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

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

the European Sting Milestones

Featured Stings

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

Ambassador Zhang Ming: “Work Together for a Better Globalization”

G20 LIVE: World Leaders in Turkey for G20 Summit. Global Economy will be discussed in Antalya

104 countries have laws that prevent women from working in some jobs

Yemen hospital airstrike under investigation amid resurgence of deadly cholera

Brexit: PM May must hush Boris Johnson to unlock the negotiations

Anti-vaccers: does the empty can rattle the most?

This is the critical number that shows when housing breaks down

Trump wants to implicate China in US attacks against global order

Wednesday’s Daily Brief: Diplomacy for Peace Day, #VaccinesWork, the cost of war on Afghans, tech and well-being

Here are four ways ASEAN can help entrepreneurs thrive – especially women

‘BioSolar Leaves’ are better at cleaning the air than trees, say the technology’s developers

This AI-powered app aims to help people with autism improve their social skills

Opposite cultures: Should it be a problem?

Why CFOs need to rethink what it means to create value

A Sting Exclusive: “Delivering on the Environmental Dimension of the new Sustainable Development Agenda”, Ulf Björnholm underscores from UNEP Brussels

Girls groomed for suicide missions fight back against the extremists of Lake Chad

EU and Indian flags at EU-India Summit in New Delhi last October (copyright EU 2018, Source: EC - Audiovisual Service)

India and the EU get close to revive talks on proposed Free Trade Agreement

Commuters in these cities spend more than 8 days a year stuck in traffic

Senior UN adviser sees ‘rare’ victory for humanitarian diplomacy as aid convoy reaches desert camp in Syria

Tourism offers much to the EU gets a little

Is Data Privacy really safe seen through Commissioner’s PRISM?

Agreement reached on screening of foreign direct investment for EU security

3 charts that show the economics of European football

Brexit negotiations: Can May’s Britain bounce back?

DR Congo Ebola centre attacks could force retreat against the deadly disease, warns UN health chief

This cheap, 700-year old solution could change billions of lives

EU Commission: Growth first then fiscal consolidation

UN-led Yemen ceasefire monitoring team gets ready to begin operations

GSMA Mobile 360: Connecting Cities, Connecting Lives, Connecting Europe

UN pushes for universal health care on International Day

The inhumane face of crisis mirrored in numbers

Apple® logo (copyright: Apple)

Apple takes further step into music: EU Regulators formally approve its planned Shazam acquisition

How to fight back against misinformation and polarization

Austerity lovers and ‘relaxationists’ fight over the EU budget

The umpteenth Italian overturn takes Renzi and PD to unprecedented victory at EU elections

A silent killer: the impact of a changing climate on health

A Sting Exclusive: “The EU Cybersecurity Act for a more secure and cyber-resilient European Digital Single Market”, by EU Commissioner Gabriel

First Western Sahara talks at UN in six years, begin in Geneva

Finnish Prime Minister calls for a more united EU of concrete actions

Macro-Financial Assistance: Europe’s way to control Ukraine?

IMF – World Bank meetings: US – Germany clash instituted, anti-globalization prospects visualized

Action needed to tackle stalled social mobility

Sweden to reach its 2030 renewable energy target this year

Capital Markets Union: Making it easier for insurers to invest in the real economy

The Parliament defies a politically biased Banking Union

Mental health in medical students: the deciphered quandary

16 foods that are good for you – and the planet

Technology can help solve the climate crisis – but it will need our help

The European Parliament hemicycle in Strasbourg (Copyright: European Union, 2017 / Source: EC - Audiovisual Service / Photo: Mauro Bottaro)

EU Parliament sends controversial copyright law reform back to discussion

EU approves disbursement of €500 million in Macro-Financial Assistance to Ukraine

How much more political is the new EU leadership? Does this include personal bend?

The unique role of business in building social good

‘Regional security and integration’ in Central Africa under threat, Security Council warned

The most unlikely innovators are changing ICT for development – it’s time we took notice

How tiny countries top social and economic league tables (and win at football, too)

Remembering Kofi Annan

A Europe that Protects: Commission calls for more efforts to ensure adoption of security proposals

How to end overfishing in the global South

ECB’s first flight in Eurozone’s banking universe will be just a reconnaissance

European Citizens’ Initiative: A game of much publicity and one big lie

More Stings?

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