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Fiscal Forecast: When the IMF Destroyed Greece, Part II
The Greek economy was almost destroyed because politicians prioritized the Greek budget deficit over the Greek economy, and because economists at the IMF were not properly educated.
The Greek economy was almost destroyed because politicians prioritized the Greek budget deficit over the Greek economy, and because economists at the IMF were not properly educated.
If neither wages nor energy prices can explain why the ECB is right in being concerned about persistent inflation, then what can explain it? There is a candidate that nobody wants to talk about: taxes.
According to the data and predictions of economists, the worst of the inflation spike may have passed but interest rates will still go up in the coming months and banks will be hawkish, imposing the tightest requirements for lending since 2011.
While the stars are lining up for another fiscal crisis in Europe, the ECB’s chief economist fails to even mention the threat. Is the ECB ignorant on what is coming down the pike?
With a welfare state that dominates their budgets, European governments are exceedingly vulnerable to a recession. When tax revenue declines and entitlements force governments to spend more, the inevitable result is larger budget deficits. What will the ECB do in response to that?
The expected raising of the interest rate by the ECB sent a short-term positive signal to the stock market.
Euro zone inflation, which peaked at 9.1% in August, has reached its highest point since the introduction of the euro in 1999. Amidst fears of entrenchment, the ECB is preparing a major hike in interest rates that may also slow down the economy.
When the ECB raises interest rates, all other things equal it increases demand for euros on the global foreign-exchange market.
There are more signs of a possible new debt crisis in Europe.