Op-ed: No news from Berlin

The list of reasons why the stock market is falling could include: weak growth perspectives threatening another recession; anticipation of greater austerity measures that drastically reduce GDP estimations; that a major European lender asked the ECB for 500 million dollars; four years of recession in Greece; the fact that many lenders could suffer further losses due to extreme sovereign debt. Have the markets reached the edge of the cliff? As they keep falling, they are farther and farther from recuperation.

It is not important that corporate profits are holding out and that the firms are somewhat better capitalized. That the lead economist of the ECB keeps saying that they do not have any liquidity problems simply underscores the authorities? inability to resolve problems within the financial sector.

Leaders in the Eurozone are deploying some grandiloquent rhetoric that does not reflect actual events. The ECB will not be able to recovery itself alone, and France will suffer as well, because it is evident that they will have to give support to other European nations. The Germans are correct in diagnosing that there is a major debt burden to correct and that this can only happen with discipline and cutbacks.

But postponing the inevitable fiscal union, Merkel underestimates the consequences of the latest market plunges and the resulting strangulation of liquidity lines created by recent negative economic data. If we all cut back at the same time, the situation will be hard to deal with. Our political economy needs to stay the course in order to make the recovery successful.