Geithner, the tax dodger, always there with advise?
“Greece’s debt situation is as unsustainable as ever; so is Portugal’s; so is the European banking sector’s and so is Spain’s,” the influential Financial Times commentator Wolfgang Munchau wrote Monday. “The worst, I fear, is yet to come.”
Southern Europe’s moribund growth is rooted in the long-term decline of competitiveness in countries like Italy, Spain and Portugal. Reforms to free up labor markets, cut business costs and slash red tape could pay off in the long term. But right now, austerity measures to bring budgets down are compounding the no-growth problem.
Greece’s economy is set to contract for the fifth successive year with a 4.4 percent drop in 2012. Portugal’s will drop by 3 percent, Italy’s by 1.3 percent and Spain’s by 1 percent.
US Treasury Secretary Timothy Geithner on Tuesday praised efforts by southern European governments to get their finances in order, but warned they also needed to stimulate growth to prevent a prolonged recession that will keep them mired in debt.
“Reforms will take time and they will not work without financial support,” Geithner told lawmakers in Washington. Without stimulus, he cautioned that Europe could sink into “a self-reinforcing negative spiral of growth-killing austerity.”