Mario Draghi, President of the European Central bank, cut the key borrowing rate from .15% to .05% in an effort to spark economic growth. For good measure, he tossed in some complicated monetary stimulus that only an Einstein could understand. But these "solutions" don't attack Europe's real problems - aging populations that don't produce but soak up scarce resources; high taxes; over-priced, union-controlled labour markets and over-regulated business. The result is economic stagnation.
The Euro is at a 14 - month low against the American dollar. Consumer demand for everything from washing machines to automobiles hasn't bounced back from the economic crisis 2008-2009. As a result, over-supply of many products is depressing prices and profit margins. Take automobiles, for example, which are a glut on the European market. Italian car sales have plummeted 50% since 2007 but the assembly lines keep churning out more cars. Analysts say 18 automobile factories would have to be shut down in Europe to bring supply in line with demand. But so far, only one factory has been closed - union opposition is so strong it trumps economic common sense. Many other industries face the same dilemma.
Until Europe faces reality and allows pro-growth reforms, expect more stagnation and more Soviet-style bottlenecks, surpluses and status quo.
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