Saxo Bank (Saxo Bank)
Markets  |  November 22, 2012 10:47:01

Failure to address the debt crisis may lead to the radicalization of society - knows about it, but ignores it


S ocial tension escalates. Youth in crisis countries are beginning to be known as the "lost generation". The company is beginning to radicalize. What should be done?

We were surprised at how little impact on the policies should be riots in Greece, Portugal and Spain. But this is finally a Eurozone is considering direct transfers to Greece.

Politicians finally realized that social tensions may prevail over much-needed reforms and the consolidation of the public finances for mobilizing voters. Recall that a group of people demonstrating across Europe are no longer "just" trade unionists and employees of the state administration. It's a national problem in many countries. A whole generation of young people in troubled countries can be described as the "lost" because of all the frustration associated with low levels of productivity, innovation and thus their weak outlook for a happy life.

Table: Unemployment among people younger than 25 years

Source: www.zerohedge.com

We have reached the point of saturation. Nothing lasts forever. Everything has its limits. As the policy of printing money (quantitative easing), lack of voter mobility, delaying unpopular steps, lack of accountability of politicians and the social acceptance of the fact that austere and simple monetary policy will change the foundations of the present bad economy.

What will happen next? One of the following two options:

Radicalization - fascism and communism

If politicians will ignore the call for change, so voters zradikalizují and move politically to the extreme right or the extreme left. We consider the horrific predictions for 2013, which includes a serious return to Communism in Eastern Europe and in some countries of southern Europe. Voters in Greece have favored neo-Nazi Golden Dawn and Italy could be the next prime minister Beppe Grillo populist movement of five stars.

  In times of crisis people tend to extremes and are now experiencing a full-fledged crisis - banking, economic, political and social. In fact, they can be much less, which is probably a good thing.

Social tensions as an impetus for policy - can mean big losses

If politicians begin to express the need to change, it will lead to large impacts on the economy. Let's not forget that if governments want to reduce social tensions doing nothing, they will have to accept the loss of the forfeited guarantees and loans to Greece.

It does not pass so easily in Germany, where 50% debt and guarantees represent a loss of 17.5 billion euros - that would blended with Germany's plans to reach a target of a balanced budget in 2014.

In addition, if one or two countries get relief - as concerns the extension of the implementation of the reforms and the nominal interest rate reduction - the IMF, ECB and European governments will have to suffer substantial losses for them and for national budgets. Several states also will have increased costs because of the need to go to the market to borrow at higher interest than subsidized interest rate for Greece.

Acceptance of loss would be a major step for Europe. "Nationalized" We debts and their burden. Now we need to democratize loss, save what is left of Europe, and probably stop the political shift to extremes.

Tackling unemployment and social tensions could be a new major policy priority, but it will take a large amount of money from the taxpayers, responsible mainly from Nordic countries.

Steen Jakobsen, chief economist at Saxo Bank

 Globální online investiční banka

Saxo Bank je globální investiční banka specializující se na online obchodování a investice na mezinárodních finančních trzích. Saxo Bank umožňuje soukromým investorům a institucionálním klientům obchodovat s FX, CFD, cennými papíry, futures, opcemi a dalšími deriváty a poskytuje i profesionální správu portfolia a fondů díky svým online obchodním platformám oceněným řadou různých ocenění.

Více informací na: www.saxobank.cz

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