The Commission sees ‘moderate recovery’ but prospects deteriorate

Pierre Moscovici, Member of the European Commission in charge of Economic and Financial Affairs, Taxation and Customs, gave a press conference on the 2015 Autumn Economic Forecast. (EC Audiovisual Services. Date: 05/11/2015. Location: Brussels - EC/Berlaymont).

Pierre Moscovici, Member of the European Commission in charge of Economic and Financial Affairs, Taxation and Customs, gave a press conference on the 2015 Autumn Economic Forecast. (EC Audiovisual Services. Date: 05/11/2015. Location: Brussels – EC/Berlaymont).

The European Commission released last week its “Autumn 2015 Economic Forecast”, advertising ‘moderate recovery’ for the European Union and the euro area. Understandably, the Commission wouldn’t dig deeper in the economy, to highlight the negative aspects of the present status and the subdued prospects for next year. For a number of important reasons the executive arm of the EU is legitimized, to a certain extent, to tone down the negative sides and emphasize the positive points of the conjuncture. And this not only for the protection of its own home base. Brussels is obliged to think about the world markets too. A pessimistic conclusion could become a destructive self-fulfilling prophecy. This is the way markets work.

However, it’s not at all a convincing narrative to ascertain a ‘moderate recovery’ in an environment of stagnating employment and household incomes and zero or negative inflation rates. For this and some other equally important reasons, the exchange rate of the euro with the American dollar has been sliding downwards during the past few weeks, having by now reached the 1.07 quote. That is just some decimal points away from full parity between the two monies. This is not a negative prospect per se but it gives a good idea about how the EU and the US economies compare. Of course one has to add to that the divergence of the fundamentals of the two monies.

Fed and ECB agree to diverge

Not without good reason then the European Central Bank is preparing further relaxation of its monetary policy. It’s obvious by now that the euro area and the entire western economic and financial system needs additional injections of newly printed cash. The American central Bank, the Fed, cannot any more uphold the world’s liquidity alone. With an additional print of $4.5 trillion in four years it has reached its limits. It’s the ECB’s turn to take the baton, printing and injecting more hundreds of billions. This extra therapy is needed to hopefully energize the real economy, through increased quantities of financing being made available to consumers and producers.

The crucial point here though is, if the euro area banks which are about to receive the additional hundreds of free ECB billions, will be willing and able to pass it on to the real. Regrettably, the printing machine seems to be the only available policy tool to support the EU and through it the global economy. Regrettably, this is so because the governments in Washington, Berlin and the other western capitals are not willing to rethink the basics of economic policy, including the long-term growth potential of a more equitable distribution of income and wealth. There is an increasing cutting edge literature about that. Last year Janet L. Yellen, the boss of the American Fed, chose to focus on this issue in her inaugural speech. Let’s now return to the European Commission’s interpretation of reality.

Close to the zero line

The very first phrase in the Press release the Commission issued to broadcast its ‘Autumn 2015 Economic Forecast’ reads as follows: “The economic recovery in the euro area and the European Union as a whole is now in its third year”. Obviously this is at least an overstatement because there is no progress whatsoever in every important facet of the economy. Incomes, employment and prices all stagnate around or below the zero line. That is why, the writer of this Press release, probably sensing the exaggeration of the above affirmation, added that Europe “should continue at a modest pace next year despite more challenging conditions in the global economy”.

Clearly it’s not only the challenging conditions of the global economy which have subdued the EU economy. The global economy until some months ago adequately supported Europe’s stagnant GDP. Without the export surpluses Eurozone would have remained deep in the post crisis recession. Now though, that the developing economies do not develop as robustly, Europe has to support its economy by own means. For this and some other equally important reasons, Germany has agreed to the ECB’s extraordinary money injections to Eurozone’s financial system. Unfortunately, the three years delay that Berlin imposed on ECB’s action has held back the monetary therapy of the euro area, and this has now become apparent.

More modest pace in 2016

In short, the Commission’s ‘Autumn 2015 Economic Forecast’ rightly observes that the EU economy “should continue at a modest pace next year”. It would have been more economically correct though to say that “it should continue at a more modest pace next year”, despite ECB’s new monetary remedy. Without it the Eurozone and the global economy would suffer.

 

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Featured Stings

EU Trust Fund for Africa: Can it be beneficial for Italy and tackle the migration crisis in the Mediterranean?

Germany takes cover from Trump in Eurozone and decides to pay for it

Commission’s action plan: financial world mandatory links to environmental targets

The migration crisis is slowly melting the entire EU edifice

Ecofin: ‘The Friday battle’ for the banking union

Worldwide consumer confidence has shot up to its highest level for four years according to a survey of 130 Global Retail leaders

COP21 Business update: Companies urge now for carbon pricing as coal is still a big issue

A Sting Exclusive: “Leading by example! EU must push for UN deal to avoid dangerous climate change”, European Parliament Vice-President Ulrike Lunacek cries out from Brussels

Italy can stand the US rating agencies’ meaningless degrading

EU Budget: InvestEU Programme to support jobs, growth and innovation in Europe

Civil society organisations disenchanted with “Youth Guarantee”

The consequences of Brexit seen by a European young entrepreneur

A Sting Exclusive: Towards better business opportunities for the EU and its neighbours, Commissioner Hahn live from European Business Summit 2015

Quality Education on the table at the European Parliament

Parliament votes for €1 billion in aid to Ukraine

Commission: Gifts of €6 billion and free trainees to ‘help’ poor employers

New chapters in EU-China trade disputes

Roxane in Cambodia

‘Worst devastation I have seen,’ says UN refugee envoy Angelina Jolie, as she visits West Mosul

“16+1” Cooperation injects new vigor into China-Europe cooperation

Russia won’t let Ukraine drift westwards in one piece

Shifting Tides: Policy Challenges and Opportunities for the G-20

This house is made entirely out of recycled rubbish

WEF Davos 2016 LIVE: “Employment contracts today are a reducing share of the workforce”, scientists worry in Davos that the 4th industrial revolution threatens employment globally

The battle for the 2016 EU Budget to shake the Union; Commission and Parliament vs. Germany

Trump to subject the Fed, challenge the ECB and make Wall St. bankers even richer

MWC 2016 LIVE: BT chief aims to be at UK 5G forefront

ECB again to subsidize euro area banks with more than one trillion euro

The Chinese film boom luring Hollywood’s stars

Eurozone closer to a deflation – stagnation trap

Income inequality threatens the socio-political structures in developed countries

Asylum: deal to update EU fingerprinting database

The European Parliament floating over the South China Sea

Commission sets moderate greenhouse gas reduction targets for 2030

The Commission favours the cultivation of more GMOs in Europe

Achieving targets on energy helps meet other Global Goals, UN forum told

The eighth round of TTIP negotiations concludes in Brussels amid scepticism and new fears

The miserables and the untouchables of the economic crisis

No hard drivers in sight to remodel the stagnating affairs of the EU

Eurozone: Inflation plunge to 0.4% in July may trigger cataclysmic developments

Bankers don’t go to jail because they are more equal than us all

Knowledge management and entrepreneurship: short term vs. long term perspective

Trump ‘used’ G20 to side with Putin and split climate and trade packs

India’s economy is growing fast, but its poorest areas lag behind. Here’s why this could be about to change

De-escalation of fighting in Hodeida is key to ‘long-overdue’ restart of Yemen peace talks: UN envoy

MWC 2016 LIVE: T-Mobile US reveals 5G trial plans

MWC 2016 Live: Industrial world prepares to reap digital benefits

“Financial crisis will not happen in China!”, the Chinese Premier underlines from Switzerland; the Sting reports live from World Economic Forum 2015 in Davos

Italy’s dilemma after Merkel-Hollande agreed loose banking union

Will Merkel ever steer the EU migration Titanic and restore her power in Germany?

Does the West reserve the fate of Libya and Syria for others? How does this relate to the EU’s Neighborhood Policy?

Brain Drain remains a crucial and unresolved issue

Free trade agreement between EU and India?

Is Erdogan ready to tear down the bridges with Europe and the West?

EU budget: Making the EU fit for its role as strong global actor

Parliament backs a modernised EU electoral law

How to help companies become global defenders of LGBTI rights

EU Top Jobs summit ended with no agreement: welcome to Europe’s quicksand!

Regional policies slowed down by EU bureaucracy

COP21 Breaking News_10 December: UN Climate Chief Calls for Final Push to Meet Adaptation Fund Goal Very Close to Target

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 )

w

Connecting to %s