THE LOOMING STORM: While governments and the media are trying to convince the greater public that the crisis has finally come to an end, objective analysis of the data, suggest that current economic and political difficulties are just the beginning

Western central banks are flooding the commercial banks with money, though without any effect on global growth – since the excess liquidity is poured into the stock markets, dangerously increasing the size of the «bubble». To be more precise, commercial banks, instead of using the money they receive to lend to businesses and help the economy grow, are using the funds to invest in the stock markets.


Moving on, China’s increase in exports amounted only to 2.9% in November, compared with a predicted 9% – a problematic report for the global economy, since the country’s exports constitute 25% of its GDP.


China’s efforts to develop its domestic market, so that it would depend less on exports, have fallen flat – resulting in the creation of an enormous «bubble» in its real estate sector, mainly due to the excessive «funding» of the banking sector through constant injections of liquidity packages.


On the other side Ireland, despite the fact that it presents the highest growth rate within the Euro-zone, it is nevertheless unable to escape the crisis – with its major problem being unemployment (31% of its households have at least one unemployed member).


At the same time, underemployment levels in Ireland are at 23% – the highest rate in the EU, followed by the UK (13%), Belgium (13%) and Germany (11%), with Greece being in a much better position (8%). Underemployment is an equally big problem with unemployment. Many countries are using underemployment in order to keep unemployment levels «artificially» low, presenting an image much better than the actual one.


In Italy now, industrial production is literally crumbling, with data implying a recession of 2.3% in 2012. The spending cuts and tax increases, austerity policies passed by the country’s government, had negative effects on demand and GDP – similar to what happened in Greece.


In this context, the Prime Minister’s resignation is considered «suspicious» by the markets – which assume that most probably he seeks to escape his current position, in order to avoid being accused for the predicted collapse of the country (a collapse that would have disastrous effect on the Euro-zone).




The sick man of Europe though is quiet certainly the United Kingdom – the budget deficit of which (7.7%) is among the largest in the West, while the total assets of it’s the banking sector approximate 10.2 Trillion Dollars or almost five times the country’s GDP (when total assets of the banking sector of the EU are 47.3 Trillion Dollars or 366% {3.5 times of its GDP} in 2012, compared to 78% in the US, and 174% in Japan). It should be noted here, that high levels of total assets in a country’s banking sector, indicate a high possibility of a default.


The country is believed to assume additional debt of around 250 Billion Euros over the next four years – which means that, including past incurred debt it needs to amortize, it must also sell new bonds worth 150 Billion Euros (amounts extremely difficult to be found, without a collapse of the pound and/or without the danger of a default, in the absence of foreign exchange).

At the same time, the current account balance of Great Britain remains in deficit, even in transactions made with some of the developing countries – while the country’s industrial production continues to shrink. Of course the British government refuses to even discuss the recapitalization of its banks – which are literally flooded with bad debts (10% of businesses are unable to pay off their debts – kept artificially alive by the banks, in order to avoid debt write-offs in their balance sheets).


The governor of Britain’s central bank, who realizes this huge problem, is also making references on global dangers of the upcoming currency war – where more and more countries are trying to maintain a low currency exchange rate, in order to solve their problems «mercantilistic-ly»


These references are being empathized first and foremost by Brazil, which struggles to keep the value of its currency as low as possible – since its current levels are driving exports down. Russia is also among those countries that have entered the currency war, to which a global recession would create huge problems – since the prices of raw materials and energy would fall, products on which it depends almost entirely.


So the clouds are thickening above the planet, amid a Utopian optimism caused by rising stock values worldwide – a situation that indicates that it won’t be long before the «Perfect Storm» will break out, one that will be even more catastrophic, the longer it is being artificially delayed.


In this context, it is reasonable to assume that Greece has the smallest of problems compared to many other countries – problems that are being exaggerated, so as to drag away attention from countries that face much bigger ones. That is to say that Greece is not the «weakest link/ring», but the «foolish ring» – with whatever this implies for its political leadership and the future of the country.


Finally, it is hard to understand why no Greek government until today, despite the fact that the issue has been raised many times in the past, has not made the drafting of a national balance sheet – which would not only cover public debts, but also public property.


A practice currently needed, since massive privatizations of the country’s public property have been planned, with sale prices touching record lows, amid a general collapse of values due to the recession. What most certainly lies behind the absence of political action towards this direction is corruption. Corruption of Greece’s current leadership, that tries to cover up its personal incompetence.


Athens, 02.02.2013

Date of original: 11.11.2012

Translation of original: Dennis Viliardos


    Vassilis Viliardos is an Economist and an Author of several books on the Greek economic crisis. He has earned his Economics degree in ASOEE (Greek University of Economics) and in Hamburg, Germany.  He lives in Athens, Greece.

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