by Alan Thornhill
Glenn Stevens couldn’t be accused of cheating.
After all, the Reserve Bank Governor wouldn’t have had time to read Paul Krugman’s latest essay, in the New York Times, before he issued today’s statement, confirming that our interest rates will be kept on hold this month.
Yet the Governor’s views, on one critical matter, are remarkably similar to those of the Nobel Prize winning US economist.
That matter, of course, is Europe.
Mr Stevens is blunt about it.
“…Europe will remain a potential source of adverse shocks for some time,” he says
For his part, Mr Krugman talks of “…Europe’s still extremely dire economic situation.”
Mr Stevens noted first that: “financial markets have initially responded positively to signs of further progress towards longer-term sustainability in European financial affairs…”
Then he talks of the shocks.
Mr Krugman also has grave reservations about the likely long term effects of the EU fix, last week.
He notes that Angela Merkel, the apostle of austerity, did give “a little ground” agreeing to “both easier lending conditions for Italy and Spain” and a rescue plan for private banks that “might actually make some sense.”
“But these concessions remain tiny, compared with the scale of the problems,” Krugman warns.
The US economist then takes a big step beyond anything Mr Stevens had to say.
He says European authorities have yet to realise that their austerity programs won’t work.
“Part of the problem is the fact that German politicians have spent the past two years telling voters something that isn’t true,” Krugman says.
“Namely that the (European debt) crisis is all the fault of irresponsible governments in Southern Spain.”
Writing from Madrid, Krugman says Spain, which has attracted much attention recently, actually had low debt and budget surpluses on the eve of the crisis.
Its problems had arisen from a “vast housing bubble” that banks all across Europe – including Germany – had “helped to inflate.”
Alan Thornhill is a parliamentary press gallery journalist.
Private Briefing is updated daily with Australian personal finance news, analysis, and commentary.
Saturday May 25
The Dow Jones Index rose 8.60 points to 15,303.10
- Sharon Coulton on Proposed family tax benefit scrapped
- Pete on Rudd government had entered “paralysis:” Gillard
- Liam Knuj on The Prime Minister, Julia Gillard’s, New Year’s Message
- Change is for the better,change is where your heart grows stronger on Family Assistance boost
- Harry on The Prime Minister, Julia Gillard’s, New Year’s Message
|Aud To Usd||0.9651||N/A||N/A|
|Bhp Blt Fpo||34.360||-0.520||-1.49%|
|Nat. Bank Fpo||31.290||-0.410||-1.29%|
|Qbe Insur. Fpo||15.650||-0.580||-3.57%|
|Macq Group Fpo||42.560||-1.560||-3.54%|
The News This Week
- National food plan launched
- Shares – and the $A – tumble
- Farmers meet to map out a future
- Ford Australia to close
- What was Joe really saying?
- Slow payers squeeze business
- Paid parental leave? Look again
- What went wrong:Treasury chief explains
- Working smarter works:Swan
- More rate cuts possible
- Employers urge moderation in the national wage case
- The right man for the job? Wrong question!
- Small business:a warning
- Where’s Gonski now?
- Super:the political questions
- Airlines (62)
- Banking (2163)
- Business (2268)
- Communications (50)
- crime (12)
- Disaster (103)
- Economics (2233)
- Environment (100)
- Financial advice (2023)
- Health (81)
- Housing (622)
- Inflation (508)
- Insurance (90)
- Investment (1879)
- Markets (1641)
- Media (117)
- medical (20)
- mining (169)
- pay (70)
- Politics (2211)
- population (74)
- Regulation (917)
- retirement (64)
- Rural australia (100)
- Security (19)
- Social security (229)
- Superannuation (212)
- Tax (352)
- The latest (4)
- Trade (544)
- Uncategorized (334)