse. And right now, it is decision time. If the politicians don't react now, there is a threat that the euro cooperation will break down before August, the Danish Bank warns. If they are not willing to fight the escalating crisis, we are very close to state bankruptcy and a possible euro-collapse, says Danske Bank senior economist Frank Øland Hansen....

"If the markets continue to worsen as they have done this morning, and nothing is done to stop the crisis, the losses will be so big in the European system, that the countries on the periphery won't have access to funding by the markets. And then, it will be hopeless before the end of the week. But that is really unthinkable. I think that we will see the politicians react relatively quickly, if the markets continue."

EU, ECB Demand Sacrifices from Italy

July 13 (EIRNS)—According to the Italian daily La Repubblica, during negotiations with government partners Italian Economy Minister Giulio Tremonti said yesterday: "I received a request in English: within six months, Italy must present a credible privatizations and liberalizations plan."

At the same time, the financial markets sent a message today: The Italian austerity package of EU40 billion is not enough and the government should immediately add EU12 billion in new cuts. Yet another aspect of this maximum blackmail of Italy is the admission by Andrew Bosomworth of PIMCO, in an interview with Germany's Die Welt today, that his firm had dumped considerable amounts of Italian state bonds, but re-entered the stage as a big purchaser of state bonds on Monday—that is when the interest Italy was forced to pay had risen to more than 50% above the rate paid before the concerted attacks by the hedge fund.

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