Blogs & Comment

More eurozone turbulence on the way?

Stephen Gordon writes in the Worthwhile Canadian Initiative blogthat the eurozone pain is mainly in Spain. It turns out that Spanish employment accounts for about 42% of total eurozone job losses since the peak in the third quarter of 2008, even though Spain has just 14% of the eurozones population. Spanish policy makers must be really, really sorry they adopted the euro, concludes Gordon.
By comparison, Gordon notes, unemployment across the states in the U.S. tends to be much less widely dispersed. Similar to the theme that I have been expounding upon(its good to have company), he adds:
Much of the difference [in the dispersion of unemployment within the U.S. and EU] must be attributed to the fact that the United States has a federal government that can transfer tax revenues generated in Texas to finance spending in California. If the euro had been designed properly, German tax revenues would now be propping up Spanish aggregate demand. Instead, Germany is embarking on a program of austerity.
Its glaring and unaddressed disparities such as Spanish unemployment that leave one wondering if the current calm on the euro front is just the one before the storm. We could be in Simon Schamas Act I, when the shock of a crisis initially triggers fearful disorientation but not the organized mobilization of outrage . an incoming regime riding the storm gets a fleeting moment to try to contain calamity.
But then Act II comes. Objectively, economic conditions might be improving, but perceptions are everything and a breathing space gives room for a dangerously alienated public to take stock of the brutal interruption of their rising expectations . The full impact sinks in and engenders a sense of grievance. In short, as Schama suggests, there is often a lag between an economic shock and the expression ofcollective rage that can lead to the collapse of the status quo.