September 24, 2011
Bad news about the euro area now streams from all directions. European finance ministers flunked hard decisions on combating the debt crisis at a meeting in the Polish city of Wroclaw on September 16th and 17th and instead floated the irrelevant idea of a tax on financial transactions. Italy’s credit rating was downgraded this week by Standard & Poor’s (S&P).
In Athens, the Greek government and the troika of international institutions overseeing its austerity programme have been sparring over what else Greece needs to do to get its next, €8 billion ($11 billion) tranche of bail-out funds. Evangelos Venizelos, the Greek finance minister, complained that Greece was being “blackmailed and humiliated”, although it has little choice but to knuckle down: on September 21st, it announced measures to raise taxes, speed up public-sector lay-offs and cut some pensions. A decision on the money is expected in October.
Another current of gloom, slower-moving than the debt crisis but just as ominous, is also in full flow. The outlook for the euro-area economy is deteriorating fast, which augurs ill for attempts to wrest the finances of indebted countries under control. At best there will be a wrenching slowdown; at worst, a relapse into recession.
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