The Globe and Mail reports today that, “Many observers have suggested that a break-up of the euro zone would be near-impossible. But strategists at UBS AG don’t think it’s all that far-fetched as Europe’s debt crisis moves into ‘a worrisome new phase’. Greece is still ‘a clear candidate’ for a debt restructuring, Portugal and Spain are potential candidates for trouble, and the contagion could spread to Belgium, Italy and France, analyst Thomas Wacker and Dirk Faltin write in a lengthy report on the dysfunction that is the 17-member monetary union.”
The euro zone is the economic and monetary union (EMU) of 17 European Union member states that have adopted the euro as their sole legal tender. It consists of Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia and Spain. Seven more EU countries are obliged to join the euro zone once they have fulfilled the entry criteria. UBS AG is a global financial services firm which provides investment banking, asset management and wealth management services for private, corporate and institutional clients worldwide.
“The UBS strategists…believe the European Central Bank will intervene further, and may even bring in new measures… The European crisis is more complex than others of the past, they wrote, because its roots are in the common currency itself, which came into being with the European Economic and Monetary Union, or EMU. …While monetary unions can work, the euro zone’s mechanisms for success – free movement of labour and a flexible price and wage system – aren’t up to snuff. …Key reforms, notably co-ordination of fiscal policy and transfer payments from the haves to the have-nots, are crucial.”
“Economists at BMO Nesbitt Burns believe the debt concerns will continue to dog Europe in the next several months, which will see continued volatility in the currency.”
This past July, CAW economist Jim Stanford wrote in the Globe and Mail that, “A truly mutual economic partnership with Europe would be great – one where they buy as much from us as they sell to us, and good stuff, too, not just resources. But a free-trade agreement (like the Canada-EU Comprehensive Economic and Trade Agreement) won’t do that. Meantime, we’ll be dragged down by Europe’s coming funk, which will easily last a decade. …In case our negotiators haven’t noticed, Europe is sinking under the weight of recession, debt and profound institutional failure. Is this really the best time to jump on board that particular ship? …Better to take a pass on this one, and negotiate a better deal with the Europeans somewhere down the road, once they’re back on their feet.”
His commentary on Canada’s $15-billion trade deficit with the European Union (which CETA would worsen), the sinking euro, the deflation expected in Europe, and the failings of Europe’s central bank, can be read at http://www.theglobeandmail.com/news/opinions/canada-eu-trade-talks-jumping-from-one-sinking-ship-to-another/article1634950/.
In October, Stanford wrote that if existing tariffs were eliminated under CETA, Canada would lose at least 28,000 jobs, most of them in manufacturing. The Globe and Mail reported, “The worst-case scenario is the elimination of tariffs, plus the Canadian dollar maintaining the 18-per-cent appreciation in value against the euro it has averaged this year compared with where the currencies were trading when negotiations on a deal were announced in March, 2009. Under those assumptions, a Canada-EU free trade agreement vaporizes more than 152,000 jobs.” More on that at http://canadians.org/campaignblog/?p=5110.
The Globe and Mail’s Campbell Clark reported this past Thursday that, “Canada’s foreign-policy priorities for 2011 seem strangely focused on our fading friends and allies, rather than rising powers… If all goes according to Stephen Harper’s plan, a ‘perimeter-security’ deal with the United States and a free-trade agreement with the European Union will bookend 2011. …By the end of the year, Canada hopes to complete a free-trade deal with the EU, giving European firms access to provincial and municipal government contracts in exchange for freer access to bigger European markets, particularly in services. It’s necessary to try to ensure access to existing markets, but (Yuen Pau Woo of the Asia Pacific Foundation of Canada) finds it strange to hear Trade Minister Peter Van Loan call the EU deal his biggest priority. The EU, after all, has economic problems and much slower growth prospects than Asia.”
