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.

the sting Milestones

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

UN ‘determined to lead by example’ on disability rights: Guterres

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

The European Sting @ Mobile World Congress 2014, Creating What’s Next for the World. Can EU Policy follow?

Sri Lanka PM: This is how I will make my country rich by 2025

UK: Crawley group wins European Citizens’ Prize

Why is black plastic packaging so hard to recycle?

These 4 leaders are working to improve integration in Southeast Asia

EU4FairWork: Commission launches campaign to tackle undeclared work

New EU energy labels applicable from 1 March 2021

How to harness the energy of social innovators for an inclusive recovery

Brexit: No deal without marginalizing the hard Tory Eurosceptic MPs

EU Covid-19 Certificate: a European solution for free testing is needed

Outbreak of COVID-19: The third wave and the people

Drinking water: new plans to improve tap water quality and cut plastic litter

A better answer to the ventilator shortage as the pandemic rages on

New Mozambique storm rips off roofs, brings lashing rain as aid response kicks in

The hidden downside to ocean data and how to make it more sustainable

Two rhythms and a sharpened pencil: how art can help us heal and make sense of the world

Parliament supports European Green Deal and pushes for even higher ambitions

The European Union’s Balkan Double Standard

GSMA Reveals Global Partners for MWC21 Barelona

5 ways to be a better humanitarian

Further reforms needed for a stronger and more integrated Europe

Universal access to energy is a major challenge for the Arab world. Here’s why

Commission and Germany’s Presidency of the Council of the EU underline importance of the European Health Data Space

Energy of African youth ‘propelling’ new development era as UN ties bear fruit

Work Together to Build a New Type of International Relations and a Community with a Shared Future for Humanity

Deal agreed to protect consumers against misleading and unfair practices

Security Council urged to help spare Syrians from ‘devastation’

MWC 2016 LIVE: Getty chief says one in four new images from phones

Link between conflict and hunger worldwide, ‘all too persistent and deadly’, says new UN report

How a ‘fourth-sector economic strategy’ can help us build a better future for all

Amidst ‘high political tension’, UN chief appeals to G20 leaders for stronger commitment to climate action, economic cooperation

‘Think beyond farm jobs’ to reach sustainable development, UN agriculture chief advises African youth

UN rights experts call on Russia to release Ukrainian film-maker whose life is in ‘imminent danger’

Use “blockchain” model to cut small firms’ costs and empower citizens, urge MEPs

Antitrust: Commission provides guidance on allowing limited cooperation among businesses, especially for critical hospital medicines during the coronavirus outbreak

Gender Disparity in Medicine: Why and How Do We Close the Gap?

More than 100,000 people have recovered from COVID-19

Why is Merkel’s Germany so liberal with the refugees? Did the last elections change that?

Why cities hold the key to safe, orderly migration

How India will consume in 2030: 10 mega trends

Europe led by Germany seems vulnerable to Trump’s threats

Sustainable finance: Commission welcomes deal on an EU-wide classification system for sustainable investments (Taxonomy)

These are the 4 most likely scenarios for the future of energy

How do we go about improving mental health in the community and reducing suicide rates in the 15-29 age group?

Reception conditions for asylum-seekers agreed between MEPs and Council

Heart attacks and strokes are more common on high pollution days, data shows

Protecting migratory species in a rapidly changing world

China’s New Normal and Its Relevance to the EU

6 ways China and the United States could jumpstart trade reforms

GSMA Announces New Speakers for Mobile 360 Series – MENA, in association with The European Sting

Employers hold too much power over information. Workers must claim their data rights

New citizenship law in India ‘fundamentally discriminatory’: UN human rights office

Quality Education on the table at the European Parliament

The fight for female medical leadership

EU-China relations under investigation?

Thought AIs could never replace human imagination? Think again

Anti-Semitism ‘toxic to democracy’, UN expert warns, calling for better education

Beating cancer: Better protection of workers against cancer-causing chemicals

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