some prediction of the breakdown of euroTim Worstall: Interesting Numbers.

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Interesting Numbers.

Some are beginning to predict the breakdown of the whole Euro project:

Italy is in much the same mess as Argentina in the last throes of its disastrous dollar-peg and faces a "horrible martyrdom" as long as it remains inside the eurozone, according to a market report issued yesterday.

Banque AIG, the financial wing of the US insurance giant, said Italy needed a 20pc devaluation to prevent a slump and a "horrendous" explosion of public debt. The warning came as fresh data from Portugal and Italy point to the worst budget deficits since the launch of the euro.

Portugal's central bank has revealed that the country's deficit was likely to reach 7pc in 2005, far higher than earlier estimates. Lisbon is mulling "Draconian" cuts that risk driving the debt-laden economy into deep recession. Rome's REF research institute forecasts an Italian deficit of 5.7pc next year, smashing the EU's 3pc limit.

Although I live in Portugal I don’t really take part in the economy here, only as a consumer. One thing that we have noted is that the property market came to a complete halt a couple of years back. Despite nearly free money (interest rates are below inflation) those several friends who worked in property sales have all quit. There just aren’t that many sales going through. Just about the only thing that is happening is foreigners buying in and there aren’t that many of those, Portugal being so much more expensive than Spain. That’s not an overview of the completeeconomy, of course, just an indication of how cocked it is. I mean, really, 7% deficit? Sheesh.

May 20, 2005 in European Union | Permalink