Unemployment and stagnation can tear Eurozone apart if austere policies persist

László Andor, Member of the European Commission in charge of Employment, Social Affairs and Inclusion (on the right), gave a press conference to present a new Strategic Framework on Health and Safety at Work 2014 – 2020 and Jonathan Todd, Spokesperson of László Andor. (EC Audiovisual Services, 06/06/2014).

László Andor, Member of the European Commission in charge of Employment, Social Affairs and Inclusion (on the right), gave a press conference to present a new Strategic Framework on Health and Safety at Work 2014 – 2020 and Jonathan Todd, Spokesperson of László Andor. (EC Audiovisual Services, 06/06/2014).

Unrelentingly, Eurostat keeps producing its statistical time series on inflation and unemployment, confirming that the Eurozone economy has entered in a long period of very low price growths and unacceptably high jobless rates. Unquestionably, this is a phase of confirmed stagnation, which may even lead to recession, if the applied policy doesn’t change, as the Italian Prime Minister Matteo Retzi and other EU leaders hope and long for.

Incidentally, on 30 June Eurostat announced its flash estimate for the June inflation at 0.5% unchanged as in May, and this assessment of EU’s statistical service so far has been accurate. The relevant announcement is quoted here: “Euro area annual inflation is expected to be 0.5% in June 2014, stable compared with May, according to a flash estimate from Eurostat, the statistical office of the European Union”.

Disinflation and high unemployment

The next day, on 1 July to be exact, Eurostat published its monthly unemployment statistics for May 2014. The relevant Press release revealed that the overall unemployment rate in Eurozone for last May was again unchanged compared to the previous month. The pertinent passage of goes like this, “The euro area (EA18) seasonally adjusted unemployment rate was 11.6% in May 2014, stable compared with April 2014, but down from 12.0% in May 2013. The EU28 unemployment rate was 10.3% in May 2014, down from 10.4% in April 2014, and from 10.9% in May 2013. These figures are published by Eurostat, the statistical office of the European Union”.

It’s as if time has frozen holding price changes at near zero levels and unemployment rates at socially and politically dangerous heights. Presumably, that’s why both the German central bankers who participate in the Governing Council of the European Central Bank, recently voted for the extraordinary monetary policy measures, despite some Berlin reserves about the futility of excessive liquidity in Eurozone. Last month, Sabine Lautenschläger, Member of the Executive Board of the ECB, and Jens Weidmann, President of Deutsche Bundesbank, didn’t oppose Mario Draghi’s groundbreaking proposal.

Insatiable appetite for liquidity

Along the lines of this unanimous decision of ECB’s Governing council, Eurozone’s central bankers agreed to further cut interest rates and take extraordinary monetary measures in order to support the liquidity of the financial system, and thus help the granting of bank loans to the real economy. Still, the German Federal Minister of Finance Wolfgang Schauble criticized this ECB verdict for unneeded increase of liquidity in the euro area. Obviously, the German government doesn’t share the bankers’ fears and is rather indifferent to the needs of Eurozone’s large banking groups, which have an insatiable appetite for liquidity.

At this point however it must be mentioned that presently the American central bank, the Fed, is sticking to its policy of reverse quantitative easing and will gradually stop supplying practically all the major world banks with zero cost liquidity. As a result, the ECB must have by now started feeling the pressures towards assuming the responsibility to cover the gap, at least partially, that the Fed leaves in the balance sheets of all major global banking groups. In many respects, ECB’s decision to grant extra liquidity to banks is a favour to bankers not to the unemployed youths.

Coming back to Eurostat’s announcements about inflation and unemployment, it seems that the combination of almost zero price changes and sky high jobless rates will continue haunting the European economic horizon for quite some time. For one thing, the monetary measures the ECB took last month to support real economic growth will need many months and probably more than one year to produce a noticeable effect, if any.

What will happen in the between? Will the millions of Europe’s unemployed continue to look for a job or will they, more probably, quit altogether searching for one? The rise of the extremist and the Eurosceptic MEP numbers in the new European Parliament is a clear sign of what may follow in the upcoming national elections. Can the governments in countries like Greece, Spain, Portugal and even France stand the pressures in the social and political fronts? The unprecedented turning of backs by many MEPs at the inaugural plenary session of the European Parliament while the EU anthem was playing, is a sign of the future, if nothing changes in the economy.

All in all, there is no alternative to economic growth. This time the European Parliament withstood the pressures and the mainstream political parties maintain a solid majority. But what about the national elections during the coming months and years? What if Nigel Farage’s UKIP wins a large number of seats in the British House of Commons in 2015 elections? What if the governing coalition in Greece loses the next election whenever it comes? For how long will Matteo Renzi’s star continue to shine in Italy? How safe are Mariano Rajoy’s and Enda Kenny’s governments in Spain and Ireland?

All those questions need answers from the economy. If unemployment and stagnation or, even worse, recession continues for some more years in Europe, then the hideous political and social tendencies may be irreversible. Matteo Renzi’s initiative for a relaxation of the strict austerity imposed by the Stability and Growth Pact rules has to succeed. Otherwise Eurozone won’t be able to meet the needs of all its member states and Italy would consider an exit from Eurozone.

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

How women in developing countries can harness e-commerce

Climate change is forcing 20 million people a year from their homes, Oxfam says

Banks get trillions and the unemployed ECB’s love…

UN chief condemns terror attack in Kismayo, Somalia

Paradise islands of Pacific increasingly vulnerable to climate change, as UN boosts resilience

Having a baby during COVID-19 gave me new respect for the job ‘mom’

LEAGUE OF YOUNG VOTERS LAUNCHES TOOL FOR YOUNG PEOPLE TO COMPARE POLITICAL PARTIES AHEAD OF EU ELECTIONS

UN agency helps stranded Ethiopians return home, ending ‘harrowing migration ordeal’

Data show EU Economy in a stubbornly subdued state

Stronger partnerships with post-conflict countries needed to ensure ‘path towards durable peace’: UN chief

COVID-19: latest on evaluation and authorisation of vaccines

Europe is no longer an innovation leader. Here’s how it can get ahead

COVID-19 vaccines: MEPs quiz top officials on authorisation and contracts

Gender equality in STEM is possible. These countries prove it

Flexible jobs can make work-life balance worse, a German study finds

UN condemns deadly attack one of its vehicles

MEPs approve EU’s spending in 2017

Is Germany yielding to pressures for more relaxed economic policies?

Modernising EU justice systems: New package to speed up digitalisation of justice systems and boost training of justice professionals

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

Spring 2020 Economic Forecast: A deep and uneven recession, an uncertain recovery

These are the world’s most future-proof cities

Yemen: 11 more ‘terrible, senseless’ civilian deaths reported, following attack in Sana’a – top UN official

Cyber-Risk Assessments: the vaccine for companies in the Fourth Industrial Revolution

Boris Johnson’s no-deal Brexit to differ when issued from 10 Downing St.

Some truths about the coronavirus, according to the World Health Organization

Do not jeopardise future-oriented EU programmes, say EP’s budget negotiators

Asylum: MEPs call for more solidarity among EU member states

Business should be joyful – just ask the sports world

Kids who live in the countryside have better motor skills, a study in Finland has found

Women must have an equal share in politics, say MEPs and national MPs

Jeroen Dijsselbloem new Eurogroup president

70 years after the Universal Declaration of Human Rights, this is why we need dignity more than ever

GSMA announces first speakers for Mobile 360 Series-Middle East and North Africa

Business could learn plenty about cybersecurity from the secret state

A Sting Exclusive: “Stronger Cybersecurity for a safer EU against cybercrime and cyber threats”, by MEP Dalli

Economic recovery won’t tackle youth unemployment problem

These are the countries that have made their climate commitments law

Yellen and Draghi tell Trump and markets not to expedite the next crisis

More than 90 per cent of Africa migrants would make perilous Europe journey again, despite the risks

Central African Republic: UN chief hails signing of new peace agreement

What Keynes can teach us about government debt today

COVID-19 and its empathic social lessons

MEPs back first EU management plan for fish stocks in the Western Mediterranean

The costs of corruption: values, economic development under assault, trillions lost, says Guterres

Green economy ‘not to be feared, but an opportunity to be embraced’ says UN chief as COP25 gets underway

Vaccination: understanding the challenges surrounding COVID-19 vaccination campaigns

Commission approves emergency measures to protect eastern Baltic cod

Coronavirus: EU funding for the transport of medical goods, medical teams and patients

Importance of teaching ethics in Brazilian Medical Schools

New EU telecom rules: latest actions in time for transposition deadline

Why the fight against nature loss should be a business priority

‘Bicycle Kingdom’ makes a comeback, as China seeks solutions to tackle air pollution crisis

Bosnia and Herzegovina: MEPs concerned by slow progress in EU-related reforms

CDNIFY @ TheNextWeb 2014

Global immunization is having its annual check-up. What can we learn?

Palliative care effectiveness at Universal Health Care: an eminent need

Women who crushed the gender barrier in medicine

Energy Union: EU invests a further €800 million in priority energy infrastructure

ITU Telecom World 2017 on 25-28 September in Busan, Republic of Korea

More Stings?

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