Saturday, November 19, 2011

Europe's welfare state to make way for austerity as debt crisis threatens to revive nationalism

By Business editor Peter Ryan - analysis

Europe's welfare state is almost certain to be slashed or even destroyed as taxpayers pay the price for the deepening sovereign debt crisis.

The austerity bill is likely to include deep cuts to social welfare programs created in the wake of World War 2 and expanded through the introduction of the European Union.

While banks endure heavy losses from their exposure to sovereign debt, taxpayers in the Eurozone - especially those from the baby boomer generation - are bracing for increased retirement ages, cuts to free education and stricter guidelines around universal health coverage.

There are already signs of protectionism and nationalism in some struggling economies as voices from right wing splinter groups seize on deepening community unrest.

Note: I travelled to Brussels as a guest of the European Commission.

Friday, November 18, 2011

EU economic recovery stalls; growth forecasts point to deep recession

The first line of the European Commission's press release was stark and scary.

"The recovery of the EU economy has stopped."

The impact of deepening fear and suspicion in the Commission's Autumn forecasts for 2011-13 reveal that "growth is at a standstill"  - perhaps the best case scenario given the deepening sovereign debt woes.

Growth is projected to stagnate well into 2012 and is expected to flatline at just 0.5 percent over the full year.

The best outlook is a return to slow growth of just 1.5 percent by 2013.

The uncertainty and outright fear engulfing Europe is now hitting investment and consumption while weakening global growth is holding back exports.

I outlined the impact of EU stagnation on the rest of the world on 11 November, when I spoke from Brussels to the AM program.

Later in the day, I updated the deepening crisis in Italy and the potential for severe consequences of a Eurozone breakup in this interview with "The World" on ABC News 24.

Note: I was in Brussels on a journalist study tour hosted by the European Commission.

Outright fear as Italy takes debt crisis to flashpoint

The departure of Italy's flamboyant Prime Minister Silvio Berlusconi is one small but important factor that has given global investors a brief moment of relief.

But in the leadup to the appointment of a new government lead by Mario Monti -a highly regarded former European Commissioner - there was outright fear that Italy's economy would implode under the pressure of borrowing costs in excess of seven percent.

I was in Brussels last week as a guest of the European Commission, and witnessed the heightening fears of cascading defaults if Europe's third biggest economy collapsed.

Here's my analysis broadcast on the 10 November edition of the ABC's AM program.

Europe faces modern Greek tragedy

By Business editor Peter Ryan - analysis

The possibility has loomed large for more than a year, but now Greece's exit or expulsion from the Eurozone is a real likelihood.

The warning from France and Germany that Greece will not receive another cent in European aid until the referendum is decided has dramatically raised the stakes in Europe's debt crisis.

If Greek taxpayers reject the second bailout plan approved by Eurozone leaders last week, the much feared scenario of a disorderly default by Greece appears certain.

But a Greek default would not be an isolated financial event for a struggling but small economy.

It has the real potential to trigger what Eurozone leaders have feared all along - cascading defaults by Portugal and Ireland which are also struggling to contain taxpayer anger from deepening austerity.

Why wouldn't taxpayers in Portugal and Ireland ask "why not us too"?

Read more on "The Drum" about the deepening crisis for Europe and what a moment of truth could unfold.