European finance ministers are currently having a couple of days enjoying the delights of Dublin at our expense – but then they do have a growing portfolio of problems to consider between pints (or does that have to be litres?)
First it’s Cyprus where the money needed to stave off disaster has grown by some 5,500 million euros since our last posting just two weeks ago. With only 1.16 million people on the island that equates to thousands of euros of extra debt – per person – since the end of March! Even selling off national gold reserves will not make a significant dent in the 23,000 million euros total bailout identified so far. The expected jump in unemployment, fall in property values and closures of businesses will kill off chunks of the Cyprus Government’s income stream and make the situation worse.
Take, for example, Cyprus Airways. Here the plan, drafted by Air France, involves reducing the number of planes operated from just ten to six and firing 650 of the staff immediately. The remaining 350 staff having their salaries cut by 17%. This will, probably, save money short-term – but then finish off the business entirely soon after.
While all of this is disastrous for Cyprus there are bigger problems for the finance ministers to face. Portugal has already had 78,000 million euros in bailouts but new estimates say that it will need to borrow 14,000 million euros more in 2014 – then more again in 2015. Now in proportion to its 10 million population that’s not as bad as Cyprus – but with the Portuguese courts blocking the austerity plans the situation is getting worse. Having more people in a country doesn’t help unless they are employed and paying taxes.
In contrast the situation in Italy and Spain looks relatively calm – even though unemployment in Spain has gone over 25% and is now almost at the level of Greece (27.2% in January). While in Italy the calm may be due to the fact that there is still no government. A temporary prime minister being required to mark time until there is yet another general election.
Meanwhile the Cameron family are being entertained at Schloss Meseberg – a rare event at Angela Merkel’s official country retreat. Speculation in the media says that this signals Britain will get concessions from the EU – but more likely Germany wants to cool demands for reform by showing just how friendly our chums in the EU club can be.
So the financial summary for EUland seems to be a continued, slow decline overall – but that hides some big problems for the small economies. The worry is that some small nations are experiencing now what still lies ahead for some big ones. But if you want to be really worried look here …