What began with worries about the solvency of Greece in the face of high deficits, fake budget figures and low growth has quickly become the most severe test of the 16-nation euro zone in its 11-year history.
Anxieties about the health of the euro, which have spread from Greece to Portugal, Spain and Italy, are not simply a crisis of debts, rating agencies and volatile markets. The issue has at its heart elements of a political crisis, because it goes to the central dilemma of the European Union: the continuing grip of individual states over economic and fiscal policy, which makes it difficult for the union as a whole to exercise the political leadership needed to deal effectively with a crisis.
A policy of muddling through may be comfortable in political terms, but experts warn it can have dire economic consequences. Jean-Paul Fitoussi, professor of economics at the Institute of Political Studies in Paris, said that European leaders had “handled this crisis very badly,” feeding market speculation and greed.
Financial risk is still a major concern for executives these days. The continuous economic crisis is a big threat to many large corporations. For one, the many defective and harmful products, worker abuse, and numerous bankruptcies past and pending – Eastman Kodak and US Airways are both heading there – and the largest financial institutions can’t manage money at all, needing basically what amounts to payday loans from the public. Apparently, even Harvard MBA programs can’t keep people from being incompetent. I’m starting to think bonuses don’t reward a good performance – it’s a reward for not screwing the pooch entirely. There’s still hope that we can overcome this problem, but it will take time and needs enough effort to achieve.
I imagine England’s feeling pretty good right now in their decision not to join the Euro.
Here is the key: [b]”fake budget figures”.[/b]
This key applies to both government and corporations in Greece and [i]around the Globe[/i].
The [b]rule of law is [i]essential[/i][/b] for business. It is more important than currency values, labor relations, or access to resources. Business must have confidence that the law, or rules of the game, are being followed without constant dramatic changes. Corruption and political volatility undercut the stability required to plan investment. How can someone develop a business model if the figures and projections are all based on a lie (fake budget figures) or if corruption (that destroys profit margins) is tolerated? They can’t!
This applies on the personal level as well as the corporate level. People will not invest if they do not believe that the balance sheet figures are true or at least close to true. Here in the US, since Enron, folks do not have much confidence in corporations telling them the truth. As for trust in government, the “off book” accounting of the Bush administration led everyone to question the veracity of the rosy economic picture being touted. The Obama administration seems to be following suit with wildly inaccurate economic projections and in some cases (like reporting on jobs allegedly created by massive amounts of tax dollars being thrown up in the air without a plan) what appears to be deliberate deceit.
In the background, like a ticking time-bomb, are the derivatives…Trillions upon Trillions of dollars worth of derivatives (that form a de facto currency) that have nothing to back them (no reserves or even “full faith and confidence”), capable of destroying the entire Bretton Woods currency scheme, and remaining unregulated. They are not under the rule of law. They are the ultimate [b]”fake budget figures”.[/b]