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

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

UN rights chief ‘appalled’ by US border detention conditions, says holding migrant children may violate international law

Long-term EU budget: MEPs lay down funding priorities for post-2020 budget

UN rights chief calls for international inquiry into Kashmir violations

EU-US trade agreement talks to be affected by American bugs

Dreaming of China

Keeping cool in the face of climate change

Here are 4 ways investors can influence more secure and responsible innovation

These are the best cities for tech

Across the world, women outlive men. This is why

‘Great Pacific Garbage Patch’ clean-up project launches trial run: UN Environment

Central banking in times of complexity

Are Halloween pumpkins a problem for the planet?

Is continuous sanctioning the way to resolve the Ukrainian crisis?

Better air pollution data is helping us all breathe easier. Here’s how

TTIP is not dead as of yet, the 15th round of negotiations in New York shouts

Is Germany closer to Russia than the West? Nord Stream II and Iran count more

Be a part of the World Forum on Future Trends in Defence and Security

Industrial price dive may lead to point of no return

Unanswered questions for Europe’s youth in President Juncker’s State of Union

This mobile laundry gives homeless people free showers and washes their clothes

The power of digital tools to transform mental healthcare

Waste-free consumption: 3 reasons why cities will lead

Right2Water initiative: Is the Commission ready to listen to citizens?

Japan’s population is shrinking by a quarter of a million people every year

Clean air is good for business

eGovernmnet for more efficiency, equality and democracy

Commissioner sings “Volar-e” but the European driver no “Cantar-e”

Education expenditure in the EU not hurt much by crisis

Not a single child spared the ‘mind-boggling violence’ of Yemen’s war

Thai citizenship means ‘dream of a brighter future’ for cave rescue boys, says UN Refugee Agency

Coal addiction ‘must be overcome’ to ease climate change, UN chief says in Bangkok

Peacekeeping: A ‘great opportunity’ to develop professionally and personally

Time to make a fundamental choice about the future of healthcare

UN standing with Zimbabwe, Malawi, Mozambique as Southern Africa death toll from deadly cyclone mounts

Good grub: why we might be eating insects soon

The European Sting at the Retail Forum for Sustainability live from Barcelona

The number of internally displaced people is at a record high. Here’s why

Online shopping across the EU to be easier from 3 December

We need greater protection for our oceans. We can’t let politics stand in the way

JADE Testimonial #2: Jacques @ Process mapping

Asylum seekers in Sri Lanka fear for their safety, in wake of Easter Sunday terror attacks

At UN forum, Asia-Pacific countries highlight importance of transport for sustainable development

Preserving biodiversity vital to reverse tide of climate change, UN stresses on International Day

South Sudan: UN rights experts see little headway on peace deal amid spike in local-level violence

Commission paralysed before the banking leviathan

UN launches new framework to strengthen fight against terrorism

We now know how much ice Antarctica has lost in the last 25 years – three trillion tonnes

FROM THE FIELD: ‘Race is on’ to halt biodiversity loss in Indonesia

We are on the edge of a new ‘cyber’ space age. This is how we make it a success

Juncker Plan exceeds original €315 billion investment target

G20 to Germany: Abandon miser policies

The ECB proposes a swift solution for SMEs’ financing

UN sees progress in fight against tobacco, warns more action needed to help people quit deadly product

Good Governance in developing modern quality infrastructure systems

UN envoy says he ‘is ready to go to Idlib’ to help ensure civilian safety amid rising fears of government offensive

Five ways individuals can help save the oceans

‘A global measles crisis’ is well underway, UN agency chiefs warn

Measles cases nearly doubled in a year, UN health agency projects

FROM THE FIELD: ‘Eco-warriors’ fight climate change in South Africa

UN chief urges ‘active, substantive and meaningful participation’ on International Day of Democracy

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