Eurostat overturns Commission’s assessment of the economy

Last Friday 28 November Eurostat did it again. Almost simultaneously with the presentation of Commission’s “Annual Growth Survey 2015”, disingenuously entitled “A new Momentum for Jobs, Growth and Investment”, the EU statistical service published its frustrating flash estimate of November inflation rate down to a mere 0.3%. Positively this new dive of inflation closer to the absolute zero means exactly that the advertised ‘momentum for Jobs, Growth and Investment’ is further estranged from Eurozone, thus defaming the Commission. Only some days ago Eurostat had also informed us that the “Seasonally adjusted GDP rose by 0.2% in the euro area…during the third quarter of 2014”. A statistical estimate of 0.2% more GDP can barely be called an increase, let alone a growth. This measurement falls deep in the area of statistical error, together with growth. What remains as hope for growth is Jean-Claude Juncker’s promise for a €300 billion rise of investment spending in the EU during the next three years. Unfortunately, The European Sting reported last Friday that there is nothing real in it. It is all about renaming and reshuffling already approved credits already included in the EU budget and the EIB programme. Not one euro of ‘fresh money’ in it. Eurostat has more to say Eurostat had more to say last Friday. On that day the service also published its estimate for the euro area unemployment rate for October, immobile from the historical high of 11.5%. In Italy the rate of people without a job jumped to the socially and economically unacceptable level of 13.2%, while France is always tormented by double digit unemployment. As for the usual victims of Eurozone’s malaise, Greece managed in October to…reduce this rate to a dizzying 25.9% from 27 .8%, while Spain marked an equally swindling reduction of unemployment by two points to 24% from 26.0%. In both countries unemployment is still ravaging the majority of the young generations condemning them probably for life to social exclusion. Despite the fact that the overall unemployment rate in Eurozone was in October at 11.5%, stuck there for many months in a row, the number of the unemployed in a mysterious way increased. According to Eurostat “Compared with September 2014, the number of persons unemployed increased by 42 000 in the EU28 and by 60 000 in the euro area”. Eurostat also estimates “that 24.413 million men and women in the EU28, of whom 18.395 million were in the euro area, were unemployed in October 2014”. This is equivalent to an entire big European country being out of employment. Inflation? What inflation? Coming back to inflation, reality is more alarming than the drop of the overall rate by a decimal point to 0.3% in November. Let’s see why the official complacency is utmost dangerous. European Commission and ECB economists insist that disinflation (falling inflation) is not an infallible sign of hibernation or even erosion of the Eurozone economy. They attribute it to exogenous factors like the drop of the crude oil and energy prices. True, energy prices plunged by 2.5% in November and by 2% in October. Let’s dig a bit deeper. Following the prices of the ‘non-energy industrial goods’ one finds that they fell in November and remained unchanged in October. This index oscillates around zero for many months. The movements of the ‘non-energy industrial goods’ price index though have to be examined in their own value. Developments in this crucial part of the economy are crucial. The sector of ‘Non energy industrial goods’ is the heart of the Eurozone economy. Whatever happens there affects overall growth and job creation, the most crucial parameters of any developed economy. In reality then the euro area is practically in the deflation or zero inflation and growth region for many months now and the Commission, together with some governments refuse to recognise it. Striking signs In short, reality is exactly the opposite from what the European Commission ostensibly says it is, in its “EU Annual Growth Survey 2015” erroneously entitled “A new Momentum for Jobs, Growth and Investment”. Very probably some confidential data paint a conjuncture so disturbing up to the point forcing the Commission on the one side to hide reality and on the other to even dilute the application of the strict rules of economic governance. Some days ago the Commission let France, Italy and Belgium get away with larger budget deficits planned for 2015, which surpass the allowed level of 3% of GDP. Jean-Claude Juncker said that for the time being those countries are not to be punished. By the same token he briefly broke the rules on deficits and borrowing pompously introduced only months ago (the two and six pack directives). The new regulations were set to repair the hollow institutional base of the single money, the euro. It was exactly the sovereign over borrowing that was to be arrested, by tightening the rules on government deficits. All that is now briefly forgotten, surely because things must be much darker than publicly recognised. Letting France and Italy to borrow more betrays grave problems. If this is the case, even Greece may expect a mild treatment from its EU lenders, who may ease the pressure over her unfulfilled obligation included in the Second Memorandum, which expires this month. The 18-19 December European Council has to clarify all that.