11 ms·
Euro area is back on the brink of recession
- adamnemecek 8y agoCommon currency without a common monetary policy, who would have thunk that this was a bad idea?
- gricardo99 8y agouh, the ECB sets the eurozone monetary policy[1] 1 - https://en.wikipedia.org/wiki/European_Central_Bank https://en.wikipedia.org/wiki/European_Central_Bank
- isostatic 8y agoThere's a lot of FUD about the EU, especially in America
- NicoJuicy 8y agoDon't get me started about the American companies that rate other countries.
- rconti 8y agoI'm guessing parent meant fiscal policy.
- adamnemecek 8y agoi did sorry.
- draw_down 8y agoIf a recession means that a particular economic setup is a bad idea, would love to know what a good idea looks like
- nickik 8y agoI think you mean 'Common currency without a common fiscal policy, who would have thunk that this was a bad idea?'. If there is one money then by definition there can only be one monetary policy. The issue is precisely that under different fiscal rules monetary policy effects different places in different ways.
- offsetr 8y agoAnd to think the comission was making speeches just a few months ago touting a faster than US growth rate.
- RECESSI0N 8y agoRecession.
- cm2187 8y agoThat I think is the saving grace of Brexit. Investor confidence in Italian public debt will evaporate sooner or later, and I don’t see Germany allowing and paying for a bailout of Italy, given how they reacted to the bailout of Greece. The UK will likely look like a safe heaven for capitals when that happens.
- futurix 8y agoInvestors already voted against pound (look at the exchange rate). Brexit shown them that U.K. is no longer predictable and stable. And since after Brexit it will be equally expensive to move funds from Eurozone to U.K. or to any other country - there are likely to choose somewhere else.
- notahacker 8y agoHow does Brexit make the UK attractive in the event of a near-term Eurozone crisis? The grim economic outlook if the UK's major trade partners are all in deep recession isn't improved by it having lost a lot of that trade earlier in the year for other reasons, and its economy isn't going to reinvent itself overnight.
- 8y ago
- maffyoo 8y agoGiven China has seen lowest growth in almost 30 years and the US where some positive numbers are hiding some negative stories, it would seem that there is a wider context to take into consideration. The article seems loaded with the premise of the Euro is bad but taking the wider global context, this premise seems flimsy. Dont get me wrong, the Euro has proven to be a great way of legally devaluing german currency and the opposite to southern med countries but my issue is the finger being pointed at something when there is almost certainly a bigger picture to be considered.
- xiphias2 8y agoYou're right, bonds are globally extremely inflated. It's predictable that people are losing confidence in fiat currencies with such an asset bubble and without a country to escape to anymore. I was proud owner of CHF as an exception from other fiat currencies until it got pegged to EUR.
- iknowstuff 8y agoWell, the peg only lasted for three years.
- xiphias2 8y agoOnly? I lost enough money in 1 day that I lost my trust in the Swiss National Bank. I'm not complaining though, I started diversifying to other asset classes and easyly made it back, so I view it as a lesson learned.
- nickik 8y agoGuess what, monetary policy about managing your personal check book. The SNB acted pretty well, one of the best in the world and the Swiss economy was much better of then most comparable countries because we could devalue when people like drove up the demand for CHF and almost pushed Switzerland in a deflation. That might be good for your check book but it would be a disaster for the economy.
- raiyu 8y agoA headline in search of an article. Very little context provided, would have probably been served even better with just a graph of the euro zone growth from 1999 quarter by quarter versus other economies like Japan, US, China for context. Journalism feels lazier and lazier as it constantly searches for more clicks and ad impressions.
- rossdavidh 8y agoI think there is no chart because, if you go find one, it shows EU growth in the last ten years has been going up and down in a pretty similar fashion to Switzerland, Japan, South Korea, and other non-EU advanced economies. This would indicate that being in the EU hasn't really helped them all that much, but it also hasn't hurt that much (in aggregate). So, not much of a story, which feeds right back to your point.
- kaybe 8y agoWell, the EU was not made to improve the economies of its members. Its main goal is to intertwine them enough to make another big war way too painful.
- toyg 8y agoAnd to make Europeans strong enough to be peers to US and then-USSR, rather than being their battlefield. This has become even more urgent now that China and India have accelerated their inevitable rise to superpower status.
- nickik 8y agoFunny that mostly not how they sold it to the poor countries, or even the rich countries. That might have been what the elites believed, more political ingratiation. That of course is good for them as well. In reality when they 'sold' this is was all about economics. And the routes of the whole thing are economic as well.
- toyg 8y ago
- NKosmatos 8y agoThings are not looking promising and 2019 is European elections year. Greece has financial and many other issues, Italy has also many financial and internal issues, Germany is not holding the same powerful position as it had with Merkel, UK is uncertain with one foot in the EU, France has already a lot of problems and many more coming up and the same goes for other countries (immigration, politics, economy...). Let’s see how things play out.
- PedroBatista 8y agoMeanwhile, every other country in the World is smooth sailing.
- NKosmatos 8y agoCertainly not, lots of issues in many other countries. It’s just that the density/concentration of problems is higher in EU (IMHO).
- PhilWright 8y agoI don't think so. When people think about the USA they only think about the 1 or 2 most significant problems overall. With Europe you think about the 1 or 2 for each of the constituent countries and so it seems more problematic. To be comparable you would need to think about the 1 or 2 most significant problems for each state in the USA. Once you do that the number of issues is not that different.
- Daishiman 8y agoThe EU doesn't have a looming student loan crisis, or a health crisis due to opioid epidemics. In terms of human suffering caused by these two issues alone I have a hard time believing the EU is worse off.
- hueving 8y agoI fail to see the looming student loan crisis given that they can't be discharged in bankruptcy.
- adventured 8y agoSince 2007 - broadly the great recession time frame forward - Lithuania has had by far the best GDP per capita growth among Euro members at nearly 40% (nominal, USD terms). Estonia is second, at around 19-20%. Latvia is third at about 11%. Slovakia is up 10%. A distant fifth is Germany at around 7%. Ireland is up a couple percent. Everyone else in the Eurozone is either near flat or negative on growth over the last ~11-12 years. Greece is down 35%, Italy is down 15%, Spain is down 14%, Portugal is down 7%, France is down 7%, Finland and the Netherlands are down about 5%. While the article is criticizing the Euro, Denmark and Sweden have also seen essentially zero per capita growth since 2007. The UK is down 20% over that time. Outside that group and the Euro, you've got Romania up 30%, Poland up around 23%, Czech up 11% and Russia up 18%. I've excluded Norway, just because their figures swing wildly with oil. There's definitely a sustained, serious growth problem in most of the Eurozone, however the baltics are doing quite well. The Netherlands, Belgium, Ireland, Finland, Germany and Austria are starting from quite high per capita figures, it's not a trivial task to keep pushing those higher. The real issue isn't growth generally, it's that the next slide backwards in terms of recession, is going to badly damage the bunch that hasn't held their ground or seen enough recovery yet: France, Italy, Spain, Portugal, Greece. I'm not sure how the Euro survives if those sink lower in a recession and see another lost decade. Which would then actually be a lost two decades - a 1/3 to 1/2 real contraction for all of them, inflation adjusted over time. Losing that much of your purchasing power over 20 years is brutal, people won't sit idly by and absorb that forever, they'll rebel against the institutions. France has pretty considerable exports, equivalent to nearly 20% of their GDP (the US is closer to 11% by comparison). If I'm them, I'd be seriously contemplating that I'd be better off controlling my own currency, so as to undercut the Germany export juggernaut rather than suffer from a currency that is too expensive (while simultaneously being artificially cheap for the German economy, spurring their exports and trade imbalance). Spain, Italy, Portual and Greece are all similarly suffering from a Euro that is too expensive for their situations (to varying degrees) and is harming their export potential.
- antientropic 8y agoWell, looking at https://en.wikipedia.org/wiki/Economy_of_the_Netherlands https://en.wikipedia.org/wiki/Economy_of_the_Netherlands, it shows Dutch GDP per capita (in EUR, nominal) up by >14% since 2007. You used GDP in USD, but to me that seems somewhat misleading: just because the EUR dropped relative to USD, doesn't mean that the economy suddenly shrank. > I'm not sure how the Euro survives if those sink lower in a recession and see another lost decade. This seems like a non sequitur to me. Why wouldn't the Euro survive? If Japan had a lost decade, would you speculate about the survival of the yen?
- novaRom 8y agoThis article seems to ignore Northern and Eastern Europe which are booming. Italy is not the whole Europe. Compare it to US where different states have different performance at different times.
- zavi 8y agoWe can always just keep siphoning cash from US multinationals thru bogus antitrust claims. That's one way to stay afloat in the face of demographic crisis, stagnant productivity, and Chinese takeover of key sectors.
- olivermarks 8y agoThe Economist has historically been a big supporter of the EU and globalization. Something has shifted in their perspective. They were also pretty downbeat about the EU's prospects while discussing the Aachen Treaty between France and Germany that was signed yesterday. https://www.economist.com/leaders/2019/01/17/france-and-germany-plan-to-sign-a-new-treaty-in-aachen https://www.economist.com/leaders/2019/01/17/france-and-germ...
- zcid 8y agoYeah, I had to double check to make sure I was actually reading the Economist. Felt weird to be getting a perspective like that from them. Why the shift?
- owengriffiths 8y agoThey don't seem to make the link that maybe Brexit is not such a bad idea after all, which seems a logical conclusion to me.
- olivermarks 8y agoI suspect that is the signal from the Rothchild empire - someone will have to pick up the Italian debt and the EU is arguably obsolete in its present form and wouldn't reform when it could prior to the UK referendum. (Rothchild own half the economist and it is largely their mouthpiece). Going forward and post UK exit from the EU (and probably other nation states too) there will be a reformation around some new organization...
- pas 8y ago"Aside from the Agnelli family, smaller shareholders in the company include Cadbury, Rothschild (21%), Schroder, Layton and other family interests as well as a number of staff and former staff shareholders." - from wikipedia
- 8y ago
- rb808 8y agoA huge issue is the stagnating population growth in European countries. Over the last 10 years Germany, Italy, Spain have only barely risen in population. Of course that means lots more retirees and fewer workers. Maybe flat economy is actually a good outcome as can be expected. One of my favorite stats is that 100 years ago the population of Europe was nearly 30% of the world's total. Now its <10% and falling quickly. Finally Yes I dont think its necessarily a bad thing, but you can't expect strong economic growth will falling working age population.
- sonnyblarney 8y agoMost of this has to do with massive growth elsewhere, not so much failing growth in W. Europe, which is more of a new trend. I don't think the 'warm bodies arms race' is going to end well for anyone, another perspective might be more apt.
- stupidprizes 8y agoI don't think the 'warm bodies arms race' will end well either. What perspective are you considering?
- sonnyblarney 8y agoCurrent growth strategies are all fundamentally 'warm body growth' i.e. the economy is grown mostly through babies or immigration, not any kind of real industrial growth or innovation. If you look at USA growth vs. Western Europe, the USA does better, but not so much if you account for headcount. As Western nations have fewer babies, there's a push for more migration, which in some places can work, not so much in others. Europe has quite a lot of people and there are real physical limits to that growth - surely, it could all be as dense as Hong Kong but at some point, there needs be some consideration. The West should not be trying to compete with Asia by having as many babies as them, surely. If anything, we should maybe be trying to help tackle population explosion in some places, which can be done even with fairly non controversial methods like basic economic prosperity.
- BogdanPetre 8y agohttp://archive.fo/URd3A http://archive.fo/URd3A
- chpmrc 8y agoI didn't know Theresa May wrote for The Economist. /s
- deleted 8y ago[deleted]