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 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

SCADA Security Conference 2017 in Prague, Czech Republic

INTERVIEW: Poverty, education and inclusion top new General Assembly President’s priority list

New UN data tool shows ‘mismatch’ between government aid and places modern slavery exists

Migration crisis update: mutual actions and solidarity needed as anti-migrant policies thrive

COP21 Breaking News_03 December: Unprecedented Global Alliance for Buildings and Construction to Combat Climate Change

Mergers: Commission opens in-depth investigation into PKN Orlen’s proposed acquisition of Lotos

We can save our ocean in three steps – if we act now

Questions directors need to ask in the age of stakeholder capitalism

Your recycling actually gets recycled, right? Not always, says this report

Why the 33,000 staff European Commission did not have a real contingency plan for the refugee crisis?

Extra mild ECB tapering of QE and zero interest rates keep euro low

Digital learning can help us close the global education gap. This is how

Fail fast, fail better: 3 ways companies can master innovation

World Migratory Bird Day highlights deadly risks of plastic pollution

EU Migrant Crisis: Italian Coast Guard Headquarters and Italian Navy to give host national opening addresses at Border Security 2016 in Rome

Here’s how India can soar in the Fourth Industrial Revolution

Youth policy in Europe not delivering for young people

5 ways the world is rallying around Australia as bushfires rage

How studying genetics and lifestyle can shape a healthier MENA region

UN chief welcomes DR Congo President’s promise to stand down

Back to school: Schoolchildren to receive milk, fruits and vegetables at school thanks to EU programme

Commission and EIB provide CureVac with a €75 million financing for vaccine development and expansion of manufacturing

UN agencies launch emergency plan for millions of Venezuelan refugees and migrants

How the EU sees its own and Russia’s role in Ukraine

Google succumbs unconditionally to EU’s “right to be forgotten” ruling

An Eastern Wind

Grave concern over escalating humanitarian crisis, casualties, displacement across northwest Syria: UN

Commission welcomes Bulgaria and Croatia’s entry into the Exchange Rate Mechanism II

Climate Change Revolution: by-laws for the world

Venezuelan crisis: MEPs reaffirm their support for Juan Guaidó

Deadly earthquake kills dozens in Turkey, UN stands in solidarity and offers support

EU shapes its ambitious strategy on India

Why the world needs systems leadership, not selfish leadership

ILO welcomes new UNDP report that places decent work at the heart of sustainable development

Biggest ever UN aid delivery in Syria provides relief to desperate civilians

China is sending science students to live with rural farmers – and crop yields are skyrocketing

EU and World Health Organisation team up to boost access to health services in developing countries

UN chief announces progress on committee to shape Syria’s political future

This entrepreneur built an island resort out of plastic waste

To beat hunger and combat climate change, world must ‘scale-up’ soil health – UN

Brussels waits for the Germans to arrive

The migration crisis is slowly melting the entire EU edifice

How Europe beat the financial crisis – and the risks it still faces

Could robot leaders do better than our current politicians?

UN agency chiefs condemn Saudi-coalition led air strike that killed dozens in western Yemen

COP21 Breaking News_03 December: UNFCCC Secretariat Launches Forest Information Hub

Security Council renews Central African Republic arms embargo

These are the world’s most fragile states in 2019

From mental health to suicide: the interruption of this chain reaction by prevention

‘Many challenges to overcome’ at UN, in fight against abuse: victims’ advocate

Commission welcomes the political agreement on the transitional rules for the Common Agricultural Policy (CAP)

Nigel Farage and Boris Johnson: who forced the two ‘brave’ Brexiteers to quit?

The developing countries keep the world going

Inclusion, empowerment and equality, must be ‘at the heart of our efforts’ to ensure sustainable development, says UN chief

The Venezuelan exodus to Roraima and its repercussions

The vicious cycle of poverty and exclusion spreads fast engulfing more children

What are the real debates surrounding immigration in an increasingly globalized world?

Parenting in the time of COVID-19? Consider these 6 tips from the WHO

Global Citizen – Volunteer Internships

Britain aligns with EU rivaling US on trade and Iran, abandons bilateral ‘Midsummer Night’s Dream’

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