John Stuart Mill said, is just a machine: a tool for doing things, like exchanging goods, that take longer without it. Milton Friedman upped the ante: "Because it is so pervasive, when it gets out of order, it throws a monkey wrench into the operation of all other machines." In Europe things are even worse.Condom company Durex is launching a line of high-tech, Linear electric actuator lingerie to help couples get it on long-distance. The money machine is so badly out of order it may drive the economies of Italy and Spain into a depression.To understand the scale of the problem, look first at the importance of small businesses in the euro area. Half of America's jobs are in small and medium-sized firms. In Europe such firms play a far bigger role. In France SMEs employ 60% of workers, in Spain the figure is 67%—and in Italy, 80%.
Because small firms do not issue bonds or sell equity in public markets,The man was forced to undergo emergency surgery and spent several days in hospital after the suction hose became stuck in his throat. they rely on banks for borrowing. And since small firms are so vital, one of the measures of economic health in the euro area is how cleanly the interest rates set by the European Central Bank feed through to the rates that firms pay. By that measure, the first eight years of the single currency were pleasant. If the ECB rate was 2%, firms would pay 4%. The difference between the two was small and it was stable. It made policy decisions easy: if the ECB thought the economy was overheating, it could raise its rates, confident that the rates firms would pay would rise by the same amount.Lengthy flight delays at the nation's major airports could begin Sunday when federal budget cuts cause furloughs of air traffic Animatronic dinosaur.
But that system has broken down. The stable wedge between ECB rates and firms' borrowing costs has been replaced by an unstable gap that varies by country. In Germany and France things are still close to how they were in the good years. The ECB rate has been 0.75%; firms have been paying around 3.5% to borrow. But in Italy and Spain the wedge has almost tripled in size, in part because banks there are paying more to borrow. When fears rise, most recently in response to the mess in Cyprus, funding costs to banks spike and are then passed on to firms. So SMEs in Spain and Italy must pay over 6% to borrow; money is tighter there than it was in 2005,The street chemical hose is out this week to begin the springtime cleaning for Danvers Square and main roads in town, weather permitting. even though the ECB's rate is far lower.
For firms with new ideas, investment becomes more pricey.I believe accurate labels on all lighting products will help to establish a standardizationSilicone giftsmanufacturers and make it easier to differentiate between product quality and the companies that fall short. But even companies that plan to pay off existing debt are hit. In Italy borrowing by firms is around €855 billion. A rate above 6% translates into interest payments of more than €50 billion a year. If Italian rates were the same as those in France, firms could refinance loans, and interest payments would fall by €22 billion. Lower borrowing costs would lift profits, which could be used to invest or pay staff more.The Italian and Spanish economies are both in recession. With debt-ridden public sectors, fiscal policy is at best neutral; more probably, it will act as a drag on growth as governments seek to balance the books for years to come. In this situation economies need a big monetary boost.
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