Predictions for 2012 are all over the map, but one area where there is consensus is that Europe is heading for a recession.* The question is how deep it will be and how much it will affect the U. S. (and President Obama’s re-election).
The Europeans are grimly following Germany’s Angela Merkel off the cliff of austerity, rather than using short-term stimulus to promote growth, which will lead to further contraction of economies in Greece, Italy and Spain.
I agree 110% with Charles Wyplosz, an economics professor in Geneva: “We’re going straight into a wall with this kind of policy. It’s sheer madness.”
I also agree with Julian Callow, the chief European economist for Barclays, when he talks about the wimpiness of the European Central Bank: “Europe is going about this the hard way. It’s not really using the central bank to alleviate these pressures in a dominant way.”
Once again, Germany is messing with the rest of Europe and with us. Obama has more to fear from the Germans than the Republicans.
*See “Austerity Reigns Over Euro Zone As Crisis Deepens,” by Nelson D. Schwartz, NYT