2 Key Numbers in Euro Crisis
01/13/2012 6:30 am EST
In the coming weeks, these two numbers will be give us a good reading on the challenges facing Europe, says Moneyshow’s Jim Jubak.
If you want just two numbers that sum up the real underlying challenges in the Euro crisis: the unemployment numbers from Germany and Spain.
This is for December…the unemployment rate in Germany right now is 6.8%—certainly lower than it is in the United States, globally extremely low given that we’re seeing the slowdown in many economies around the world. The German economy continues to kick over, unemployment is not a huge problem. The German economy in fact looks pretty good.
The unemployment rate in Spain, however, in December was 23%. Spain has a really slow economy. You have people that haven’t had jobs for a long time, and with the austerity programs kicking in at the national and probably soon the regional levels, it’s hard to see how that gets reduced.
So if you look at this and go OK, the plan to fix this right now is austerity, which would really…it seems to me that more people are out of work in Spain than in Germany, where they’re not going to have austerity programs. So you’re going to see this discrepancy, this distance, between the two economies expand.
This is not just Germany and Spain; it’s Italy and Austria. It’s the core of Northern European economies that are doing relatively well against the peripheral economies. I don’t mean peripheral just in the sense of Portugal—I mean Spain, Italy, France. French unemployment is now about 10% and growing.
The question is really how you fix this problem. Is this something you can do with a single currency? How do you get the Spanish economy growing faster if all you’re doing is cutting deficits? There really doesn’t seem to be any answer that has been put forward by anybody in charge of the process in Europe to address this.
So you’ve got two parts of the Eurozone that are growing at very different rates and where the difference between those growth rates is increasing. This isn’t a formula for an easy fix, it isn’t a formula for austerity fixing it.
It’s indeed a situation that needs something entirely new that hasn’t been put on the table. But this is not a crisis which has produced a lot of original thinking.