Eurozone downturn and deficits to persist

[BDforever]

The eurozone recession will persist into 2013, the European Commission has conceded in its latest forecast.

Governments face an uphill battle to rein in their overspending, with Spain, France and Portugal all failing to cut their deficits to agreed targets.

Spain's deficit, at 10.2% of GDP in 2012, was well above its 6.3% target, and would stay above target into 2014.

The eurozone economy would shrink 0.3% in 2013, the Commission said, making the governments' task even harder.

Previously, the Commission had expected the 17 economies in the eurozone to collectively enjoy 0.1% positive growth this year. In 2012 the economy is estimated to have shrunk 0.6%.

Delivering its winter forecast, Commission Vice-President Olli Rehn said that unemployment across the single currency area expected to continue rising to 12.2% this year as the recession lingers. Last year's jobless rate was 11.4%.

However, he said the eurozone was expected to rebound in the last three months of this year, registering 0.7% growth in the fourth quarter.

The forecast appears somewhat more pessimistic than the European Central Bank President Mario Draghi, who last month said he believed the eurozone would begin recovering in the second half of this year.
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The French need to do their homework”

Michael Fuchs Deputy leader of Angela Merkel's CDU party faction

The Commission's acknowledgement that the eurozone is in worse economic shape than previously mirrors a change in the International Monetary Fund's thinking. The IMF said in January that it expected the eurozone to experience a "mild recession" in 2013, having previously predicted growth.
Plea for more time

The austerity measures being implemented by eurozone governments are widely blamed by economists as a major contributor towards the Continent's economic woes, although there is disagreement among economists as to whether governments should therefore go easy on the spending cuts.

Spain, which has one of the biggest budget deficits, made the least headway in bringing its finances back under control, and faces one of the nastiest recessions.

Of its 10.2% deficit in 2012, 3.2 percentage points was due to the cost of cleaning up its banking system, which has been decimated by loans made to property developers and speculators during the last decade's housing bubble that have since proved unrepayable.

More worryingly, the Commission does not expect Spain to improve greatly over the next two years. Its deficit is forecast to be 6.7% this year, compared with a 4.5% target, and 7.2% in 2014, compared with a 2.8% target.

Spain cannot simply blame its weak economy for this outcome, the Commission implied. Madrid's structural deficit - which strips out the effect of the recession - fell only by 1.4% of GDP last year, barely half the 2.7% target set by the Commission.

However, overspending by governments across the eurozone as a whole is still expected to fall on average this year. That is despite the persistent economic downturn, which typically reduces governments' tax revenues and increases their benefit bills.
source: BBC News - Eurozone downturn and deficits to persist, Commission says

 

[Developereo]

Wonder if I should go all-cash again? Is there another selloff in the making?

The euro crisis: Europe bleeds out | The Economist

Apr 30th 2013, 14:27 by R.A. | WASHINGTON

IT IS a car crash of a data release. One simply can't look away. Hard to know precisely which part of the euro area's latest unemployment report is the most grimly compelling. The overall rate, at 12.1%? In the spring of 2010 unemployment rates in America and the euro zone were effectively the same at about 10%. There is now a gap of 4.5 percentage points. Total unemployment? In the first three years of the downturn America did far worse than the euro area, adding some 7.5m workers to the unemployment rolls to Europe's 4.7m. Since then total unemployment in the euro area has risen by another 3.2m while America reduced the ranks of the jobless by 3.5m. The euro area now has some 19.2m unemployed workers.

Individual country numbers inspire their own brand of horror. Greek joblessness topped 27% in January (the most recent month for which data there are available), while Spanish employment has risen to 26.7%. Joblessness in France rose by slightly more in the year to March than it did in Italy. And did you know that Dutch unemployment rose by 1.4 percentage points over the past year? German unemployment, of course, has held steady at 5.4% since last summer.

It is the youth figures that are most remarkable, however: 59.1% of those under 25 are unemployed in Greece, 55.9% in Spain, 38.4% in Italy, 38.3% in Portugal, 26.5% in France—3.6m youths in all.

There is blame to go around for this, but one has to reserve special criticism for the European Central Bank. The Federal Reserve's main policy rate has been effectively zero since late 2008; the ECB's has never fallen below the current 0.75% level. The Fed has undertaken major asset-purchase programmes in an effort to raise growth expectations, lower interest rates, and improve lending conditions; the ECB deployed a special lending programme to banks last year in order to prevent a systemic collapse, but its balance sheet has since been shrinking as those loans are repaid. The Fed has reacted to weakening inflation and inflation expectations and has linked policy changes to labour market indicators. The ECB has presided over a wrenching disinflation that has brought inflation well below target, and which is both a consequence of recession and itself an implement of macroeconomic pain. Europe's governments have behaved badly, but American fiscal policy has hardly been better. The ECB faces a more complicated set of political constraints, but it has already proven how adroitly, aggressively, and inventively it can act when necessary.

The ECB meets this week. On Thursday it may announce an interest-rate cut; if it doesn't it is probable that a cut will be made in June. But a rate cut will not be enough, not remotely. As things stand ECB policy is scarcely being transmitted to the periphery, where rates to firms and households are far higher than in Germany. The euro area needs a jolt to expectations, targeted credit easing designed to improve peripheral liquidity, and broad quantitative easing. Mario Draghi has surprised markets before. Hopefully he will do so again. Because at the moment, the ECB is behaving as though the main economic failure in the 1930s was the world's pathetic inability to grit its teeth and endure the costs of tight money.

 

[Audio]

Wednesday's data are expected to show the euro zone economy grew 0.2 percent in the second quarter, according to a Reuters poll. That would mark an end to the recession that took hold in late 2011.

Global Economy: Seeking European signs of sturdier global rebound | Reuters

We will see on wednesday.....

Here's a good article from Credit Suisse about Spain and Greece:

Europe’s “Least Likely to Succeed” Could Soon Start Doing Just That

Unemployment easing slightly:

EU Unemployment Rate Falls - WSJ.com
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Also, don't read the Economist on anything €uro related. They're full of shit Brits wishing for it to fail.

#edit: i wish @Hello_10 would still be here.....he'd be crying right about now.

 

[vostok]

While Europe will recognize itself a vassal of the United States - it is not threatened. The Europeans, anyway, pretty smart and will come from the power of the host at the last moment, when they have nothing to be threatened. That's when we'll see the true face of the EU.

 

[flamer84]

While Europe will recognize itself a vassal of the United States - it is not threatened. The Europeans, anyway, pretty smart and will come from the power of the host at the last moment, when they have nothing to be threatened. That's when we'll see the true face of the EU.

Half the time i can't even understand the illiterate english this guy spits out....write something so we can understand you russian peasant! Do you copy paste from Google translate commie?