Pain of austerity gets personal

Only the European Union remains wedded to fiscal austerity. The economic impact of one of the main demand centres wallowing in recession with virtually no growth is not insignificant. Chinese GDP growth projection for 2013 is 7.5%, much the same as last year’s. Most of this will come from the domestic economy. The US will be lucky to achieve 2.5% growth this year.

Greece and Spain have shown us that austerity brings with it extremely high unemployment, reaching over 25% of the working population. That kills import demand, investment and production, all drivers of trade. Northern Europe has flat demand and no growth, again killing any possibility of decent trade growth. Do not confuse a rising stock market with consumer confidence and improved economic conditions.

And now, to add insult to injury after the near collapse of the banking system, Cyprus is going to sequester 10% of personal savings to help fund the excesses of the government and banks. This will clearly create a loss of confidence in the financial system, not only in Cyprus, but in Greece, Italy, Spain, Portugal and possibly even in the northern countries. Why save if the money will be officially ‘stolen’.

As the shipping industry stumbles from hurdle to hurdle with excess capacity in the dry, liquid and container sectors due to lack of trade and input to industry from such bulk items as iron ore, aluminium, cement, etc., the ports will come under increasing pressures with lower revenues due to reduced number of ship calls and tonnes of cargo handled.

In 2010, as trade growth recovered, it was assumed that the Great Recession had been defeated, yet we remain in the doldrums with pressures all around. The global economy has not yet turned the corner.