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France downgraded, trouble looming

November 8th, 2013 · No Comments

It is an elemental misjudgement. Yes, there may be small countries where this applies. They can hope to export their way out of trouble, if they have a high enough trade gearing. They may be able to overcome the debt deflation shock if their debt levels are low enough. If not, they can go to the IMF for a package of reform cushioned by debt relief, devaluation, and cheap IMF bridging loans.None of this applies in southern Europe or to the quasi-EMU states in trouble in central Europe and the Balkans. If a region holding 300 million people tries to retrench at once, it causes a self-feeding downward slide for the whole system. That is exactly what we are seeing.

via France downgraded, trouble looming.

Tags: France