The Euro got roughed up again yesterday as currency markets continue to assess the potential fallout from last weekend's nearly $1 trillion "bailout" package for struggling member states. The reaction in those member states? Hardly enthusiastic. Indeed, The Financial Times is reporting that unions in Spain are planning large-scale strikes. From the dispatch:
“The government has decided to sacrifice the purchasing power of public sector workers and pensioners to the dictates of the financial markets,” Cándido Méndez, UGT leader, said in an article in the El País newspaper. “And it’s very likely that it will be a pointless sacrifice.”
[Finance Minister Elena] Salgado said it was hard to disagree with the unions about the effect of the cuts on growth but made it clear that the government had no choice other than to reduce salaries.
“We would never have started them there, the cuts?.?.?.?We’re a socialist government and therefore cutting salaries and freezing pensions is something we only do because we have to. There is a moment when you have to do it and we did it.”
More than one story in recent weeks has noted the similarities between Greece or Spain and some US states confronting serious fiscal issues and large public-sector workforces -- California being the most commonly referenced. George F. Will, for one, offers up his perspective under the headline "Greece and GM: Too Weak To Fail" in the Washington Post.
The general sense is that it is not too late, too far gone for the US. But it is not easy to stay out in front of the issue -- austerity is a bitter pill to swallow here, too. Consider what is happening in New Jersey, where a new governor, Republican Chris Christie, is trying to tackle fiscal issues with alacrity. From "New Jersey Governor Sets The Tone for the US" in The Hill:
Upon taking office Christie declared a state of emergency, signing an executive order that froze spending, and then, in eight weeks, cutting $13 billion in spending. In March he presented to the Legislature his first budget, which cuts 9 percent of spending, including more than $800 million in education funding; seeks to privatize numerous government functions; projects 1,300 layoffs; and caps tax increases.
Teachers unions are incensed, fighting Christie’s proposal that — in order to avoid cuts to education — teachers accept a one-year wage freeze and contribute 1.5 percent to the generous-by-every-standard healthcare plans they now enjoy for free. New Jersey, which has the highest unemployment in the region and highest taxes in the country, lost 121,000 jobs in the private sector in 2009 while adding 11,300 new education jobs. During the last eight years, K-12 enrollment rose just 3 percent while education jobs increased more than 16 percent.
Today it is the Euro's turn to earn the forex market's scorn. Who's next?
