The current belt-tightening Southern Europe is undergoing spells Euro deflation and a theoretical spiraling-down into depression. This is being countered by the European Central bank's (ECB) buying of government bonds of the afflicted states, but the ECB's rigid, stated policy is only to keep inflation at 2% or less, not to avoid deflation. Like the Federal Reserve, the E...//en.wikipedia.org/wiki/European_Central_Bank The question is whether the ECB will modify policy enough to counter a depression? The UCB head, Mario Draghi can be regarde as an economic conservative who is influenced by both the French and German leadership. http://en.wikipedia.org/wiki/Mario_Draghi The electing of a socialist premier in France could allow Draghi to more aggresssively deal with the deflation-depression threat . . . Brough http://civilization-overview.com
I would not be surprised to see dollar/euro parity in the next few years. I don't see another way out for Europe. I think they are going to muddle through this just as they have done. When the pain gets to intense, they will yield, but then and only then. That has been their story, and I don't see them changing their story.