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Friday, January 17, 2014

EU Savings Meltdown

According to a report by the European parliament’s budgetary control committee, the euro and EU are under threat from a meltdown in the real value of savings brought about by the current loosening of monetary policy and an increase in inflation.

The Telegraph quotes the report:
As a consequence of the macro-economic assistance programmes and ECB lending operations, EU citizens face a meltdown of their life savings with interest rates being lower than 1pc … around the current inflation rate. 
This situation could potentially put the acceptance of the euro currency and the EU as a whole at risk."
All very well but the report rather misses the fundamental problems wrt the euro and the EU:

1 Austerity, based on monetarist dogma dictated by the ECB, has all but destroyed the Southern economies of the Eurozone.

2 The destruction of the Southern economies, as evidenced by the appalling levels of unemployment (especially amongst the young) and the imposition of draconian "solutions" by the troika, is a major threat to democracy.

3 The "raid" on Cypriot banks, at the behest of the ECB, destroyed people's faith in the banking system in the Eurozone and will act as a major discouragement to saving.

In effect the seeds of destruction of the euro and EU are many fold, and cannot be blamed merely on the recent belated loosening of monetary policy.

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