Or put another way, the brutal assault on living standards of
the people of the eurozone is certain to accelerate as the system’s
self-destruct mode strengthens.
It’s not just the weather that’s gone into deep freeze this
spring. Markit
reports a worsening of “manufacturing conditions across the currency union”. Germany and Ireland both fell back into recession,
while rates of decline quickened in nearly all other nations. France ’s rate of slowdown did not actually
increase but its present speed of contraction is bad enough, only exceeded by
that of Greece .
The survey’s gloomy report adds: “March saw total new orders
decline for the twenty second successive month, dropping at the fastest pace
since December. Demand was weaker in both domestic and export markets,
reflecting lacklustre client confidence. The outlook for manufacturing also
deteriorated, as the ratio of new orders-to finished goods inventories dipped
to a three-month low.
“Job losses were reported for the fourteenth straight month
in March, with steep rates of declines reported in France ,
Italy , Spain , the Netherlands ,
Ireland and Greece .”
So the terms of the Cyprus bailout “agreed” by its
government at the point of a Troika gun, bad as they are, can only be an
opening to something far worse. There’s a
huge 60% tax on bank deposits over the guaranteed limit of €100,000, which
means that many businesses are closing with the loss of tens of thousands of
jobs – 4,500 in the public sector alone– a heavy blow for a population of less
than a million. Those in work will pay a “temporary insurance fee” of 1.5% on
salaries for access to healthcare.
The people of Slovenia are next in line for
attention by the punishment squad led by the International Monetary Fund and
the European Central Bank. Its economy is shrinking rapidly and its budget
deficit is ballooning towards 5% of GDP. According to the IMF, “a negative loop
between financial distress, fiscal consolidation and weak corporate balance
sheets is prolonging the recession”.
This spiral of decline isn’t limited to the eurozone.
Markit’s figures for the UK
are hardly encouraging: manufacturing output fell in March at its fastest
pace since July last year, along with a further decline in new orders and
employment. The Bank of England reported that lending to households and
companies contracted in February in spite of its efforts to increase the flow
of credit to the real economy.
The Bank of England has, of course, taken part in the
unprecedented pumping of billions into the financial system via quantitative
easing, aka as printing money. Since the crash started at the end of 2007,
central banks around the world have created a staggering $12 trillion of new money
in a desperate bid to stave off total collapse.
All this has done is to fuel inflation, encourage
speculation in basic commodities like wheat and, all in all, create the
conditions for another financial bubble to burst. According to Daily Telegraph finance writer Harry
Wilson, huge sums have gone into sales of high-yield debt, formerly known as
junk bonds.
In January alone, non-investment grade Asian companies,
whose debt is ranked by credit rating agencies as riskiest, sold just over $9bn
of high-yield bonds, a year-on-year increase of more 6,000%, he reports.
Reports of investment banks and other institutions borrowing
to buy junk bonds – what is known as leverage – only adds to the tendency towards
a new, even more destructive crash.
All attempts to fix the capitalist system are just making
things worse. These are the conditions which must make the campaign against
austerity into a movement to replace the broken, bankrupt system of production
for profit, once and for all time.
Gerry Gold
Economics editor
No comments:
Post a Comment