Eurozone: In vicious cycle of disinflation and unemployment?

European Parliament. Family photo of the Citizens Agora on unemployment: Giving young people a say. (EP Audiovisual Services, 08/11/2013).

European Parliament. Family photo of the Citizens Agora on unemployment: Giving young people a say. (EP Audiovisual Services, 08/11/2013).

Eurostat, the EU statistical service, announced late yesterday evening that in December unemployment remained at the persistently high level of 12% since October, while inflation took a new downwards turn to 0.7% in January, from 0.8% in December. It’s difficult to say which one of the two developments is more alarming. On both accounts Eurozone has become the target of strong criticism from international economic organisations like the IMF and OECD.

In any case, the new decrease of the inflation rate justifies those who fear that Eurozone runs the risk of ending up in the negative part of the chart, where deflation (negative inflation) would threaten all euro denominated values. ECB’s President Mario Draghi has repeatedly warned that inflation is bound to remain at very low levels for a long time, far away from central bank’s target, set at below but close to 2%. This persistent tendency of disinflation (falling inflation) has attracted heavy criticism on the grounds that Eurozone doesn’t do enough to support internal demand and thus lead its own economy out of recession and the world to a higher level of growth. The IMF and the US are warning Europe about that for a long time.

Falling inflation

In detail now, Eurozone inflation rate in January fell because of a new retreat of energy prices. Eurostat stated that energy prices are estimated to have fallen by 1.2% during the first month of the year. However, a more close reading of the inflation components as published by Eurostat, reveals that prices of ‘Non-energy industrial goods’ in January were increasing with a mere 0.2%, down from 0.3% in December.

This category of goods represents the heart of every developed economy and developments there monitor the deeper long-term tendencies in its productive structures. Consumer goods price developments in the sectors of ‘Food, alcohol & tobacco’ and ‘Services’ are influenced by factors like, taxation, weather conditions and administrative and trade regulations, which do not represent the real conditions in the productive apparatus. In short, the news coming from the ‘Non-energy industrial goods’ sector are more alarming than the developments around the overall inflation rate.

Unemployment ogre

Passing to the unemployment ogre, the unacceptably high overall 12% doesn’t tell the whole story. Among the Member States, the lowest unemployment rates were recorded in Austria (4.9%), Germany (5.1%) and Luxembourg (6.2%), and the highest in Greece (27.8% in October 2013) and Spain (25.8%). According to Eurostat “Compared with a year ago, the unemployment rate increased in fourteen Member States, fell in thirteen and remained stable in Sweden. The highest increases were registered in Cyprus (13.9% to 17.5%), Greece (26.1% to 27.8% between October 2012 and October 2013), the Netherlands (5.8% to 7.0%) and Italy (11.5% to 12.7%)”.

As it is easily understood, increasing unemployment doesn’t only haunt the ‘usual suspects’, but also core Eurozone economies like Holland. Still, the main policy lines in the euro area remain restrictive. Austerity always reigns in the entire Eurozone, and countries like Greece, Portugal and Italy are confronted with critical political destabilisation and social unravelling. Unfortunately, it seems that despite the fact that the political situation has entered the accident prone area and the social tissue is torn to pieces, there are no signs of policy change.

Not even the zeroing of deficits, in the fiscal front and the foreign account in member states like Greece, Italy and Spain don’t seem enough to bring about a policy U-turn, from austerity to growth supportive measures. All in all, it’s unclear yet what it takes to change the minds of Eurozone’s policy makers in Berlin, Paris and Brussels.

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

Brexit: reciprocal visa-free access for EU and UK nationals

Syria still suffering ‘staggering levels’ of humanitarian need, Security Council hears

Eurasian Union begins: the giant modelled on the EU is Moscow’s biggest challenge

An EU Summit without purpose

Six steps that can help us to tackle homelessness

The space internet race is dawning. Here’s what to expect

Worldwide UN family celebrates enduring universal values of human rights

Philanthropy is at a turning point. Here are 6 ways it could go

Violence in North and West Africa increasingly targeting civilian and border areas – OECD/SWAC

The European Parliament x-rays the troika’s doings

7 ways business can be agents for peace

Newly licensed vaccine, ‘milestone in the fight’ against Ebola in Africa, UN health agency

Main results of EU-Japan summit which took place on 25/04/2019 in Brussels

Managers’ pay under fire

Our food system is pushing nature to the brink. Here’s what we need to do

UN ‘comes together in sadness and solidarity’ to honour staff who died on board Ethiopian Airlines flight

New EU short-stay visas: more advantages for legitimate travellers

The Parliament sets the way for the European Banking Union

Q and A: This is how stakeholder capitalism can help heal the planet

Who is first (and last) in the race to build a workforce fit for the future?

Advanced economies still have plenty of work to do to reach Sustainable Development Goals

Not faith, ‘but those who manipulate the faithful’ driving wedge between religions, UN-backed forum in Baku told

‘Stay together and step up’ action to meet Global Goals, ECOSOC President tells development forum

EU Trade Ministers come together in a desperate attempt to save TTIP

People are scared of artificial intelligence – here’s why we should embrace it instead

The EU Parliament blasts the Council about the tax dealings of the wealthy

Refugee crisis update: Commission still in panic while Turkey is to be added in the equation

Climate change and health: a much needed multidisciplinary approach

EU-US trade deal: Europe to Americanize its social model?

Merkel had it her way with the refugees & immigrants but can Greece and Turkey deliver?

‘Global trust’ declining, ‘our world needs stepped-up global leadership’

Progress made at COP25, despite lack of agreement to increase climate ambition

UN food relief agency airlifts aid to DR Congo province hit by Ebola outbreak

Snowden is the “EU nomination” for this year’s Oscars

Why the Fourth Industrial Revolution needs more arts graduates

Commission reports on progress made by Albania and North Macedonia

In the future, no one should be excluded from healthcare

What makes Copenhagen the world’s most bike-friendly city?

Rohingya refugee shelters ‘washed away’ in Bangladesh monsoon rains: UN agency

Zhua Zhou: Choosing The Future

ECB doesn’t dare touch Eurozone’s big banks

These tech start-ups are changing what it means to farm

Human trafficking, slavery reports and health of migrants in Libya

How smartphones can close the global skills gap for billions

This entrepreneur is helping farmers get food to consumers during lockdown

Can the next financial crisis be avoided?

Record-breaking heatwaves killed about 1,500 people in France

With potential to boost profits by up to 20 per cent, a woman’s place is at work, says UN labour agency

Could Europe become the first climate-neutral continent?

EU-Belarus: MEPs back agreements on readmission and visa facilitation

Rights of ‘gilets jaunes’ protesters in France, ‘disproportionately curtailed’, say UN independent experts

We must stop choking the ocean with plastic waste. Here’s how

FROM THE FIELD: One teen’s journey from refugee camp to US school principal

Britain’s May won the first round on the Brexit agreement with the EU

What cryptocurrencies will do to the integrity of politics

Who is to pay for Trump’s trade war against China?

UN chief ‘deeply saddened’ by Ethiopia plane crash which killed 157, including at least 21 UN workers

EU-US Privacy Shield data exchange deal: US must comply by 1 September, say MEPs

Declaring commitment to ‘peace and stability’ for Libya, top UN envoy steps down as stress takes its toll

US cities are going to keep getting hotter

More Stings?

Advertising

Comments

  1. Hi, i think that i saw you visited my website so i got here to go back the
    prefer?.I’m trying to in finding issues to improve my website!I assume its
    adequate to make use of some of your ideas!!

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