The Next Global Crisis: Public Finance
After 2008’s banking crisis, the recession in 2009, perhaps the next phase of global economic turmoil will come from public finances. The problem is especially acute in top-heavy Europe.
Budget deficits, the depreciation of the Euro currency and high unemployment rates make the public finance situation in Europe especially difficult to control. “Spain recently had its rating downgraded by moody’s rating agency and Greece was downgraded deeper into junk status. Whilst perhaps the best approach would be that of a discriminating view on the continent, the complication is the use of a common currency. This takes away the flexibility in terms of what can be done to address some of the problems. Because of the use of the Euro as the common currency, the countries can no longer finance by printing money for instance or devaluing their currencies for competitiveness purposes.”
