But the Eurozone economy is something else, after a sclerotic recovery that was barely, even in the Northern States, better than the UK's and hardly above inflation, all the main economic indicators are falling again. Business activity has slowed in May, Manufacturing output has slowed in May and inflation is also falling.
All the while there is QE in the background and record low interest rates. But today will see the European Central Bank cut from 0.25% to 0.1%. How this is supposed to make a difference is beyond me. Rates at that level are a signal not a tool.
The European banks are not lending and companies are not investing - as we can see from unemployment being at an 11.5% average across the Eurozone.
It really is a tale of woe and hard to see a way out when the economy is straightjacketed into the Euro. Spain, Italy and Greece desperately need a devaluation to write-off the debt and pain of recession and grow once more, albeit from a lower base - confidence is the name of the game and that is what the euro currency shreds. With markets so subdued even the German powerhouse is in trouble and a weakening China also means that Germany is not in the next 2-3 years going to lead some economic charge.
Of course in the UK we did not have the euro. A devaluation occurred, although that has now been made up in currency terms, QE was undertaken on a wide scale and the Bank of England pushed Funding for Lending and other such programmes to try and re-start the economic engine. It took a while but it seems to have been partially successful (the cancelling of austerity will be seen as the main failure in years to come).
The Euro crisis of 2011 seems like distant history now, but the reality of its malign influence is still with us and will be for years to come; The politicians of Europe have so much capital invested in the project that they will bankrupt the economy of the EZ before letting the Euro go. We maybe here sometime.
3 comments:
The ECB seems to be about the only policy response and its efforts are asymmetric, it will help some countries more than others and not necessarily those who need the help either.
The ECB should be dictating a grand bargain: radically loose monetary policy in return for deep structural reforms. But look across the Eurozone and there's almost no effort to improve competitiveness, tackle unemployment and other basics.
Yup....nailed it STE
Radically loose monetary policy is the skidmark of economic thinking. It screams 'panic' more loudly than CU screams 'Communism!'
Spain Italy and Greece need exactly the opposite of a debt write off. Their populations (their true wealth) will flow to where the social and legal allows them to flourish.
I find it exasperating that so many claim 'there's almost no effort to improve competitiveness, tackle unemployment' etc and then the same group are up in arms when the EU suggests that any movement in Britains economy is because its corpse is being humped by a stray dog (Thats you, Osbourne)!
I've noticed a pecularily English trait since I've come to this country: fairness.
I used to just smile and nod.
Since I've had children and had the school system explained to me its begun to impinge on me personally and I have to say its as stupid a notion as I've heard.
Children are taught to a level. As soon as that level is reached the child is abandoned and resources comcentrated on the 'weaker' students. I resent this removing of resources from my children onto some spud-headed munter who's never going to be able to read more than an X-Box controller. Why interfere with nature.
Likewise with QE, as STE lauds above. Why?
Why bail out bust companies and punters who demonstrably cannot thrive at the expense of new, small, dynamic, vibrant companies? Its fucking lunacy, is what it is.
Why do people who have already proved they cant run a company, get govt subsidy to do it? Car sales as well. Remember that was bailed out with govt money too.
The same (usually) London based arseholes then turn around and lament that there is a lack of entrepreneurial spirit or talent in the country to invest in.
Heres a clue dickheads - the investment comes first.
Wheres our Skype? Wheres the UKs Nokia or Apple or Samsung?
Its not just that there isnt one, in 25 years of the internet revolution THERE HAS NEVER BEEN ONE.
I am right and the rest of you are wrong. You are all talking your own book, nothing more.
At least have the balls to admit it.
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