The Tragedy of the Euro author Philipp Bagus — also coauthor of Deep Freeze: Iceland’s Economic Collapse and currently an Assistant Professor of Economics at Rey Juan Carlos university in Madrid — and GoldMoney’s Alasdair Macleod talk about the profound implications that recent European elections will have on the eurozone’s debt crisis.
They begin with an overview of Spain’s current economic state. As a resident of Spain, Bagus expresses concern with the Spanish government’s decision to increase taxes rather than cutting spending. Although Madrid is aware of the need to free the private sector and encourage entrepreneurship, they live in fear of tackling the vested interests that support big government.
Both Bagus and Macleod agree that since Francois Hollande’s election in France, the French government has been moving in the wrong direction, to the point of almost reversing the tentative reforms put in place by Hollande’s predecessor, Nicolas Sarkozy. The traditional European Union alliance between France and Germany is being stretched to breaking point, and France is at serious risk of facing its own Greek-style crisis — a true nightmare scenario for the EU.
Bagus and Macleod also discuss the effect next years German elections will have on Chancellor Merkel’s method of protecting Germany from falling deeper into recession. Bailing out the rest of Europe would cost Germany more than double its existing public debt. Along with Luxembourg, Holland and Finland, political pressure in Germany to leave the eurozone will grow, which could encourage breakaway movements in other countries.
This podcast was recorded on 24 July 2012.