Europe: inter-locking problems

World markets have continued to slide, partly on the negative view of the eurozone proposals to deal with the sovereign debt issue, but also on the fear that the world economy is sinking into recession. The OECD report today is depressing.

http://www.bbc.co.uk/news/business-15528949

Resentment and fear are stalking Europe.

Underpinning much of the resentment is the feeling that the eurozone crisis is the fault of Germany in that it in effect has a veto on the actions of the European Central Bank. Germany is ensuring that the ECH cannot engage in quantitative easing or issue euro-bonds.  the ECB is criticised as its interest rate and exchange rate policy gives the impression of being geared to the needs of Germany.  For their part, the Germans claim they have no desire to rule Europe economically.  See:

http://www.spiegel.de/international/europe/0,1518,794970,00.html

Quite apart from the problem of having a prime minister who is a laughing stock, there are underlying concerns about the fragility of Italian society, as well as the cost of selling sovereign bonds.  Three interesting articles:

http://www.telegraph.co.uk/finance/financialcrisis/8858614/Eurozone-crisis-sees-Italy-tire-of-Silvio-Berlusconis-Don-Juan-antics.html
http://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100012903/italy-europe-and-red-brigade-terror/
http://www.telegraph.co.uk/finance/financialcrisis/8861179/Italys-crisis-deepens-on-eurozone-slump-bail-out-doubts.html

France is worried it  might lose its AAA rating as French banks hold large amounts of Greek sovereign debt.  The Greeks resent their economy being controlled by the EU.  Portugal is heading into recession which will make it impossible for it to repay its sovereign debt.

In the UK, the terms of membership of the EU are coming under ever closer negative scrutiny, which is leading to serious tension within the Coalition.  Three articles worth a read:

http://www.telegraph.co.uk/comment/telegraph-view/8859151/Nick-Clegg-is-out-of-step-with-Britain-over-Europe.html
http://www.telegraph.co.uk/news/politics/nick-clegg/8859374/Nick-Clegg-close-ties-with-Europe-are-absolutely-essential.html
http://www.telegraph.co.uk/news/politics/conservative/8858823/Half-of-Conservative-MPs-want-to-pull-out-of-the-EU.html

Background: useful summary of the main problems:

http://www.bbc.co.uk/news/business-14934728