Europe Will Bring the World into Depression

The European economic situation is becoming a world problem. There seems to be no way the Euro can be saved. There will definitely be a flow-on effect to the world economy. Despite the new agreement, without the UK, nothing has really changed. The regulation and punishment for spending too much is too late for Greece, Spain, Portugal, Ireland and Italy. When these countries ultimately default, and they will, France and Germany will be drawn into Depression with them because their banks have continued to lend to these deficit countries.

There will be another problem in Europe that no one has highlighted. When unemployment gets too high in the struggling countries life will be unbearable. Labor is free to move across borders in the EC. Workers will move to where the work this. That is Germany and to a lesser extent France. Economic refugees will flood across the borders. The UK will not be exempt from this. For centuries England, Scotland and Wales have been destinations for workers from Ireland leaving due to lack and work and political problems. When Ireland defaults hundreds of thousands will move out.

Welfare systems in these "target" countries will be burdened to the extreme. Unemployment benefits will have to be reduced, per person, to cope. Lack of demand in Europe means lower production in the US and Asia. The future also looks bleak for Australia, the main provider of basic resources to China.

Going for a budget surplus in 2012 may be politically justified and the Australian Government may just make it in time for the next election with tough cutbacks. However, no matter which political party wins government it will have to go straight back to spending to keep the Australian economy moving with the sharp cutbacks forced on China by the failing world economy.
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