![\"\"](\"http:\/\/www.sdaconseil.com\/blog\/wp-content\/uploads\/2011\/10\/Storm.jpg\" "\\"Storm\\"")
<\/a><\/p>\nWe know it is going to be a long hard slug out of this financial crisis.\u00a0 Slow growth in Japan, Europe and USA will slow deleveraging for governments and consumers for years to come.\u00a0 Growth options are just limited.\u00a0\u00a0 Despite all the venerable intents to zoom in on exports, the reality is such that a good part of the export game has already been shifted to the emerging markets.\u00a0 And are they not keen to protect their exports:\u00a0 Their exchange rates have weakened from 3 to 10% against the US dollar since the beginning of the year (with the notable exception of China at +3.4%).\u00a0 \u00a0At best, the roadmap to sustained economic recovery will be a slow process.\u00a0 At worst, the forthcoming European debt crisis could derail and push it into a tailspin of economic damage.\u00a0<\/p>\n
The stakes are clearer and riskier than ever in Europe. \u00a0Three issues stand out. \u00a0First there is a solvency issue with Greece, a liquidity problem with Ireland, Portugal and to some extent Spain and Italy, and a banking crisis in the making.\u00a0 A frightening number was published by John Hancock last week: \u00a0today the total debt of the three largest banks in France reaches a staggering 250% of France’s GDP.\u00a0 The European Financial Stability Fund, with funds estimated at Euro 440 billion, will look rather insufficient to deal with this soup of solvency, liquidity and banking stress.\u00a0 Yet we know the cost of an extensive bail-out is a fraction of the cost of breaking up the Euro. Solving the bail-out issue remains the priority in the very short term. \u00a0Second, the true proportion of the gap between monetary union and loose fiscal policies, in part at the origin of this mess, is coming to light: large imbalances in labour costs, budget deficits, national debts and current accounts amongst European nations have been allowed to grow over time and are now threatening the very monetary union.\u00a0 Third, it is awfully painful for depressed countries to restore competitiveness.\u00a0 How far can austerity dig in, wages fall and jobs disappear without breaking a social contract in these countries?<\/p>\n
Thus the ideal package would fix 3 things:\u00a0<\/p>\n
1. The bail-out:\u00a0\u00a0 Currently short of reassuring financial markets<\/p>\n
2. Some sort of fiscal union in Europe: Currently under tortuous negotiations<\/p>\n
3. A roadmap to country competitiveness for depressed nations: \u00a0Which remains hard to sell.\u00a0\u00a0\u00a0\u00a0<\/p>\n
Under crucial time pressure, what can we possibly expect from European politicians to deliver? \u00a0At the minimum, failure to sort out the bail-out between sovereign debt and banks could deal a nasty blow to the world economy, or even create a tailspin:\u00a0 tipping the USA into a double-dip, slowing Asia and so on.\u00a0 Leaving the fiscal question untouched would condemn the European Union to an uncertain economic future.\u00a0 Leaving out the small troubled countries would tear off cohesion in the European project.\u00a0<\/p>\n
The words of Churchill resonate:\u00a0 ‘Want of foresight, unwillingness to act when action would be simple and effective, lack of clear thinking, confusion of counsel until the emergency comes, until self preservation strikes its jarring gong -these are features which constitute the endless repetition of history’.<\/p>\n
Europe is on the edge of biting a large bullet, with consequences ranging from a muddled economic mess to a full banking crisis.\u00a0<\/p>\n
A storm is approaching.\u00a0\u00a0 Hang on.<\/p>\n
Andr\u00e9 Du Sault.<\/p>\n","protected":false},"excerpt":{"rendered":"
10 October 2011 We know it is going to be a long hard slug out of this financial crisis.\u00a0 Slow growth in Japan, Europe and USA will slow deleveraging for governments and consumers for years to come.\u00a0 Growth options are just limited.\u00a0\u00a0 Despite all the venerable intents to zoom in on exports, the reality is […]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[1,8],"tags":[69,68,95],"_links":{"self":[{"href":"https:\/\/sdaconseil.com\/index.php?rest_route=\/wp\/v2\/posts\/211"}],"collection":[{"href":"https:\/\/sdaconseil.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/sdaconseil.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/sdaconseil.com\/index.php?rest_route=\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/sdaconseil.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=211"}],"version-history":[{"count":3,"href":"https:\/\/sdaconseil.com\/index.php?rest_route=\/wp\/v2\/posts\/211\/revisions"}],"predecessor-version":[{"id":215,"href":"https:\/\/sdaconseil.com\/index.php?rest_route=\/wp\/v2\/posts\/211\/revisions\/215"}],"wp:attachment":[{"href":"https:\/\/sdaconseil.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=211"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/sdaconseil.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=211"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/sdaconseil.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=211"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}