Euro woes increase risk of trade wars

[Cali_Democrat]

http://blogs.reuters.com/great-debate/2010/05/20/euro-woes-increase-risk-of-trade-wars/

Europe won’t just be exporting deflation to the rest of the world, it will export serious trade tensions as well: first between the United States and China, and, possibly, eventually between Europe and the United States.

The austerity required to get Greece and other weak euro zone nations’ budgets in shape will exert a powerful deflationary force, as many countries which formerly imported more than they exported will be forced to cut back.

<snip>

The euro is now about 15 percent below where it started the year against the dollar, making U.S. exports less competitive and adding to pressure on the United States to be the world’s foie gras goose: being force-fed everyone else’s exports while its own unemployment rate remains high.

<snip>

Perhaps the best outcome is rising trade and currency tensions between the United States and China, while at worst this could set the stage for broader conflicts and a round of tit-for-tat tariffs to match similar currency devaluations.

Michael Pettis, a professor at Peking University, explains the issue succinctly on his blog, in which he says:
“Make no mistake, if southern European trade deficits decline, someone somewhere must bear the brunt of the corresponding adjustment. The only question is who?”

Read more...http://blogs.reuters.com/great-debate/2010/05/20/euro-woes-increase-risk-of-trade-wars/

[Vincardog]

1. someone somewhere must bear the brunt of the corresponding adjustment. The only question is who?

Anyone want to bet it will not be the predatory financial institutions that are creating the problems?