Eurozone banks are unable to support real economy’s dawning growth

Olli Rehn, Vice-President of the European Commission responsible for Finance and the euro, Jeroen Dijsselbloem, president of Eurogroup, Valdis Dombrovskis, Latvian Prime Minister, Andris Vilks, Latvian Minister for Finance, and Ilmārs Rimšēvičs, Governor of the Bank of Latvia, all holding giant false 1 Euro coins at the effigy of Latvia (from left to right). (EC Audiovisual Services, 09/07/2013).

Olli Rehn, Vice-President of the European Commission responsible for Finance and the euro, Jeroen Dijsselbloem, president of Eurogroup, Valdis Dombrovskis, Latvian Prime Minister, Andris Vilks, Latvian Minister for Finance, and Ilmārs Rimšēvičs, Governor of the Bank of Latvia, all holding giant false 1 Euro coins, in the festivities to celebrate the enlargement of the euro area to include Latvia (from left to right). (EC Audiovisual Services, 09/07/2013).

Industrial production in the European Union is definitively in a virtuous path as statistical data confirm business managers’ assessment, that their order books are as full as they have never been in the past. The same is true for industrial production. According to a press release published yesterday by Eurostat – the EU statistical service – “in June 2013 compared with May 2013, production of durable consumer goods grew by 4.9% in the euro area and by 4.2% in the EU27”. Also on monthly comparison base capital goods increased by 2.5% in both zones in June 2013, while during this same month compared with June 2012, capital goods grew by 3.3% in the euro area and by 3.2% in the EU27.

This is a statistically sound confirmation of an impressive betterment of economic sentiment in the euro area and the EU in general. Only some days ago the European Commission had issued a note saying, that in July the Economic Sentiment Indicator (ESI) increased by 1.2 points in the euro area (to 92.5) and by 2.4 points in the EU27 (to 95.0), continuing the upward trend observed since May. According to the same source the ESI’s increase was based on improved confidence among consumers and managers in industry, services and retail trade. The Commission confirmed that “Economic sentiment improved in four out of the five largest euro area economies, i.e. Italy (+2.9), Spain (+1.2), France (+1.2) and Germany (+0.7), while it deteriorated in the Netherlands (-2.0)”.

Industry grows

The managers of manufacturing firms, who participate in the European Commission’s business sentiment surveys, were also adamant about the betterment of economic climate in Eurozone and the EU’s as a whole. On that occasion the Commission’s statement for the month of July 2013 business sentiment. went like that, “In the euro area, managers’ assessment of developments in overall new orders improved markedly after last quarter’s deterioration. It is noteworthy that July’s reading of the number of months assured by orders on hand marked a new historic height in the EU…..The combination of positive developments in new orders, a rise in the number of months assured by orders on hand (in the EU even to historically high levels) and increasing capacity utilisation appears to point to a pending exit of the manufacturing sector from recession”.

In short there is no doubt that the European Union in general and Eurozone in particular are about to abandon their long-term recession. There is also good news even from the labour market. According to a recent Eurostat press release the EU27 unemployment rate was 10.9% in June, down from 11.0% in May. Unfortunately, on a yearly comparison base, unemployment was up in June.

This doesn’t change however the tangible betterment of economic climate In Europe during the past two or three months. In a fast changing world yearly comparisons may fail to describe short-term realities. Apparently this is the case with the European Union. Capital markets share this view. Over the past two weeks all major EU stock exchanges have recorded sizeable gains, despite the negative news about Eurozone banks.

The banks can’t

No to forget that EU banks have currently decided to continue reducing their size both in terms of assets as well as by cutting down the number of their branches. In this respect Eurozone banks are expected to reduce also their lending and borrowing. Given that EU’s real economy is thought to have entered into a growth period albeit slow, euro area’s banking sector remains its weak point.

Again the banks prove once more to be Eurozone’s dark spot, not being able to transmit to the real economy the abundant and almost zero cost liquidity offered to them by the European Central Bank. The excessive size of the lenders does not allow them to perform their duty towards the real economy, because they have overly exposed themselves to risky placements using borrowed money. Now that the real economy is about to expand and needs loans, the banks are unable to honour their basic mandate, being obliged to downsize in every respect. Lenders not only are unable to give out more loans but actually have to shrink quickly, selling assets (loans and placements) of around €3 trillion. Their size is currently three times larger than Eurozone’s GDP. In comparison the US banks are around 1.8 times the country’s GDP.

Advertising

the sting Milestone

Featured Stings

Can we feed everyone without unleashing disaster? Read on

These campaigners want to give a quarter of the UK back to nature

How to build a more resilient and inclusive global system

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

The Red Cross’s health chief explains how business must respond to coronavirus

Ben Stiller’s new role, more about hope than humour, as he’s named Goodwill Ambassador for UNHCR

Eurozone’s north-south growth gap to become structural

JADE Testimonial #3: Sebastian @ Fundraising

Can Greece’s devastating economy deal with the migration crisis?

Coronavirus update: UN addresses school disruptions, suspends public access to New York Headquarters

Mozambique: UNICEF Goodwill Ambassador Orlando Bloom meets the child cyclone survivors who’ve lost everything

New seat projections for the next European Parliament EU28

How to have a good Fourth Industrial Revolution

How water scarcity triggers the refugee crisis – and what tech can do to solve it

Davos participants call for digital trade deal

Protecting whistle-blowers: new EU-wide rules approved

Food safety: Enhancing consumer trust in EU risk assessment and authorisation

The European Youth explains the age gap in European business in the 21st century

World ‘not yet on track’ to ensure children a better future: UN rights chief

Security Council welcomes Yemen breakthrough, but lasting peace remains a ‘daunting task’

This Pacific island has banned fishing to allow the marine ecosystem to recover

Wednesday’s Daily Brief: mental health, conflict prevention, Ebola in Uganda, Sudan protests, child labour

European Court of Justice to Google: It is #righttobeforgotten but not #righttoberemembered

Civil society organisations disenchanted with “Youth Guarantee”

A Sting Exclusive: the EU referendum is about fighting for an outward-looking Britain

A Sting Exclusive: “Our ambition is by 2020 Indonesia to become an emerging power of World’s Maritime Access”, reveals the Chargé d’Affaires at the Embassy of Indonesia in Brussels, treating WEF, ASEAN and EU-Indonesia relations on the eve of the World Economic Forum East Asia 2015 in Jakarta

COP21 Breaking News_04 December: Launch of CREWS, climate risk & early warning systems

How can we make entrepreneurship serve the greater good?

This Brooklyn farm company is training a new generation of urban farmers

EU-wide rules for safety of drones approved by European Parliament

Uzbekistan wins its long fight against malaria, as global rates continue to rise

Commission reports on progress in risk reduction in the Banking Union and calls for faster progress on Capital Markets Union ahead of EU Leaders’ meetings

G7 summit: Trump Vs. G6 leaders on trade and climate change

Finland is a world leader in clean energy. Here’s what’s driving its success

Suicide in postpartum depression

Brexit preparedness: EU completes preparations for possible “no-deal” scenario on 12 April

MEPs adopt new Fisheries Partnership with Morocco including Western Sahara

Venezuela must guarantee judicial impartiality – UN human rights expert

Parliament in favour of lifting visa requirements for Kosovars

Fighting against the Public Health System dismantling means guaranteeing assistance to all

A poor kid died just now. Do you know why?

Lifting the lid on the value of a company’s human capital

Syria: A bloody tracer of Trump – Putin rapprochement

Mali peace process in a ‘critical phase’, says head of UN Mission

Why Sweden’s cashless society is no longer a utopia

China and China-EU Relations in the New Era

Three trends shaping the future of mobility in 2020

Lorenzo Natali Media Prize 2019: winners of EU’s development journalism award unveiled

UN committed to helping Haiti build better future, says Guterres, marking 10-year anniversary of devastating earthquake

EU strengthens cooperation with Ethiopia

How the United States can win back its manufacturing mojo

First do no harm. Why healthcare needs to change

Guinea-Bissau spotlights threats of organized crime, Sahel terrorism in speech to UN Assembly

New energy security framework will help meet growing needs in East Africa, sustainably – UN economic wing

Why is the EU launching a doomed policy in stopping immigrant waves? What are the real targets?

Pervasive corruption costs $2.6 trillion; disproportionately affects ‘poor and vulnerable’ says UN chief

European Commission: the LED lights of your Audi A6 shall save our planet

4 things to know about the state of conflict today

Alexis Tsipras ready to test Eurozone’s political sturdiness; Up to what point?

Biggest London City Banks ready to move core European operations to Frankfurt or Dublin?

Yes, together we can make a change! YO!Fest and EYE 2016

How to stop plastic pollution at source

How technology and play can power high-quality learning in schools

How the digital economy is shaping a new Bangladesh

More Stings?

Comments

  1. Very energetic blog, I enjoyed that bit.

    Will there be a part 2?

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