1. Crash, Euro crises and welfare futures

2. Outline: from 2008 to 2012 Why the crash in 2007-8? – On mortgages, banks and public expenditure How the disease spreads – Banks and states: the PIIGS Italy and Greece Spain, Ireland (and Portugal) – States and bond markets The mess we are in

3. The crash in 2008 1990s – 2000s: growth of derivatives markets – Bonus-based promotions of mortgage loans & debt US / UK property bubble bursts: – Mortgage defaults – Property prices collapse / negative equity – Bank balances inadequate (run on banks) – Governments step in to forestall bank collapse Private debt becomes public debt. Economies contract: unemployment rises (CEE)

4. Banks and currencies 2008-9 bailouts = public account deficits Bang goes the Stability and Growth Pact as borrowing rises Bond market (finance government borrowing) steps in – Cost of loans rise for vulnerable economies – Enter the Eurozone PIIGS – Portugal, Italy, Ireland, Greece, Spain

5. The problem in Spain (Ireland) Massive expansion of (& investment in) property 1990s and 2000s. Post-crash: – Abandoned development projects – Domestic banks undermined Rising unemployment hits state revenues – Result: massive public sector deficits – Result: mass youth unemployment

7. The problem in Greece (Italy) Heritage of extensive government borrowing – Small Eurozone economy slips sub EconFin radar Public expenditure sews together coalition parties (insider privileges & public pensions) Problems with taxation: lost revenue, constant borrowing to shore up deficits. – Greek problems affect Cyprus

11. The issue of the Euro How to cure debt: – Devalue currency (impossible under Euro) – Raise interest rate (same + higher unemployment) – Renegotiate repayments (the IMF & ECB solution + ‘firewall’ of ECB guarantees) The risk of default: the message of the bond markets

12. The markets react: 2010

13. Moody’s + S & P ratings for Eurozone

15. Seen from the other side …

16. Impact on welfare… Market imperative is imposing cuts, mostly welfare, that hurt the most vulnerable – Real pension cuts (Spain, Portugal, Greece) – Real reductions in unemployment support. Reduced consumption, falling employment, austerity bites ECB: Eurobond bailouts: only agreeable to Germany if controls exerted over PIIGS fiscal policy

17. Public protest:

18. And good argument

19. Temporary dictatorship…

20. Rejected outright

21. Europe’s future in German hands?