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Greek labor unions staged a nationwide strike Wednesday to protest austerity policies imposed on the country by its foreign creditors — including Germany, whose Chancellor Angela Merkel is scheduled to visit Athens this week.
Schools and pharmacies were shut, ships remained docked at ports, hospitals operated on emergency staff, and transport in Athens was disrupted because of the walkout called by the private sector union GSEE and its public sector counterpart, ADEDY.
Thousands of striking workers, pensioners and the unemployed were expected to march to parliament around noon.
"This is our answer to the dead-end policies that have squeezed workers and made Greek people miserable," GSEE said in a statement. "We are striking and fighting to put an end to austerity."
Unions said their anti-austerity message was also aimed at Merkel, who is due to meet Greek Prime Minister Antonis Samaras in Athens on Friday. Germany has insisted on painful spending cuts and tax hikes in return for international loans.
GSEE and ADEDY have staged dozens of strikes since Greece's first bailout in 2010. They say the measures prescribed by the European Union and the International Monetary Fund (IMF) have hit the poor and worsened the country’s six-year recession.
But protests have largely fizzled out, with low turnout blamed on a growing mood of resignation and protest fatigue.
Source
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Did Greece just issue a 5% coupon bond? wtf?
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About 80 percent of Greece's debt is in the hands of the European Union and the International Monetary Fund, at very low interest rates and on a long repayment schedule. Private creditors are holding just about 30 billion euros of bonds with maturities between 10 and 30 years.
This is what makes it so attractive for private parties. Yields are an average of 2% on the EU and IMF bonds iirc.
http://mobile.reuters.com/article/idUSBREA380OO20140409?irpc=932
edit: for those who are interested Weidman the president of the German central bank gave a speech last monday in Amsterdam with his views on the debt crisis. I was there and it was pretty interesting.
http://www.bundesbank.de/Redaktion/EN/Reden/2014/2014_04_07_weidmann.html
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(Reuters) - Greece's much-heralded return to the bond market buoyed euro zone debt on Thursday, outperforming flat equity markets as gains driven by easing U.S. interest rate concerns fizzled out.
Just two years after being at the epicenter of the euro zone's sovereign debt crisis, Greece drew solid demand at a five-year bond sale that aimed to raise 3 billion euros and offered a yield of 4.95 percent, beating Athens' 5 percent target.
The country's deputy prime minister Evangelos Venizelos said the sale had been at least eight times oversubscribed.
source
8 times oversubscribed while possibly exagerated is still crazy :o.
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A car bomb has gone off outside a Bank of Greece building in central Athens, smashing windows in nearby shops but causing no injuries, police and witnesses say.
The blast on Wednesday struck hours before Greece planned its first foray into the international bond markets since it plunged into a debt crisis four years ago, and a day before a visit by German Chancellor Angela Merkel.
A police officer, spealing on condition of anonymity, told Reuters news agency that someone had anonymously warned a newspaper of the attack about 45 minutes before the explosion just before 6am local time.
The caller said the device contained about 70kg of explosives.
There was no immediate claim of responsibility, but police believed leftist or anarchist groups were behind it, the official said.
Witnessess saw debris strewn across the street in a busy part of the capital lined with banks, shops and a mall.
Source
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"European Union institutions have become instruments for creditors to impose their will on debtors"
Just an OP-ED, but I love that quote 
Euro-Zone Fiscal Colonialism
LONDON — Last Tuesday, the European Parliament finally approved a mechanism for restructuring and closing down failed banks across the euro zone. But the system, which will not be established until 2015, is unworkably complex and leaves a veto power with national governments. Six years after the financial crisis began, Europe has still not resolved its banking mess. ... Link
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So how is the situation in your countries prior to the next european elections ?
In France the situation is quite explosive, with a quater of the population in the pools who consider voting for the FN, a party that is showing a strong stance against the EU. The idea of the european union, and even more the euro, is being criticized by left and right, and if nothing change in the few years coming, we will most likely see France trying to get out of the euro - or should I say the mark ?
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On April 30 2014 03:09 WhiteDog wrote:
we will most likely see France trying to get out of the euro - or should I say the mark ?
Euro's fine.
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Most spanish people think about European Union right now like a Evil Merkel Dictatorship with Germany controlling Europe, but I don't think that anti-european party will get too many votes from Spain anyway. Spanish people like to complain, but they are very passive in the elections, and they will vote the usual partys.
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On April 30 2014 03:19 haitike wrote:
Most spanish people think about European Union right now like a Evil Merkel Dictatorship with Germany controlling Europe, but I don't think that anti-european party will get too many votes from Spain anyway. Spanish people like to complain, but they are very passive in the elections, and they will vote the usual partys.
We're really close then, latin people yeah. Talk and then go to the beach.
On April 30 2014 03:15 SilentchiLL wrote:Show nested quote +On April 30 2014 03:09 WhiteDog wrote:
we will most likely see France trying to get out of the euro - or should I say the mark ? Euro's fine.
Keep telling that to yourself it will most likely help us get out of this economical mess.
Wow I m shocked at this guy comment... The lack of critical thinking in this is astonishing, and you find that interesting ? It is just dangerous...
So does he believe everybody in europe can have a positive commercial balance ? He propose a picture of spain, portugal and greece that puts aside all the negative impact of his solutions on european societies (unemployment ? No growth since the crisis ? Increase of the debt ?)... Wow is this german stance on europe ?
By the way Jonny's article is really good.
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I said I found it interesting I never said I agreed with him. I think it's obvious the southern and some northern countries like NL went trough a lot deeper recessions than they had to by cutting deficit or rather raising taxes.
edit: Our anti euro party is polling around 20 of 150 seats in the national parliament. Mainly low educated people vote for them and they usually don't vote for the European parliament so I don't think they'll get that much vktrs
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...
So what happened? Well, recall the problem. A bunch of countries that had previously been considered substantially less creditworthy than Germany joined the euro, and immediately saw a huge reduction in their borrowing costs. That led to irresponsible budgeting in Italy, a lot of private borrowing in Spain and Ireland, and a bit of both in Greece. Then after the global financial crisis hit, all these countries wound up in recession.
The bad economic climate started to push budget deficits up. And it became clear that contrary to the hopes of international investors, the German government had no interest in guaranteeing southern Europe's debts. The combination of rising deficits and reduced confidence led investors to demand higher interest rates to lend money to these governments. The higher interest rates made the deficits worse. A downward spiral was under way.
...
Eurozone officials have preached a gospel of budget austerity and "structural reform" to ailing economies as the cure for the crisis. By making central bank assistance contingent on willingness to adopt a plan that the European Central Bank approves of, the ECB has in part managed to turn this into a self-fulfilling prophesy. Everything has gotten better since governments agreed to the ECB plan, and a government that tried to abandon austerity would likely find itself abandoned by the ECB and thus worse off than ever.
...
The only way to regain competitiveness is for the sheer weight of unemployment to start dragging nominal wages downward across the economy. In an enthusiastic, well-behaved country like Latvia or Ireland this is a grinding medium-speed process. In a reluctant country like Spain or Greece it's agonizingly slow. Either way, it's much more painful than a currency depreciation because only some prices adjust — people with old debts or long-term contract obligations get totally screwed.
These problems of excessively valuable money used to occur globally during the gold standard era whenever there was a slowdown in global gold mining. In a famous 1896 speech, presidential candidate William Jennings Bryan alleged that American farmers and workers were being crucified on a cross of gold — made to endure avoidable suffering for the sake of the principle that gold was the only true judge of wealth. Today, unemployed Irish, Greek, Spanish, Italian, and Portuguese people are being crucified on a cross of euros. The single currency project has political motives that go beyond macroeconomic management, and keeping the project together requires someone's interest to be sacrificed.
...
For the crisis countries to recover without independent currencies, local nominal prices need to fall so that those countries can improve their competitiveness. Mathematically, for that to work while the eurozone as a whole averages 2 percent inflation requires that inflation be higher than 2 percent somewhere else. That would be uncomfortable for German citizens and politicians, and the ECB is widely thought to cater to German preferences (for example it is located in Frankfurt, Germany rather than in Brussels with the other major European Union institutions).
But this explanation only gets us so far. German inflation has been above average recently, but still below the ECB's 2 percent target.
...
Source
Some excerpts from a good article on the Eurocrisis. It lays it out in full from the point of view of many economists (and myself).
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On May 09 2014 23:44 aksfjh wrote:Show nested quote +...
So what happened? Well, recall the problem. A bunch of countries that had previously been considered substantially less creditworthy than Germany joined the euro, and immediately saw a huge reduction in their borrowing costs. That led to irresponsible budgeting in Italy, a lot of private borrowing in Spain and Ireland, and a bit of both in Greece. Then after the global financial crisis hit, all these countries wound up in recession.
The bad economic climate started to push budget deficits up. And it became clear that contrary to the hopes of international investors, the German government had no interest in guaranteeing southern Europe's debts. The combination of rising deficits and reduced confidence led investors to demand higher interest rates to lend money to these governments. The higher interest rates made the deficits worse. A downward spiral was under way.
...
Eurozone officials have preached a gospel of budget austerity and "structural reform" to ailing economies as the cure for the crisis. By making central bank assistance contingent on willingness to adopt a plan that the European Central Bank approves of, the ECB has in part managed to turn this into a self-fulfilling prophesy. Everything has gotten better since governments agreed to the ECB plan, and a government that tried to abandon austerity would likely find itself abandoned by the ECB and thus worse off than ever.
...
The only way to regain competitiveness is for the sheer weight of unemployment to start dragging nominal wages downward across the economy. In an enthusiastic, well-behaved country like Latvia or Ireland this is a grinding medium-speed process. In a reluctant country like Spain or Greece it's agonizingly slow. Either way, it's much more painful than a currency depreciation because only some prices adjust — people with old debts or long-term contract obligations get totally screwed.
These problems of excessively valuable money used to occur globally during the gold standard era whenever there was a slowdown in global gold mining. In a famous 1896 speech, presidential candidate William Jennings Bryan alleged that American farmers and workers were being crucified on a cross of gold — made to endure avoidable suffering for the sake of the principle that gold was the only true judge of wealth. Today, unemployed Irish, Greek, Spanish, Italian, and Portuguese people are being crucified on a cross of euros. The single currency project has political motives that go beyond macroeconomic management, and keeping the project together requires someone's interest to be sacrificed.
...
For the crisis countries to recover without independent currencies, local nominal prices need to fall so that those countries can improve their competitiveness. Mathematically, for that to work while the eurozone as a whole averages 2 percent inflation requires that inflation be higher than 2 percent somewhere else. That would be uncomfortable for German citizens and politicians, and the ECB is widely thought to cater to German preferences (for example it is located in Frankfurt, Germany rather than in Brussels with the other major European Union institutions).
But this explanation only gets us so far. German inflation has been above average recently, but still below the ECB's 2 percent target.
...
SourceSome excerpts from a good article on the Eurocrisis. It lays it out in full from the point of view of many economists (and myself).
Pretty good piece, but I believe it is giving too much power to the ECB's capacity to change anything. What is the ECB's power on exchange rate with the commercial excedent Germany has ? Almost zero. Can it really devaluate or ask for more inflation considering the impact it would have on German economy ?
Really the place of central banks in economic thinking is completly messed up since monetarists.
There are a some works, most notably Natixis' work on the euro zone, that shows that beyond all this, there is some kind of macroeconomic fracture between germany and the rest of the euro zone, and they even defend the idea - on "macroeconomic basics" only - that Germany should exit the euro. Here are their argument :
1. Asymmetries in the economic cycles.
While Germany was stagnating between 2002 and 2005, the rest of the Eurozone was growing. Since the financial crisis, the opposite has been happening. Same with unemployment. Between 2002 and 2005, it shot up in Germany but declined in the rest of the Eurozone. Since 2008, it dropped in Germany while it skyrocketed in the rest of the Eurozone to a record high of nearly 15%.
This asymmetry is based on credit. In Germany, growth or lack thereof is largely independent of credit. But in the rest of the Eurozone, growth is predicated on massive credit expansion. So when credit ballooned before the financial crisis, the economies grew. When credit collapsed afterwards, the economy sank into a quagmire. Due to this asymmetry, the report argues, a common monetary policy is not appropriate for the Eurozone.
2. Weakening economic ties between Germany and the rest of the Eurozone.
After the financial crisis, German exports to the rest of the Eurozone dropped. But Germany didn’t just throw in the towel and sink into a long recession. Instead, it pushed hard to export to other parts of the world. So 2012 was a record year for German exports, but the share of exports to the rest of the Eurozone dropped from around 45% before the financial crisis to about 35%. These weakening trade ties indicate apparently that Germany is more attached to the rest of the world than the Eurozone.
3. Structural asymmetries.
There are a number of them. For example, 35% of GDP in Germany is associated with manufacturing and industrial services, compared to 20% for the rest of the Eurozone. The labor market in Germany is more flexible than in some of the rigid situations elsewhere. The poverty rate in Germany is rising faster than in the rest of the Eurozone – from 11% in 1999 to 16.1% in 2012, as opposed to the rest of the Eurozone, where it rose “only” from 15.7% to 17.6%. And the savings rate in Germany, with its rapidly aging population, is higher than in the rest of the Eurozone. (This is a particularly spurious argument: with the exception of France, most Eurozone countries have rapidly aging populations, Italy faster than any other.)
4. Different needs in exchange rates.
Germany “prefers” a strong euro, the report finds, and the rest of the Eurozone needs a week euro to become competitive in the export markets.
5. Incapacity in the rest of the Eurozone to impose “internal devaluation.”
“Internal devaluation” has been the hallmark of efforts to get the southern European economies off the ground: slash wages to make production more competitive. Cutting household income was supposed to resolve the crisis. This happened in Spain in a huge way, to the detriment of Spanish workers, and with at best mixed results for the economy. But this cannot happen in France, where the cost of labor, mostly due to taxes on labor, has reached extremes. The people won’t sit still and allow their wages to be slashed, and the government can’t live without the cash flow it siphons off from payrolls. So for France, the only solution forward would be a massive devaluation.
http://cib.natixis.com/flushdoc.aspx?id=73799
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On May 10 2014 00:29 WhiteDog wrote:Show nested quote +On May 09 2014 23:44 aksfjh wrote:...
So what happened? Well, recall the problem. A bunch of countries that had previously been considered substantially less creditworthy than Germany joined the euro, and immediately saw a huge reduction in their borrowing costs. That led to irresponsible budgeting in Italy, a lot of private borrowing in Spain and Ireland, and a bit of both in Greece. Then after the global financial crisis hit, all these countries wound up in recession.
The bad economic climate started to push budget deficits up. And it became clear that contrary to the hopes of international investors, the German government had no interest in guaranteeing southern Europe's debts. The combination of rising deficits and reduced confidence led investors to demand higher interest rates to lend money to these governments. The higher interest rates made the deficits worse. A downward spiral was under way.
...
Eurozone officials have preached a gospel of budget austerity and "structural reform" to ailing economies as the cure for the crisis. By making central bank assistance contingent on willingness to adopt a plan that the European Central Bank approves of, the ECB has in part managed to turn this into a self-fulfilling prophesy. Everything has gotten better since governments agreed to the ECB plan, and a government that tried to abandon austerity would likely find itself abandoned by the ECB and thus worse off than ever.
...
The only way to regain competitiveness is for the sheer weight of unemployment to start dragging nominal wages downward across the economy. In an enthusiastic, well-behaved country like Latvia or Ireland this is a grinding medium-speed process. In a reluctant country like Spain or Greece it's agonizingly slow. Either way, it's much more painful than a currency depreciation because only some prices adjust — people with old debts or long-term contract obligations get totally screwed.
These problems of excessively valuable money used to occur globally during the gold standard era whenever there was a slowdown in global gold mining. In a famous 1896 speech, presidential candidate William Jennings Bryan alleged that American farmers and workers were being crucified on a cross of gold — made to endure avoidable suffering for the sake of the principle that gold was the only true judge of wealth. Today, unemployed Irish, Greek, Spanish, Italian, and Portuguese people are being crucified on a cross of euros. The single currency project has political motives that go beyond macroeconomic management, and keeping the project together requires someone's interest to be sacrificed.
...
For the crisis countries to recover without independent currencies, local nominal prices need to fall so that those countries can improve their competitiveness. Mathematically, for that to work while the eurozone as a whole averages 2 percent inflation requires that inflation be higher than 2 percent somewhere else. That would be uncomfortable for German citizens and politicians, and the ECB is widely thought to cater to German preferences (for example it is located in Frankfurt, Germany rather than in Brussels with the other major European Union institutions).
But this explanation only gets us so far. German inflation has been above average recently, but still below the ECB's 2 percent target.
...
SourceSome excerpts from a good article on the Eurocrisis. It lays it out in full from the point of view of many economists (and myself). Pretty good piece, but I believe it is giving too much power to the ECB's capacity to change anything. What is the ECB's power on exchange rate with the commercial excedent Germany has ? Almost zero. Can it really devaluate or ask for more inflation considering the impact it would have on German economy ? Really the place of central banks in economic thinking is completly messed up since monetarists. There are a some works, most notably Natixis' work on the euro zone, that shows that beyond all this, there is some kind of macroeconomic fracture between germany and the rest of the euro zone, and they even defend the idea - on "macroeconomic basics" only - that Germany should exit the euro. Here are their argument : Show nested quote +1. Asymmetries in the economic cycles.
While Germany was stagnating between 2002 and 2005, the rest of the Eurozone was growing. Since the financial crisis, the opposite has been happening. Same with unemployment. Between 2002 and 2005, it shot up in Germany but declined in the rest of the Eurozone. Since 2008, it dropped in Germany while it skyrocketed in the rest of the Eurozone to a record high of nearly 15%.
This asymmetry is based on credit. In Germany, growth or lack thereof is largely independent of credit. But in the rest of the Eurozone, growth is predicated on massive credit expansion. So when credit ballooned before the financial crisis, the economies grew. When credit collapsed afterwards, the economy sank into a quagmire. Due to this asymmetry, the report argues, a common monetary policy is not appropriate for the Eurozone.
2. Weakening economic ties between Germany and the rest of the Eurozone.
After the financial crisis, German exports to the rest of the Eurozone dropped. But Germany didn’t just throw in the towel and sink into a long recession. Instead, it pushed hard to export to other parts of the world. So 2012 was a record year for German exports, but the share of exports to the rest of the Eurozone dropped from around 45% before the financial crisis to about 35%. These weakening trade ties indicate apparently that Germany is more attached to the rest of the world than the Eurozone.
3. Structural asymmetries.
There are a number of them. For example, 35% of GDP in Germany is associated with manufacturing and industrial services, compared to 20% for the rest of the Eurozone. The labor market in Germany is more flexible than in some of the rigid situations elsewhere. The poverty rate in Germany is rising faster than in the rest of the Eurozone – from 11% in 1999 to 16.1% in 2012, as opposed to the rest of the Eurozone, where it rose “only” from 15.7% to 17.6%. And the savings rate in Germany, with its rapidly aging population, is higher than in the rest of the Eurozone. (This is a particularly spurious argument: with the exception of France, most Eurozone countries have rapidly aging populations, Italy faster than any other.)
4. Different needs in exchange rates.
Germany “prefers” a strong euro, the report finds, and the rest of the Eurozone needs a week euro to become competitive in the export markets.
5. Incapacity in the rest of the Eurozone to impose “internal devaluation.”
“Internal devaluation” has been the hallmark of efforts to get the southern European economies off the ground: slash wages to make production more competitive. Cutting household income was supposed to resolve the crisis. This happened in Spain in a huge way, to the detriment of Spanish workers, and with at best mixed results for the economy. But this cannot happen in France, where the cost of labor, mostly due to taxes on labor, has reached extremes. The people won’t sit still and allow their wages to be slashed, and the government can’t live without the cash flow it siphons off from payrolls. So for France, the only solution forward would be a massive devaluation. http://cib.natixis.com/flushdoc.aspx?id=73799
I think the response to the notion that the ECB can do little is that it has already done so much outside the scope of monetary policy to begin with. Seeing how a lot of the loans/aid given to troubled nations came with strings attached to austerity, simply reversing that agreement could possibly give a lot more potential for inflation. It simply doesn't have the will to do so, likely because of its close ties to Germany.
Also, there are definitely reasons why Germany could escape the EU and do perfectly fine on its own (for now).
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On May 10 2014 03:32 aksfjh wrote:Show nested quote +On May 10 2014 00:29 WhiteDog wrote:On May 09 2014 23:44 aksfjh wrote:...
So what happened? Well, recall the problem. A bunch of countries that had previously been considered substantially less creditworthy than Germany joined the euro, and immediately saw a huge reduction in their borrowing costs. That led to irresponsible budgeting in Italy, a lot of private borrowing in Spain and Ireland, and a bit of both in Greece. Then after the global financial crisis hit, all these countries wound up in recession.
The bad economic climate started to push budget deficits up. And it became clear that contrary to the hopes of international investors, the German government had no interest in guaranteeing southern Europe's debts. The combination of rising deficits and reduced confidence led investors to demand higher interest rates to lend money to these governments. The higher interest rates made the deficits worse. A downward spiral was under way.
...
Eurozone officials have preached a gospel of budget austerity and "structural reform" to ailing economies as the cure for the crisis. By making central bank assistance contingent on willingness to adopt a plan that the European Central Bank approves of, the ECB has in part managed to turn this into a self-fulfilling prophesy. Everything has gotten better since governments agreed to the ECB plan, and a government that tried to abandon austerity would likely find itself abandoned by the ECB and thus worse off than ever.
...
The only way to regain competitiveness is for the sheer weight of unemployment to start dragging nominal wages downward across the economy. In an enthusiastic, well-behaved country like Latvia or Ireland this is a grinding medium-speed process. In a reluctant country like Spain or Greece it's agonizingly slow. Either way, it's much more painful than a currency depreciation because only some prices adjust — people with old debts or long-term contract obligations get totally screwed.
These problems of excessively valuable money used to occur globally during the gold standard era whenever there was a slowdown in global gold mining. In a famous 1896 speech, presidential candidate William Jennings Bryan alleged that American farmers and workers were being crucified on a cross of gold — made to endure avoidable suffering for the sake of the principle that gold was the only true judge of wealth. Today, unemployed Irish, Greek, Spanish, Italian, and Portuguese people are being crucified on a cross of euros. The single currency project has political motives that go beyond macroeconomic management, and keeping the project together requires someone's interest to be sacrificed.
...
For the crisis countries to recover without independent currencies, local nominal prices need to fall so that those countries can improve their competitiveness. Mathematically, for that to work while the eurozone as a whole averages 2 percent inflation requires that inflation be higher than 2 percent somewhere else. That would be uncomfortable for German citizens and politicians, and the ECB is widely thought to cater to German preferences (for example it is located in Frankfurt, Germany rather than in Brussels with the other major European Union institutions).
But this explanation only gets us so far. German inflation has been above average recently, but still below the ECB's 2 percent target.
...
SourceSome excerpts from a good article on the Eurocrisis. It lays it out in full from the point of view of many economists (and myself). Pretty good piece, but I believe it is giving too much power to the ECB's capacity to change anything. What is the ECB's power on exchange rate with the commercial excedent Germany has ? Almost zero. Can it really devaluate or ask for more inflation considering the impact it would have on German economy ? Really the place of central banks in economic thinking is completly messed up since monetarists. There are a some works, most notably Natixis' work on the euro zone, that shows that beyond all this, there is some kind of macroeconomic fracture between germany and the rest of the euro zone, and they even defend the idea - on "macroeconomic basics" only - that Germany should exit the euro. Here are their argument : 1. Asymmetries in the economic cycles.
While Germany was stagnating between 2002 and 2005, the rest of the Eurozone was growing. Since the financial crisis, the opposite has been happening. Same with unemployment. Between 2002 and 2005, it shot up in Germany but declined in the rest of the Eurozone. Since 2008, it dropped in Germany while it skyrocketed in the rest of the Eurozone to a record high of nearly 15%.
This asymmetry is based on credit. In Germany, growth or lack thereof is largely independent of credit. But in the rest of the Eurozone, growth is predicated on massive credit expansion. So when credit ballooned before the financial crisis, the economies grew. When credit collapsed afterwards, the economy sank into a quagmire. Due to this asymmetry, the report argues, a common monetary policy is not appropriate for the Eurozone.
2. Weakening economic ties between Germany and the rest of the Eurozone.
After the financial crisis, German exports to the rest of the Eurozone dropped. But Germany didn’t just throw in the towel and sink into a long recession. Instead, it pushed hard to export to other parts of the world. So 2012 was a record year for German exports, but the share of exports to the rest of the Eurozone dropped from around 45% before the financial crisis to about 35%. These weakening trade ties indicate apparently that Germany is more attached to the rest of the world than the Eurozone.
3. Structural asymmetries.
There are a number of them. For example, 35% of GDP in Germany is associated with manufacturing and industrial services, compared to 20% for the rest of the Eurozone. The labor market in Germany is more flexible than in some of the rigid situations elsewhere. The poverty rate in Germany is rising faster than in the rest of the Eurozone – from 11% in 1999 to 16.1% in 2012, as opposed to the rest of the Eurozone, where it rose “only” from 15.7% to 17.6%. And the savings rate in Germany, with its rapidly aging population, is higher than in the rest of the Eurozone. (This is a particularly spurious argument: with the exception of France, most Eurozone countries have rapidly aging populations, Italy faster than any other.)
4. Different needs in exchange rates.
Germany “prefers” a strong euro, the report finds, and the rest of the Eurozone needs a week euro to become competitive in the export markets.
5. Incapacity in the rest of the Eurozone to impose “internal devaluation.”
“Internal devaluation” has been the hallmark of efforts to get the southern European economies off the ground: slash wages to make production more competitive. Cutting household income was supposed to resolve the crisis. This happened in Spain in a huge way, to the detriment of Spanish workers, and with at best mixed results for the economy. But this cannot happen in France, where the cost of labor, mostly due to taxes on labor, has reached extremes. The people won’t sit still and allow their wages to be slashed, and the government can’t live without the cash flow it siphons off from payrolls. So for France, the only solution forward would be a massive devaluation. http://cib.natixis.com/flushdoc.aspx?id=73799 I think the response to the notion that the ECB can do little is that it has already done so much outside the scope of monetary policy to begin with. Seeing how a lot of the loans/aid given to troubled nations came with strings attached to austerity, simply reversing that agreement could possibly give a lot more potential for inflation. It simply doesn't have the will to do so, likely because of its close ties to Germany. Also, there are definitely reasons why Germany could escape the EU and do perfectly fine on its own (for now).
Yes but I think the point is, more than considering that the ECB has been kinda biaised towards Germany, that its position is simply impossible to keep considering that the european union, and more than that Germany's economy in relation to the rest of the euro zone economy is so different.
I'm all to criticise Germany, but to be fair, they did what they had too and not what benefit them the most.
And every country in the eurozone can live without the euro.
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Cocaine Sales to Boost Italian GDP in Boon for Budget
Italy will include prostitution and illegal drug sales in the gross domestic product calculation this year, a boost for its chronically stagnant economy and Prime Minister Matteo Renzi’s effort to meet deficit targets.
Drugs, prostitution and smuggling will be part of GDP as of 2014 and prior-year figures will be adjusted to reflect the change in methodology, the Istat national statistics office said today. The revision was made to comply with European Union rules, it said.
Renzi, 39, is committed to narrowing Italy’s deficit to 2.6 percent of GDP this year, a task that’s easier if output is boosted by portions of the underground economy that previously went uncounted. Four recessions in the last 13 years left Italy’s GDP at 1.56 trillion euros ($2.13 trillion) last year, 2 percent lower than in 2001 after adjusting for inflation.
“Even if the impact is hard to quantify, it’s obvious it will have a positive impact on GDP,” said Giuseppe Di Taranto, economist and professor of financial history at Rome’s Luiss University. “Therefore Renzi will have a greater margin this year to spend” without breaching the deficit limit, he said.
A spokesman for the Finance Ministry declined to comment on the new system.
The change in methodology will also bring research and development and arms into the GDP calculation. R&D, now considered investment spending, was previously excluded because it was classified as an intermediate cost.
Source
Sounds legit.
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wow, if they include the complete black market they might outperform the USA this year
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ECB unveils radical moves to fight deflation and lift economy
Mario Draghi became the first major central banker to cut a key interest rate below zero as he unveiled a series of radical measures to stave off a crippling bout of deflation, and signalled his willingness to take further action.
As well as interest rate cuts, the European Central Bank president announced a package of up to €400bn of cheap loans for eurozone banks in an attempt to boost lending to the region’s credit-starved small businesses.
Mr Draghi said that policy makers were still willing to embark on some kind of quantitative easing if ultra-low inflation persists. “Are we finished? The answer is no.” He said the ECB had “decided to intensify preparatory work related to outright purchases” of asset-backed securities, a limited form of bond buying.
“This is really a turning point in the situation of the eurozone,” said Carlo Messina, chief executive of Italian bank Intesa Sanpaolo. He pointed to the ECB’s decision to stop draining liquidity relating to its bond purchases and to the boost that could come from a lower exchange rate.
The combination of the action combined with a signal the bank is prepared to consider QE prompted a rally in global equities, although the euro rebounded after touching a four-month low.
Shares on the FTSE Eurofirst 300, which measures the eurozone’s biggest listed companies, increased by 0.4 per cent, just short of a six-year closing high, while borrowing costs in the region’s indebted periphery tumbled.
Bond yields on benchmark 10 year bonds issued by Spain, Ireland and Italy fell to a record low in the aftermath of Mr Draghi’s remarks, while the premium demanded by investors to compensate them for the risk of investing in Spanish debt instead of German Bunds fell to levels last seen in 2010.
Germany’s Xetra Dax 30 broke above 10,000 points for the first time after Mr Draghi revealed the full extent of the ECB’s measures in his press conference. The euro fell by 0.3 per cent on the day hitting $1.3502 before going back to its initial level.
The overall market response indicated that investors felt the ECB had been “accommodating” according to Steven Major, global head of fixed income research at HSBC. “It is impressive, given the expectation that had built up before today, that the ECB did not disappoint,” he said.
Carsten Brzeski, economist at ING, said the ECB had ignited “monetary policy fireworks”.
The ECB cut its main refinancing rate to 0.15 per cent, from 0.25 per cent and its deposit rate from zero to minus 0.1 per cent, making it the first major central bank to venture into negative territory.
None of the Federal Reserve, Bank of Japan or Bank of England have tried this, although the ECB hopes the move will lift inflation by weakening the euro and spurring lending in the bloc’s troubled periphery. All of the governing council’s 24 members backed the package.
Acknowledging that almost all of policy makers’ conventional tools were exhausted, the ECB president indicated the governing council would shift to a large-scale programme of asset purchases should inflation remain at worryingly low levels.
Mr Brzeski said: “With rate cuts, new liquidity measures, and some hints at further unconventional measures, the ECB presented a policy package of last hope. This was as far as it could go without getting lost in the uncharted territory of QE.”
The ECB cut its eurozone growth forecast for 2014 to 1 per cent and revised down its forecasts for inflation to 0.7 per cent in 2014, 1.1 per in 2015 and 1.4 per cent in 2016.
Mr Draghi said the ECB will offer cheap loans, known as a targeted longer-term refinancing operations (TLTROs), which will resemble the structure of the Bank of England’s Funding for Lending Scheme. There will be four TLTROs, all maturing by September 2018, worth up to €400bn.
Unlike the Bank of England, however, the ECB has decided to exclude mortgage lending from the scheme.
“The ECB has acted perhaps more slowly than other central banks but with a more targeted approach,” said Alberto Gallo, head of credit research at RBS.
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-0.1% is hardly significant though. It's more of a signal of a willingness to do whatever it takes to combat inflation in line with his remark to do whatever it takes to save the euro.
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On June 06 2014 09:05 RvB wrote:
-0.1% is hardly significant though. It's more of a signal of a willingness to do whatever it takes to combat inflation in line with his remark to do whatever it takes to save the euro.
They have yet to announce the entire package. Many experts, and I'm incline to believe them, says that ECB is about to throw everything they have including the sink, only they want it to do it slow as to not create instability. Once these measures has taken effect and they see that the market still is stable many believe that ECB will do quantitative easing next.
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EPT
