As the economic turmoil in Europe is enduring, Dukascopy is seeking the reasons for the current debt crunch. We have interviewed the experts who have investigated the issue for a while and are willing to share their point of view.
Professor G. Grant Amyot, Professor of Economics and Political Economy at Queen's University, Canada, is providing his opinion on the recent news from troubled Italy, while Professor Ricardo Cabral, Assistant Professor, Center of Competence for Social Sciences, University of Madeira, is looking at the roots of the sovereign debt crisis.
G. Grant Amyot:
"My guess about the current situation in Italy with the Prime Minister's replacement in favour of experienced Mario Montiand is the following: I believe that he will be allowed to introduce both austerity and growth measures. I mean that he is intelligent enough to realize that surely the austerity measures can kill Italy as it is a weakening economy which is already looking like it is going into recession. But I think he will be given a few months to implement a platform that will satisfy the European Union and at the same time try to stimulate the economic growth. I consider him knowledgeable enough to steer his way through and negotiate measures which can be supported in parliament.
Nevertheless, I am not sure that Mario Monti will last till the May 2013 elections. I think the danger is likely to
come from Berlusconi's party; at some point it may decide to withdraw its support in parliament from him. But
I don't think that they would have the nerve to do it right away, they have to let him work for a few months."
Ricardo Cabral:
"Europe is in an economic turmoil because of governance problems. I consider that the structure of governance in Europe is non-functional. Essentially the governance institutions are claiming that the difficulties are up surging in periphery countries, namely Portugal, Spain, Greece, Ireland, etc. which made the mistakes and now they have to be bailed-out by the other Eurozone members. But these indebted countries have been directed by the policies proposed by the EU governing institutions through a stability growth pact. However, the stability growth pact concentrated solely on the budget deficits, it did not focus on net borrowing requirements, such as also private deficits, and so the economic and monetary union in my view created these imbalances within the Eurozone.
These days politicians do not insist on remaining on this course which has driven us to the troubling point and think that if they just push harder it will work. It did not work in the past and if they keep going that road it will result a very big recession in the EU and it will be probable that EU will disintegrate.
I have made an analysis of this particular matter. It is not just the countries from the periphery that have a problem, there are about 12 -13 countries in the European Union which have imbalances. So what the European Union is doing is addressing the matter by taking country by country and destroying the economies of these countries. The EU is creating unprecedented destruction of private sector economic activities of these countries."