Good buy crisis, Hello unrest...

European leaders declared a victory over the debt crisis and now will start thinking of improving the economy. At the same moment on the streets of Athens the "first shot" was fired. Yes, it is real - today an assault rifle fire happened in Athens, and the target was the headquarters of the main ruling party - New Democracy, including the office of the leader (and currently prime-minister) Antonis Samaras. No casualties, police said. The blame of this terrorist act lays on leftish anarchists.

Generally it is funny when we hear European politicians saying that the financial crisis is over and now they will focus on real economy. It is funny to say the crisis is going away, at a moment when it transforms to first levels of civil unrest and disorder. Yea, they are right. It is no more a crisis. It is a civil war...

All this looks like an attempt for a verbal influence on investors and on crisis itself as in fact European politicians proved that they can do nothing else than to talk. In fact the crisis is not over, because even lowered, the interest rates of key European bonds are still a serious burden for the respective country budgets. The fact that months ago the interests were higher does not mean that now they are low. In fact, the overall debt of troubled countries is so high that any interest above 2% is a problem. Even Germany will have problems if its interests jump to 4 or 5%.

In addition to this we must not forget that current lowering is a temporary occurrence, and interests can very fast go up again. In fact in EU economy nothing serious is changed, no real reform is implemented. The only change is accelerating the money-print from ECB, that in a short time is helping to lower the interest rates, at the cost of higher inflation. But to be resolved the real crisis, it is needed government budgets to become balanced, the debt to start going down nominally, or at least - as a portion of GDP, and a real GDP growth to appear, along with lowering the unemployment.

Nothing of this has happened. We just have a printing of Euros, lending it to banks and these banks - under political pressure - buying bonds.

At the same time the real economy has totally crashed. The unemployment in some countries (Greece, Spain) is above 25%, with youth unemployment around 50%. And the business is continuing to flee as general business environment is still extremely leftish and aggressive toward any fool that decides to hire people.

In Arab world (for instance - Algeria) the large number of jobless youths makes much of them radical and inspires the terrorism. There is an interesting word for this - "a wall supporter". I.e. a young man that has nothing to do than to lean against a wall, talk and think about aggression. Having high youth unemployment EU can follow this model. Obviously finding a "Kalashnikov" (AK-47) is not so difficult, as Greek terrorists showed today.

When I hear that EU politics have resolved the debt crisis and now they will focus on economy, I am becoming frightened. It is a real danger for all of us. EU politicians are very stupid and very left-minded to find a real solution. The only thing they are doing is to worsen the situation. All they propose are left reforms and government spending in an attempt to "stimulate" the economy. The result is exactly the opposite. And this is normal and expected to be so, because growth needs hardworking and entrepreneurism, and not political talking and abstract stimulus financed by the taxes of the same these hardworking and entrepreneurial people. The growth needs less laws and less regulation. And not more laws and more regulation and intervention in economy, that we are seeing now...

The crisis is not over. It is becoming bigger and bigger. Printing money is not a solution. It is another problem. The crisis can not be over, while we are being governed by blind politicians. And even the fact that they are dividing the finances and debt from the real economy, demonstrates how funny are these people. You can not resolve the debt crisis and then start reforming the economy. Finances and debt are a part of economy. Everything is connected in one common system and must be reformed together. As nothing is reformed, so the roots of the crisis are still here. And it is a question of time we see the next type of manifestation of the same crisis. May be it will be Cyprus, may be it will be post-election Italy. May be it will be the already partially bankrupted Spain. And one day - the socialist France with no millionaires left in. The Socialism in EU is not stepping back. It is even gaining ground. So more and more interesting times are ahead...

Dobri
Jan 14th 2013

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