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from Nicholas Wapshott:

The EU-U.S. love-hate relationship

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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.

from John Lloyd:

The inconvenient voters of Europe

Sixty years ago, pondering the question of an unruly populace, the German playwright Bertolt Brecht mused, “Would it not be easier / In that case, for the government / To dissolve the people / And elect another?”

It was a rare piece of ironic criticism of East Germany’s communist regime for Brecht, since he usually supported it. But after the regime’s suppression of a workers’ revolt in 1953, he spoke out. It’s one of his most famed observations, trotted out whenever a populace is ungrateful enough to vote “against their own good.”

from Nicholas Wapshott:

No, austerity did not work

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There have been a lot of sighs of relief in Europe lately, where countries like Britain and Spain, long in recession, have finally started to grow. Not by much, nor for long. But such is the political imperative to suggest that all the misery of fiscally tight economic policies was worth the pain that there are tentative claims the worst is now over and, ipso facto, austerity worked.

Hold on a minute. Growth is good. Growth is what allows countries to pay down their national debt by increasing economic activity, putting the unemployed to work and making people prosperous enough to pay taxes. But gross domestic product growth alone is not enough to provide adequate sustained prosperity if it does not also lead to significant job growth.

from MacroScope:

Beware the bias in euro zone forecasts (again)

Next time you ask an economist a question about the euro zone, be sure to enquire where their head office is based.

London? New York? Expect a pessimistic response on euro zone matters.

Frankfurt? Paris? Happier days are coming soon for the currency union.

So that's oversimplifying matters slightly - but as we've seen time over, institutions based outside the euro zone are likely to be gloomier about its prospects, and those based inside it are more likely to look on the bright side.

from MacroScope:

Austerity fatigue – the financial world’s latest fad phrase

From the U.S., we've had lots of talk of tapering. In Europe, the latest fad phrase in the financial world is “austerity fatigue”.

It’s a strange euphemism, somehow disconnected from reality. More than 19 million euro zone citizens were out of work during May, roughly equivalent to the combined populations of Belgium and Austria. Youth unemployment is on the wrong side of 50 percent in Greece and Spain.

from MacroScope:

Forecasts for the euro zone depend more on head office location than analysis

Ask an economist a question about the euro zone, and the answer will as much depend on the location of their head office as any analysis of the data.

It's been noted before (herehere, and here), but economists and fund managers working for euro zone-based banks and research houses tend to be optimists about the euro zone. Everywhere else - including Britain, North America and the Nordics - they tend to be pessimists.

from MacroScope:

Although it seems routine, rising euro zone unemployment is still shocking

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Another month, another rise in the number of jobless in the euro zone.

As expected, the unemployment rate hit a new record 12.2 percent in April, according to Eurostat on Friday, meaning some 19,375,000 euro zone citizens are out of work.

That's more than the populations of Austria and Belgium combined and almost a quarter are aged under-25.

from Thinking Global:

The growing Franco-German schism

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Germany's Chancellor Angela Merkel talks with France's President Francois Hollande (R) at the European Union leaders summit in Brussels March 15, 2013. REUTERS/Laurent DubruleTaxicab2

Occasionally a public opinion survey surfaces that signals a seismic event. That is the case with a new report from the Pew Research Center that measures the widening tremors of a political earthquake now shaking Europe.

from MacroScope:

Want to know what the ECB is going to do? Watch the German PMI

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A sudden turn for the worse across German companies should clinch an interest rate cut from the European Central Bank next week, or in June at the latest.

That's because the latest PMI surveys, which have a decent correlation with economic growth, suggest the German economy  shifted back into reverse this month, against the expectations of economists.

from Photographers' Blog:

Cyprus, it’s all Greek to me

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Nicosia, Cyprus

By Yorgos Karahalis

I've been working in the media industry since 1986 and I can’t recall the last time Cyprus, the small divided Mediterranean island, attracted so much attention since the 1974 invasion by Turkey, which stills keep the island and its residents separated.

A decision by the European Union for a "haircut" on deposits in all Cypriot banks made the country one of the top stories in the region and across the world. Various scenarios for Cyprus’s financial meltdown appeared everywhere.

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