The financial markets were again mistreated Wednesday by concerns related to the debt crisis of several European countries.
Italy has replaced Greece as the epicenter of the eurozone debt crisis, as a 7% yield on 10-year sovereign bonds is considered by many investors to be unsustainable over time.
According to François Dupuis, chief economist at Desjardins Group, it is important not to allow the crisis to spread to Italy, the third-largest economy in the eurozone with a debt of 1900 billion euros. “If Italy’s economy derailed, it would bring the entire euro area to its knees,” says Dupuis.
In recent years, Greece, Ireland and Portugal have each in turn been forced to call for international aid after seeing the performance of their bonds cross the threshold of 7%.
According to the tax expert, Brigitte Alepin, the global economy is currently struggling with financial instability due in part to the borrowing power of politicians. “If a politician has the power to borrow, instead of confronting voters when facing a deficit, it is more tempting for him to borrow,” she says.
The tax expert Brigitte Alepin, describes the tax crises in 4 steps:
1- Radical rise in national deficits
2- National debt crisis
3- Negotiation of public expenditure sharing
4- Bursting of tax revolts
If a phase is not settled, the economy inevitably switches to the next phase until the markets burst, says Alepin. “History tells us that when we get to phase 3, there is a lot of opportunity to reach the fourth and final step,” says Alepin.
According to her, Canada is in the first phase with an increase in its deficit. It warns, however, that governments are in a crucial period and must make the necessary decisions.
A decade of gloom
The European debt crisis is likely to plunge the world economy into a “lost decade,” warned Wednesday the director of the International Monetary Fund, Christine Lagarde, before calling on the rich countries to restore growth and confidence.
The term “lost decade” echoes the combination of persistent deflation, rising indebtedness and economic powerlessness that have marked Japan’s situation throughout the 1990s and beyond. after the bursting of his real estate bubble. A scenario that many analysts fear to see reproduce in Europe.
An article of TVA News.