Economic Problems in Europe: A Canadian Perspective

The problems in economies of smaller European countries are serious and need more than band aid solutions currently being offered. Injection of cash from Germany and France, themselves carrying large debts, can tide these countries over but will they stay afloat? Many economists doubt it.

PIG countries Portugal, Ireland and Greece, are in trouble because the ‘investment’ from abroad that had been the source of astronomical growth in their economies till the meltdown has evaporated. The recession has caused massive unemployment and hardship among the population that had become used to easy life of well paid jobs in construction of hotels and apartments for tourists and towers for foreign corporations coming in to participate in the high growth rates. Not only is there an exodus of foreign businesses there are fewer tourists as well. The government revenues have plummeted just when the unemployment and demand for social services is at its peak. To ask for belt tightening by the already suffering populace in order to pay the bondholders may make the economic sense, it is suicide for a politician proposing it.

Before the adoption of Euro by the growing economies of relatively poorer countries, their currencies floated up and down depending on their economies. I may be wrong but I do think that if Greece still had its own currency today, the drachma would have sunk lower and interest payments would not be as onerous as they are in Euros. Lower currency would have attracted more tourists as well as encouraged exports and employment situation would not have been so bad. Lower currency would have also reduced the impact of debt and interest payments without ‘restructuring’ and the foreign banks would have taken a haircut without having to book the losses. While lower drachma may not have been a complete solution, it would have reduced the impact of recession, perhaps to a tolerable level.

Howsoever the current problem is handled; the solution will be temporary because the base of the economy in each country of Europe is different. The countries have their good and bad years at different times and need to use economic tools differently than those in a good phase. Two major tools are interest rates and the relative value of currency. By harmonizing both, Europe has taken away the flexibility the smaller economies need. With key policies set to suit large manufacturing economies of colder countries, smaller tourism based economies will continue to have unacceptable – to the citizens – periods of recession when they will need to receive the support from countries benefitting from a high Euro and the common economic policies or else they will drop out of Economic Union and muddle through on their own with their floating currencies and other economic policies to suit their situation.

Although not as serious, the situation in Canada is similar to that in Europe. The commodity based economies of Newfound Land, Alberta and Saskatchewan are prospering while manufacturing provinces like Ontario languish. Higher Loonie is a distinct disadvantage to Ontario businesses who also suffer the double whammy of higher energy prices. As an aside, if Quebec did not benefit from higher revenues from exports of electricity there would be more support for Bloc Quebecois in the forthcoming elections. The major difference between Canada and Europe is that the population is concentrated in the suffering regions in Canada and, unlike Europe, the Bank of Canada takes their interest in consideration when setting the economic policies.


Heard on the Weather Channel:

The snow will end in late June this winter and resume in early July in the next.

Poor Me!

I spent some of the Easter Sunday listening to Bach and Mahler on CBC. I enjoyed both but the question that is bothering me is this: Bach was a deeply religious man and one can understand him composing great Masses. But Mahler, by all accounts, was not religious and yet he wrote the wonderful Resurrection Symphony. Surely, there has to be more than technique in creating a great work of art; something rising from the depth of the soul. How can some doubter create work of such strong religious emotion?

One can look at the problem from a listener’s point of view too. Do you have to be deeply religious to really feel, yes feel as well as enjoy, the Mass and Requiem pieces of Bach, Mozart, Beethoven, Verdi and Brahms, Easter music from Parsifal or the final two movements of Resurrection? I enjoy these works but I do have a feeling that I am missing something by not being able to fully participate in the emotions represented by these works. Poor me!

Retirement Age and Life Expectancy

It is reported that the government of Alberta is trying to get retired people back to work. In this context, it may be interesting to note that till late nineteen nineties retirement age was less than the average life expectancy of the citizens of the country. The rising life expectancy caught up with the retirement age of 65 in 1995. Since then life expectancy has increased by one year every year and is now 74 while the retirement age is stuck at 65. The increasing discrepancy has serious implications not only for labour shortages but also in terms of tax revenues as well as the costs of pension plan benefits and medical care. The obvious remedy is to relate retirement to the life expectancy. If people worked to the age of 74 there would be no need to import short term workers, financial crisis in health care would disappear and most company pension plans would be solvent.