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from Global Markets Forum Dashboard:

A very German problem for the ECB

The clock is ticking down to the European Central Bank’s policy meeting tomorrow and markets are waiting to see what the bank’s president, Mario Draghi, will say about the state of the regional economy, especially since euro zone inflation fell in July to its lowest level since the height of the financial crisis five years ago.

Earlier today, Lorcan Roche Kelly, one of the most prolific financial-market tweeters who has nearly 14,000 followers, joined us in the forum to give us an idea of what to expect from the ECB and said at most, Draghi will reiterate the central bank’s latest acronyms - TLTRO (Target Long Term Refinancing Operation) and Annual Quarterly Review (AQR) - but is unlikely to spring any new ones on the markets.

“Draghi will blame transitory factors like energy (for weak inflation) as he is not in a position to introduce any new policy for fight that inflation,” Lorcan said, adding that “with the TLTROs next month, he will have to wait for that operation to move through the system before trying anything new.”

Euro zone inflation has been stuck in what the ECB calls a 'danger zone' of below 1 percent since October last year and is not expected to bounce back to the bank's target of close to, but below, 2 percent even by 2016, when it is expected to reach 1.4 percent, as expected by a Reuters survey of economists.

from Data Dive:

Eurozone unemployment is still stagnant

Eurozone employment is stuck in a bad place. Numbers out yesterday show the unemployment rate hovering at 11.6 percent for a second consecutive month. While at least it isn’t rising, the rate needs to drop a lot further for Europe to truly get back on track from the 2008 financial crisis. Nineteen million people remain out of work across the eurozone, Reuters reports, and the unemployment rates in Spain and Greece both remain above 25 percent.

"We can only really speak of a proper recovery when Europe's economy creates new jobs in hundreds of thousands every month on a sustained basis," European Commissioner for Employment Laszlo Andor said.

from Expert Zone:

Currencies and the collapse of globalisation

(Any opinions expressed here are those of the author and not of Thomson Reuters)

We live in stirring times. The president of the European Central Bank, Mario Draghi, crossed the monetary policy Rubicon and cut one of the euro area’s key interest rates into negative territory. This is dramatic stuff, as even the most economically oblivious are likely to recognise that negative interest rates are a radical policy.A picture illustration of Euro banknotes and coins taken in central Bosnian town of Zenica

At the same time, the United States Federal Reserve is gracefully gliding out of its quantitative policy position - and by October that money printing process is likely to be effectively at an end. The question from most investors is therefore “what next for U.S. monetary policy?”.

from Nicholas Wapshott:

The EU-U.S. love-hate relationship

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.

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

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

 

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.

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