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Americans should praise Obama for holding the US economy at a stable rate given the European economic debacle.
to get re-elected at the time. Though he can't be too unhappy that the downfall he refused to face now comes in Hollande's watch.
Who today "proudly" presides over a 30 percent drop in mortgage loans, plans to raise various taxes and lower employer contributions to payroll taxes and pensions, and, oh mon dieu, scratch the sacred 35-hour work week.
2013 will be, for Hollande, the year of protests. He'll need to keep the people satisfied on the one hand and, as if that's not hard enough, on the other hand and at the same time keep the international debt markets at bay. The markets will tend to punish him for every inch he gives the workers and vice versa. Tell me again, why would anyone want a job like that? A job he only got in the first place because he promised the people none of that ugly stuff would happen in the first place
The other main French carmaker, Renault, is doing a "bit less bad" than Peugeot, primarily because it has larger stakes in international markets. But with Renault's profit per vehicle but a fraction of what for instance Audi, BMW and Daimler make per unit, something perhaps in the order of 10 percent, it's not hard to see where this leads. And Daimler too, even with its much better margins, has announced profit warnings.
Europe stands to lose tens of thousands of car industry jobs in the near future. The US does not. Perhaps at a later stage it will, but for now Obama has saved a lot of people from getting pink slips.
Beyond the car industry, European leaders don't look so hot either. British PM David Cameron is set for a fight with his own party over the UK contributions to the EU budget. He wants to freeze it, they want a substantial cut. The EU itself wants more money from its members. German Chancellor Angela Merkel faces a similar battle at home.
Greek PM Antonio Samaras has a very hard time getting the latest troika "reforms" accepted by his party and governing coalition, and serious questions are being asked about the constitutionality of for instance the pension cuts involved. The Lagarde List may hasten his downfall. Protests in Portugal are becoming increasingly desperate and violent, and pose a growing threat to PM Pedro Passos Coelho's grip on power. Spanish PM Mariano Rajoy will need to come up with more austerity, and them some more, over the next year, and at some point he will be booted out. Mario Monti's days in Italy are numbered. Holland's new and old PM Mark Rutte fights his own party over proposed steep rises in healthcare premiums. Wherever you look in Europe, deepening trouble lies ahead. This week's PMI numbers are once again terrible.
In almost every nook and cranny and at every step of the way, in Europe, political chaos looms just around the corner. And the troika just keeps on pushing its demands down people's throats. By this time next year, at the very least not many present leaders will still be in the saddle. If they don't go voluntarily, they will be forced out.
Watching Obama's leadership, or the way it was displayed if you will, in the ongoing aftermath of Sandy, the strength of which was underlined by Governor Christie and Mayor Bloomberg's reactions, I got to wonder which European leader would be capable of a similar feat if called upon. Couldn't come up with one, really. Merkel, perhaps. But only perhaps. The rest would be woefully out of their league.
Imagine Obama, in a pre-1776 setting but in the present US political climate, calling for closer ties among separate red and blue states, like a banking union, fiscal union etc., that would take away far-reaching powers from the separate states and hand them to Washington and Wall Street. That — absurd — image probably better explains the impossibility of what the IMF and EU leaders and incumbent politicians seek to accomplish today than any other can. Just as it best explains the proclivity for broad unrest, blood and war on the old continent.
When you compare the US and the EU at this point in time (and this point only), it's all too obvious who's doing better. Europe makes Obama look good. But that's not the whole story. Europe will also break Obama's career in his second term. It's not just in President Hollande's case that you may need to wonder why anyone would want that job.
All the plans to save Greece, Spain et al and keep them in the euro zone are still based on growth recovery prospects which are in turn based on entirely unrealistic assumptions. And every single turn of the way those assumptions have to be recalibrated downwards. Which always leads to more austerity demands, more cuts. And at some point that will no longer work. You can't cut beyond the bone. And obviously you can't grow an economy with 25 percent unemployment or with over 50 percent of your young people out of work.
The euro zone is about to fall to pieces. That will shake the global financial world to its core, including the US. There are estimates for countries that leave the currency union to see their GDP fall as much 40-50 percent in the first year. It's today all but certain that Greece needs a debt restructuring in which the EU and ECB will be forced to write off substantial parts of their holdings. For the incumbent politicians in the richer core countries that's about the last thing they want to explain back home. If only because they know full well that there's much more of that in the offing.
Europe should focus on a painless as can be transition to a situation in which the hardest hit countries can leave the eurozone and still remain friends. But it's still double or nothing all the way for the leadership, an increasingly dangerous kind of blindness. The longer they delay accepting this, the more devastating the explosion will become. And not just in Europe. It will expose the facade, the mirage that the world economy has become, where keeping up appearances has become possible only through mobster accounting standards and grand theft auto from coming generations.
When the euro zone explodes, so will the rest of the world economy. Including the US. Obama doesn't have to worry about NOT getting a second term; he should instead worry about getting it, and about what's going to happen on his watch in the next four years. If he lasts in office that long.
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