European Commissioner Joaquin Almunia said last week that the EU does not need to take more measures against the recession, the greatest economic crisis since the Great Depression of 1929. Then he added that the policies financed so far to support job creation are enough so that unemployment levels won’t become long term or structural.  What the Commissioner said gives us a good idea of what he wanted to say, but he did not dare to put it directly. He obviously meant that the EU will not spend more money or make plans to support the labour market. It would have been absurd, and the public opinion in the 27 EU countries could have exploded had Almunia said this directly, the more so because the Commissioner plainly explained only minutes later, that it’s the banks which  need more support, and he also alleged that European banks need more capital than their American counterparts. As Almunia put it, the banks are the weak part that needs support and not the millions of the unemployed European Citizens. This is contemporary politics.
Let us take one thing at a time. First, we have the allegation by the Commissioner that the EU has done enough against the dreadful prospect that the present or probably higher levels of unemployment will not become structural. How on earth does he know that? Where did he find that effective demand for German exports will return to its 2007 level? Until now, we all knew for sure that the German economy lost approximately 10 percent off its GDP, and this due to a dive in exports. If the German economy is to return to its 2007 levels of production and employment, it has to start growing with very strong percentages to cover the double digit losses. Most everybody knows that this is not going to happen within the next two years. If this is so, two years is enough time for the present unemployment levels to become structural, and then nobody can tell if Germany will be able in the foreseeable future to again assume production levels that will guarantee the employment levels of 2007. Presumably, Mr. Almunia is either wrong or he does not want to say what he really knows and thinks.
Why does the good Commissioner act like this? The answer comes with his next remark. He said that “the European banks need more capital than their American counterparts.” This is something really new. Until now, we knew that the European banking system is in better shape than US credit firms. Indirectly, Almunia now said that the European commercial banks will need more central bank and state monies in order to recapitalise adequately which makes it obvious why there won’t be any money or public resources left to support employment. This also explains why the competent commissioner for the European economy says that there is no need for more job creating policies. Simply, there is no public money left for this. The banks took it all.
Coming now to the wider world, the OECD made public last week its estimate on the losses due to the crisis and found that its member states’ economies shrank by 4.2 percent during the brief period of the first quarter this year. Mathematically, if these losses are to be recovered soon, the OECD economic area should star growing soon by the same percentage. But such a prospect is completely unreal. Why then are central bankers saying that we are approaching the end of the crisis?
They are just helping themselves and fellow banks and the stock exchanges to again attract private savings to recapitalise. If, however, the real economy does not soon resume its activities, the balloon will burst, creating a much worse crisis than the present one. As things stand now, it is clear that some people play with fire. Our prediction is that the world will not soon start to consume and invest as it did until 2007, and the next crisis is nearer than many people think.