Crisis crosshairs find new targets

There is no longer any focus to the economic crisis. It's becoming too widespread for that.

Yes, today's Bank of Scotland job market index was surprisingly strong, particularly if you've got an IT qualification and you live in Dundee.

But it's wise to have a rather wider horizon.

Stock markets started the week with another plunge. Bank shares were hit again, with the Royal Bank of Scotland falling below 20 pence. It needs to hit 51 pence for the UK taxpayer to break even on its investment.

The Brent crude oil price has fallen significantly on expectations of weaker world demand. Sterling is weakening against the dollar, which means inflationary pressure in the UK.

Congress in gridlock

At least as significant are developments from Washington, which is coming back into focus as a risk to the world economy after resolving the brinkmanship in summer over setting a debt ceiling. Attempts to get a deal on slashing the federal budget by at least $1.2 trillion are reported to be on the brink of failure.

It's no surprise that Washington's gridlocked. But if its legislators haven't yet woken up to the dangers of Europe's political failure in the face of a rampant and unforgiving markets, then it could be an expensive lesson for the US to learn for itself.

In the eurozone, the sovereign bond markets continue to bear down harshly on prospects. In the past three weeks, they've consecutively targeted Greece, then Italy, then Spain.

It's no longer treating these countries like dominoes. Several of them are in the crosshairs at the same time.

Spanish cuts

Today, France's credit rating is under new pressure. Belgium's bond yields have ticked up again, and it hasn't had a government to take control of its high debt levels for well over a year. Hungary's not in the eurozone, and it's declared itself in trouble.

A new Spanish government has done nothing to reassure the bond markets. The election of the Popular Party was already priced in, and while it wants to take the country's austerity and push it further, it is yet to show how serious it is about doing so, or where the cuts will come.

The market is punishing both those whose deficits have gone unchecked for too long, and those who are now cracking down on deficits so hard that they're undermining their chances of growing out of trouble.

Grey economy

Sometimes, it helps to see what's happening beneath the surface of these market movements and big political power plays.

It may be merely anecdotal and I don't pretend to much knowledge of Spain, but last month, I was on holiday in the country. This was in a small mountain village in the Alpujarras mountains of the south, where the two industries are tourism and agriculture.

In most hospitality businesses, it was hard to see any credible sign of cash flow. Good quality restaurants were all but empty.

With Spain's unemployment rate above 20% and youth unemployment well over double that level, you might have thought there would be revolution in the air.

But instead, the word was of a move into the grey economy, below the reach of the tax authorities, where people make what they can in cash.

And at a meeting of the community council in the village where I was staying, it was noted that people are returning to their home villages from the towns and cities, bringing about 20% more land back into production - albeit for low prices on their citrus fruit, olives, chestnuts and almonds.