Brace for Euro implosion – drop tax plans now

As the world economy moves towards the abyss, the Gillard government must postpone the introduction of carbon and mining taxes or risk looking irresponsible, warns The Centre for Independent Studies (CIS).

While some economics experts are hopeful for a quick global recovery, CIS Research Fellow Dr Oliver Marc Hartwich, who predicted early last year the US and European fiscal and monetary problems currently plaguing the market,  is warning of more doom and gloom.

German born economist Dr Hartwich anticipated the damage the Euro crisis would cause on the global market and predicts the next stage of the saga will trigger a new round of the Global Financial Crisis.

Dr Hartwich said Australians were underestimating the flow-on effects of the European crisis.

“Europe is the world’s largest single market, and the EU remains an important trading partner for Australia. We are not immune from an economic implosion of the euro zone,” he said.

“European leaders have shown they are incapable of managing the crisis. In fact, they have only made it worse.

“What we can expect in the coming weeks is Europe’s very own Lehman moment when financial markets freeze and banks and whole countries could collapse.”

While there is never a good time for new taxes, with world markets on the edge this is a particularly bad time for additional costs, according to Dr Hartwich.

“No responsible government would introduce new taxes and impose new burdens on households and businesses at a time of such uncertainty. The Gillard government must scrap its carbon and mining tax plans immediately to restore confidence.”

Dr Hartwich said Australia can do nothing to avert the European disaster, but the government can avoid undermining its economic competitiveness in these difficult times.

Previous articles by Dr Hartwich regarding the financial crisis:

• February 10, 2010 he had predicted the end of European monetary union in The Australian (http://bit.ly/qkDXct).
• February 17, 2010 he called the Greek crisis a ‘taste of future disasters for Europe’ in the Business Spectator (http://bit.ly/qqRQqV).
• May 5, 2010 he said in an article for the Institute of Economic Affairs that the first Greek bailout would not solve the country’s problems (http://bit.ly/glJnYN).
• May 13, 2010 after the creation of the EFSF rescue fund, he wrote that this could only postpone but not avert Europe’s financial catastrophe (http://bit.ly/qAL42J).
• When markets had calmed on Europe in June 2010, he maintained that Italy and Spain were bound to blow up (http://bit.ly/nGE3ew and http://bit.ly/os1xaH).

Dr Oliver Marc Hartwich is a Research Fellow at The Centre for Independent Studies and is available for comment. Media enquiries Jessica Kostera p: 02 9438 4377 m: 0411 759 934 e: