Groundhog saw shadow of unemployment

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MOSCOW. (RIA Novosti political commentator Dmitry Kosyrev) - In the last few years, Phil the groundhog has been making one wrong forecast after another.

The American tradition, which marked its 122nd anniversary on February 2, states that if on that day the groundhog leaves the burrow where it has been hibernating and sees its shadow, which happens if the sun is shining, the spring is still a long way away.

Regardless of the groundhog, the weather in Russia is still colder than in the United States, even in Pennsylvania, a north-eastern state from which all groundhogs named Phil come from. However, now the two countries share a problem: The second stage of the economic crisis has set in, when unemployment requires more urgent attention than the banking system.

The unemployment rate in the United States is the same as in other countries. In early 2008, it was 4.9% in the United States as compared to 7.2% today. In the European Union (EU), the figures are 6.8% and 7.4%, respectively. In the estimate of the Ministry of Health and Social Development, Russia also has up to seven percent unemployed, just like Europe and America.

The U.S. administration's measures are becoming increasingly "socialist." For the time being, everything is concentrated around "Obama's package" worth almost $900 billion. The package was approved by the House last week, and should be endorsed by the Senate this week. It contains simple but smart measures, such as a long-term loan of $1,500 per capita for the purchase of a truck or car. Washington is hoping that even such a small sum will help restore the sales of U.S. cars that have fallen by one third as compared with 2007. Needless to say, this is somewhat different from the prohibitive car import duties that have been introduced in Russia. In effect, this is a reverse action aimed at supporting domestic car-makers, but it will produce the same effect.

We will see the positive results of Obama's package at the end of the year or later. However, analysts are already talking about the failure of the previous package by Treasury Secretary Henry Paulson. It was described as a "failure" at the Davos World Economic Forum by Joseph E. Stiglitz, who won the 2001 Nobel Prize in Economics. His assessments of unexpected crises have been uncannily accurate. He said that the first $700 billion given over to the banks was wasted - they did not resume any loans. Stiglitz likes even less the idea of setting up a special bank for problematic assets by buying them from the banks. They will simply run bankrupt as a result because banks are kept afloat by the problematic assets for which they may still get something in the future.

Once again, we can draw unpleasant parallels with the EU and Russia, where banks are reluctant to issue loans, and nobody knows what to do with bad assets. Should they be written off as Prime Minister Vladimir Putin suggested in Davos? What will happen with the banks in this case? That should be thoroughly analyzed.

Stiglitz doesn't like Obama's plan either. He explained that it would lead the United States to the third stage of the crisis - unacceptable internal debt up to $10 trillion, and budget deficit of $1.4 trillion. These figures are unprecedented since the end of WWII. Interest rates on this debt that will have to be paid to American creditors are a third problem (in addition to finances and unemployment).

In this case, many nations, not only the Americans, will wish they could hibernate together with groundhog Phil for a long time to come, because the ideas of how to extricate themselves out of the crisis have been very similar everywhere so far.

The opinions expressed in this article are the author's and do not necessarily represent those of RIA Novosti.

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