Eurozone plans return to growth

From left to right: Pierre Moscovici, French Minister of Finance; Christine Lagarde, Managing Director of the IMF; Wolfgang Schauble, German Federal Minister for Finance; Maria Fekter, Austrian Federal Minister for Finance, (Council of the European Union photographic library).

From left to right: Pierre Moscovici, French Minister of Finance; Christine Lagarde, Managing Director of the IMF; Wolfgang Schauble, German Federal Minister for Finance; Maria Fekter, Austrian Federal Minister for Finance, (Council of the European Union photographic library).

After Dr Wolfgang Schaeuble, the German minister of Finance stated that it was a fair decision by Brussels to give France two more years to straighten up its fiscal accounts, the climate in Eurozone has changed from winter to spring. Up to now Paris was at odds with Berlin over the severe austerity policies imposed on Eurozone, as the only effective cure for the single money zone’s financial problems. The French President Francois Hollande had problems at home, with the economy oscillating around zero if not receding unable to offer more jobs, and his own governing socialist party on roof tops against the Germans.

Now all Eurozone countries with stagnation or recession problems, including the three programme member states (Greece, Portugal Ireland) have received from Brussels two more years, to straighten their fiscal deficits. This must have been realized with the consent of Germany, as Schaeuble left to be understood.

The idea is that in cutting down government spending during the past two to three years, almost all Eurozone economies at the exemption of Germany are now either stagnating or receding, while unemployment skyrockets. Incidentally Hellastat, the Greek statistical service announced yesterday that unemployment in this country reached 27% in February compared to 26.7% in January this year and 21.9% in February 2012. This dreadful development is not confined only to Greece. Spain suffers of exactly similar unemployment rates while Portugal, Ireland, France and even Holland are seeing their numbers of workers without a job at dangerously high levels.

Unfortunately, this is not a tendency with visible end or reversal, if the same policies were to be followed throughout this year as in 2012. The European Commission in its spring forecast predicts GDP losses for 2013 and only 0.5% growth towards the second half of 2014. Understandably this tiny 0.5% may very easily become negative, if the austerity policies are to be continued with the same vigour as in 2012. Recession has actually now touched even Germany, with the country’s business community being in negative sentiment.

Compromise for growth

Seemingly in view of all that Berlin has diluted a bit its bitter medicine, as Schaeuble was quoted agreeing with the Brussels EU Commission, in giving everybody two more years of tolerance to bring down their excessive fiscal deficits. It’s not clear however if the German minister of Finance is authentically expressing Berlin’s governing elite. In the past this minister was reprimanded by Chancellor Angela Merkel for being ‘generous’ while negotiating the Cyprus package. In any case Germany cannot retract from what Schaeuble said.

As a result the present political and economic conjuncture in Eurozone hinges on a short-term compromise between austerity loving Germany on the one side and on the other almost all the other Eurozone countries. Seemingly if the economies react positively during the next months after this slight dilution of austerity, the climate will change.

Markets help

The sentiment in capital markets is visibly positive to this new turn of Eurozone towards a bit more relaxed policy direction, and Eurozone sovereigns can borrow at reduced interest rates. This week Portugal returned after two years to capital markets, placing easily a 10 year government bond of around €3.5 billion at an interest rate of 5.25%.

Things are much more positive for Ireland. The tenth report on the country’s economy drafted by the troika of creditors and auditors comprising the Commission, the ECB and the IMF, was published yesterday and was very encouraging. The report went as far as to open for Ireland the exit door from the ‘programme’. Not to forget that Ireland has already returned very successfully in the capital markets, with an auction of a 10-year benchmark bond of which the yield declined to a low of around 3½ percent. The report said that, the three “teams (Commission, ECB, IMF) also discussed with the Irish authorities preparations for programme exit”.

At the same time Greece is targeting this year to zero the prime deficit (without interest rate payments) in the government budget. If this effort bares fruits it will trigger a new haircut on the country’s huge debts, bringing it from presently at 165% of the GDP to sustainable levels, probably lower than 120%. The Greek minister of Finance, Giannis Stournaras, said yesterday that his country may return to economic growth and the capital markets before the end of next year.

As for Italy and Spain, they are expected both to make good use of the two more years given to them in order to bring to acceptable levels their budget deficits and return to growth. At the same time the European Commission and the European Central Bank show a distinct interest for the Small and Medium Enterprises. The target is that the SMEs get access to loans and adequate financial support. Those plans are expected to effectively aid the south Eurozone countries, to restart their economies.

All in all Eurozone is not standing idle now and the dawning new compromise between the Germany and the rest of the Eurozone may open, if not a new growth period, at least to reverse the downside trend.

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

the European Sting Milestones

Featured Stings

How to build a more resilient and inclusive global system

Stopping antimicrobial resistance would cost just USD 2 per person a year

FROM THE FIELD: Urban Mexico moves toward better livelihoods, cleaner cities

Attempt to defy international law over Golan Heights sovereignty ‘doomed to failure’ Security Council hears

A critical European young voice on Net Neutrality: the distance between Brussels and Washington

EU to gain the most from the agreement with Iran

IMF’s Lagarde: Ukraine must fight corruption

Euronest: delivering reforms is the best way forward for EU’s Eastern Partners

MEPs vote for upgrade to rail passenger rights

UN must bring more women police officers into the fold to be effective – UN peacekeeping official

It’s time to switch to a four-day working week, say these two Davos experts

The Chinese retail revolution is heading west

Europe, US and Russia haggle over Ukraine’s convulsing body; Russians and Americans press on for an all out civil war

EU budget: the Common Agricultural Policy beyond 2020

Gaza investigators call on Israel to review ‘rules of engagement’ as Gaza protest anniversary looms

5 lessons for social entrepreneurs on how to change the system

In an era of global uncertainty, the SDGs can be our guide

Niger population’s suffering ‘increasing with each passing month’: UN Refugee Agency

Why impoverishment and social exclusion grow in the EU; the affluent north also suffers

GSMA Mobile 360 Series –Digital Societies, in association with The European Sting

What does strategy have to do with a platform approach?

Nicaragua crisis: One year in, more than 60,000 have fled, seeking refuge

4 key ways countries can finance their SDG ambitions

7 amazing ways artificial intelligence is used in healthcare

A day in the life of a Venezuelan migrant in Boa Vista, Brazil

JADE Generations Club 2015: Knowledge vs. competences – Do not wait for the change to happen, but make it happen

WEF Davos 2016 LIVE: “CO2 is not the problem, it is the symptom”, the pilots who crossed the world using solar energy cry out from Davos

Minsk “ceasefire” leaves more doubts than safety, with EU already planning steps further

Educational disadvantage starts from age 10

EU Commission: The banks are not obliged to finance the real economy

Mark Zuckerberg will be at the European Parliament today to meet President Tajani and the political group chairpersons

If people aren’t responding to climate warnings, we need to change the message

Ten UN peacekeepers killed in a terrorist attack in northern Mali

How will the EU face the migration crisis when the Turkish threats come true?

What we can learn from Asia’s courts of the future

End of plastic water bottles at European Parliament

How do we build an ethical framework for the Fourth Industrial Revolution?

Have we reached peak smartphone?

Infringements: Commission adapts its calculation methodology for financial sanctions

Ahead of key UN-backed Marrakech migration conference, youth recount harrowing journeys

‘We face a global emergency’ over oceans: UN chief sounds the alarm at G7 Summit event

Europe eyes to replace US as China’s prime foreign partner

From cheeseburgers to coral reefs, the science of decision-making can change the world

Two peacekeepers killed in an attack against UN convoy in Mali

More women and girls needed in the sciences to solve world’s biggest challenges

Neelie Kroes at the European Young Innovators Forum: Unconvention 2014

EU-UK: A deal synonymous to ‘remain’, England pays the Irish price

An alternative view of Globalization 4.0, and how to get there

Memoirs from a unique trip to China: “my new old dragon” (Part II)

‘The welfare of the Libyan people’ the UN’s sole agenda for the country, says Guterres in Tripoli

ECB should offer more and cheaper liquidity if Eurozone is to avoid recession

Eurozone closer to a deflation – stagnation trap

EU attempts to make new deal with Turkey as relations deteriorate

Afghanistan extends ceasefire with Taliban; UN urges both sides to work towards lasting peace

Why global collaboration is needed to protect against a new generation of cyber threats

It’s not just the protests. Here’s how young people are helping the planet

Has Germany rebuffed ECB on the banking union?

Why we need both science and humanities for a Fourth Industrial Revolution education

Colombia: New Congress marks rebel group’s transition ‘from weapons to politics’, says UN

Can free trade deliver cheaper renewable energy? Ask Mexico

Gender Equality in Medicine: are we now so different from the Middle Ages?

More Stings?

Speak your Mind Here

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s