Reuters blog archive
from Nicholas Wapshott:
The elaborate gavotte between the American and European economies continues.
While the Federal Reserve has begun to wind down its controversial quantitative easing (QE) program, the European Central Bank (ECB) the federal reserve of the eurozone, has announced it is considering a QE program of its own.
It is a belated acknowledgement, if not an outright admission, from Mario Draghi, president of the ECB, that five years of the European Union’s austerity policy has failed to lift the eurozone nations out of the economic mire. The ECB has presided over a wholly unnecessary triple-dip recession in the eurozone and sparked a bitter rift between the German-dominated European Union bureaucracy and the Mediterranean nations that must endure the rigors imposed from Brussels. All to little avail.
If there are any “austerians” left standing, let them explain this. Ignoring the cries of the unemployed and those pressing for urgent measures to promote growth in Europe, the ECB blithely imposed its punishing creed, arguing that there would be no gain without pain. The result? Little gain, endless pain.
The eurozone economy endured growth at a miserable 0.2 percent year-on-year in the last quarter of 2013 (after an 18-month-long eurozone recession). Unemployment is at a wretched 11.9 percent. The eurozone is suffering from chronic “lowflation,” with inflation at an annual 0.5 percent, heading toward perhaps the most destructive economic condition of all -- deflation.
Pro-Moscow protesters in eastern Ukraine took up arms in one city and declared a separatist republic in another yesterday and the new build-up of tensions continues this morning.
The Kiev government has launched what it calls “anti-terrorist” operations in the eastern city of Kharkiv and arrested about 70 separatists. Moscow has responded by demanding Kiev stop massing military forces in the south-east of the country.
from Lawrence Summers:
The world’s finance ministers and central bank governors will gather in Washington this week for the twice yearly meetings of the International Monetary Fund. Though there will not be the sense of alarm that dominated these meetings after the financial crisis, the unfortunate reality is that the global economy’s medium-term prospects have not been so cloudy for a long time.
The IMF in its current World Economic Outlook essentially endorses the secular stagnation hypothesis -- noting that the real interest rate necessary to bring about enough demand for full employment has declined significantly and is likely to remain depressed for a substantial period. This is evident because inflation is well below target throughout the industrial world and is likely to decline further this year.
from John Lloyd:
A surge of far-right parties is about to hit the European parliament. Last weekend’s success of the National Front in France was led by the party’s leader Marine Le Pen, who pledges to take France out of an agreement that is destroying jobs and flooding towns with immigrants. Similar advances by the right are appearing in differing degrees of intensity elsewhere in Europe.
The European elections next month will likely see 100 or more deputies from the Freedom Party of Austria, the British UK Independence Party, the Dutch Freedom Party, the Finnish True Finns, the Flemish (Belgian) Vlaams Blok, the German Alternative for Germany, the Greek Golden Dawn, the Hungarian Jobbik, the Italian Five Star Movement, the Swedish Democrats as well as the National Front enter parliament. They’ll be noisy, passionate, insulting, disruptive and in some cases well-primed to exploit every weakness and mistake in the European parliament.
from Global Investing:
The West has just agreed to stump up a load of cash for Ukraine but there is a distinct sense of deja vu around it all.
Let's face it - Ukraine's track record on how it manages ts economy and foreign affairs isn't great. This is the third aid programme Kiev has signed with the International Monetary Fund in a decade and two of them have failed. The IMF has its fingers crossed that this one will not go the way of the past two. Reza Moghadam, the IMF's top European official, tells Reuters in an interview:
From financial forecasters to the International Monetary Fund, calls for the European Central Bank to do more to support the euro zone recovery are growing louder.
With inflation well below the ECB’s 2 percent target ceiling and continuing to fall, 20 of 53 economists in a Reuters Poll conducted last week said the bank was wrong to leave policy unchanged at recent meetings and should do more when it meets on Thursday.
from Hugo Dixon:
Both continental European euro-enthusiasts and British Conservatives received a boost last week when the German and UK finance ministers called for a rewrite of the European Union’s treaties. The goal, outlined by Wolfgang Schaeuble and George Osborne, is to kill two birds with one stone: shore up the euro zone and keep Britain in the EU.
The entente is significant. German-UK relations have certainly warmed since December 2011, when London tried to block one of Berlin’s pet projects – a treaty that restricted borrowing by euro zone countries – unless it was given guarantees to protect the City of London.
Surprise is the least forgivable sin of statecraft. Yet nothing has so characterized the Ukraine crisis as the West's continuing surprise at Russia's behavior.
The past 30 days have provided almost daily reminders of the deep disconnect between Western expectations of what statecraft would -- and ought to -- look like in the 21st century, and the reality of how the Kremlin seeks to assert its interests in the world.
from John Lloyd:
It’s France’s turn to be the “sick man of Europe,” a competition that no country wants to win.
The phrase seems to have originated with Tsar Nicholas I of Russia, who wrote it in reference to the Ottoman (Turkish) Empire in the mid-nineteenth century. The Tsar said Turkey was “sick” and journalists added the “man of Europe” a century later. It was bestowed on whichever laggard European state could be put into a headline.
from Hugo Dixon:
European Union leaders at the summit last week made a commitment to cut their dependency on Russian gas. The Ukraine crisis has highlighted the issue: about 30 percent of the gas the EU consumes comes from Russia.
Not that there is any immediate risk of the Kremlin turning off the taps. After all, Russia gets around 14 percent of its entire export earnings from gas it sells to other European countries.