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 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

TTIP: why it is worth not to pull the covers over your head?

This is what CEOs around the world see as the biggest risks to business

Can privatisation be the panacea for the lack of growth in Europe?

The European Commission to stop Buffering

Security: better access to data for border control and migration management

Smart city experts should be looking to emerging markets. Here’s why

168 hours left for MEPs – ECOFIN Council to deliver a Banking Union

EU seeks foreign support on 5G from Mobile World Congress 2015 as the “digital gold rush” begins

The Chinese solar panels suddenly became too cheap for Europe

Young and unemployed the perfect victims of ‘vultures’

Miguel Arias Cañete European Commission

EU should invest more in climate and not sit back on its laurels and watch

‘Two pack’ austerity package in force but with less vigor

China Unlimited – The chinese tourism in Lisbon

Tackling Youth Unemployment

Close to final agreement on the EU Banking Union

5 trends in the global economy – and their implications for economic policymakers

Can Pakistan make its energy sector greener, cheaper and more reliable? The government thinks so

Brussels terrorist attacks: Schengen in danger once again while leaders gather Europe’s multiple broken pieces

In Rwanda, high-speed drones are delivering blood to remote communities

7 key challenges for the future of ASEAN – and how to solve them

Liaison Officer – 2020

3 ways we are making an impact on plastic pollution

80,000 youngsters at risk in DRC after forcible expulsion from Angola: UNICEF

UN warns of ‘deteriorating climate’ for human rights defenders in Guatemala

Paris, Washington, IMF against Berlin and ECB on money and interest

Trump asked Merkel to pay NATO arrears and cut down exports ignoring the EU

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

EU’s guidelines on net neutrality see the light although grey areas do remain

Terrorist content online should be removed within one hour, says EP

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

In the age of the tourism backlash, we need ‘destination stewards’

UN gears up emergency food aid for hurricane-struck region of Bahamas, as death toll rises

‘Going green’ is good business says private sector at UN’s COP24 climate conference

Syria: A bloody tracer of Trump – Putin rapprochement

Quicker freezing and confiscation of criminal assets in the EU

Germany fears that Americans and Russians want to partition Europe again

7 ways to break the fast fashion habit – and save the planet

Eurozone: The crisis hit countries are again subsidizing the German and French banks

What the Amazon rain forest tells us about globalization

5 things to know about the Western Balkans

Mental health at stake: A silent epidemic of 21st century

Trump ostracized by his party and world elites but still remains in course; how can he do it?

Parliament commemorates the victims of the Holocaust

Adriatic Sea: MEPs adopt multiannual plan for fisheries

G7 summit: Trump Vs. G6 leaders on trade and climate change

UN experts urge United Arab Emirates to release terminally ill woman to live her last days ‘in dignity’

Thousands flee fresh violence in South Sudan, many ‘suffering from trauma’

How UN cultural treasures helped set the stage for Game of Thrones

GSMA Announces Speakers for Mobile 360 – Russia & CIS 2018

This city is planting a tree for every man, woman and child

President Juncker temporarily transfers portfolio responsibilities following departure of two Members of the European Commission

The power of trust and values in the Fourth Industrial Revolution

‘Massive and protracted’ humanitarian crisis in DR Congo can be ‘beaten back’ if donors step up

Why cooperative and competitive federalism is the secret to India’s success

Can free trade deliver cheaper renewable energy? Ask Mexico

A for-profit project has improved nutrition in Rwanda – is it a model that can eliminate hunger across Africa?

G20: Less growth, more austerity for developing countries

Digital development: technology-enabled, but human-centric

3 charts that show the economics of European football

DR Congo: Strengthened effort against Ebola is paying off, but insecurity still major constraint – UN health agency

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

%d bloggers like this: