There has been more bad news out of Europe today. On top of the downgrades of several eurozone countries and the EFSF bailout fund, Germany today announced that it has lowered its growth forecasts for 2012 from 1% to 0.7%. Throughout the euro crisis Germany has been central to the bailouts of struggling countries, contributing a huge amount to the recently downgraded EFSF. Economic recovery in Europe is not possible without an economically stable and strong Germany. While this would be very worrying in isolation, the World Bank today announced that it has cut global economic growth forecast from 3.6% for both 2012 and 2013, to 2.5% in 2012 and 3.1% in 2013. While there is some hope of a more relaxed monetary policy for Europe in the future, this is only because of China’s slow economic growth, something that should not be welcomed in the long term.
While there are serious economic concerns in Europe the continent is also facing domestic political upheaval. The unelected Greek government is failing to implement needed austerity measures, Italy’s technocratic government is making too few changes too late, and the patience of the German people is being tried. There is only so long that Germans will put up with contributing to the clean up of their neighbor’s mess, and we could soon see domestic German politics reflect this growing attitude.
While the continual downgrade of European countries and the slowing growth of China are out of the responsibility or remit of any American politician, the GOP should take note. The sovereign debt crisis in Europe is our future if serious measures are not taken to adapt an aggressive and serious fiscal policy that tackles spending and government growth. Unfortunately the only candidate who understands the severity of the situation and is advocating such measures is alienated by the GOP because of his pro-peace, pro-trade and pro-diplomacy foreign policy.