The Nation Newspaper

Tag: Euro Zone

  • Euro zone May business growth in slow lane

    Euro zone business activity picked up a touch last month but remained in low gear and forward-looking indicators suggest the bloc’s economic growth won’t accelerate anytime soon, a survey found.

    IHS Markit’s Euro Zone Composite Final Purchasing Managers’ Index (PMI), considered a good measure of overall economic health, nudged up to 51.8 in May from April’s 51.5.

    While that was higher than an earlier flash reading of 51.6 it remained close to the 50 mark separating growth from contraction.

    IHS Markit said the PMI pointed to second quarter growth of 0.2 per cent, weaker than the 0.3per cent predicted in a Reuters poll late last month and slower than the 0.4 per cent the bloc’s economy expanded in the first quarter.

    “The overall picture remains one of weak current growth and gloomier prospects for the year ahead,” said Chris Williamson, chief business economist at IHS Markit.

    “There seems little prospect of any immediate improvement: new orders barely rose in May, painting one of the gloomiest pictures of demand seen over the past six years, and companies’ expectations of growth over the coming year likewise fell.”

    A sub-index measuring new business fell to 50.4 from 51, one of its lowest readings in six years.

    The PMI covering the euro zone’s dominant services industry crept up to 52.9 from April’s 52.8, helping to offset a fourth month of contraction in manufacturing.

    With new business growth slowing, optimism among services firms declined. The business expectations index fell to a four-month low of 61.1 from April’s 62.2.

  • Euro zone strikes Greek deal with tough conditions

    Euro zone leaders made Greece surrender much of its sovereignty to outside supervision on Monday in return for agreeing to talks on an 86 billion euros ($95 billion) bailout to keep the near-bankrupt country in the single currency.

    The terms imposed by international lenders led by Germany in all-night talks at an emergency summit obliged leftist Prime Minister Alexis Tsipras to abandon promises of ending austerity and could fracture his government and cause an outcry in Greece.

    “Clearly the Europe of austerity has won,” Greece’s Reform Minister George Katrougalos said.

    “Either we are going to accept these draconian measures or it is the sudden death of our economy through the continuation of the closure of the banks. So, it is an agreement that is practically forced upon us,” he told BBC radio.

    Greece however aims to reopen its banks on Thursday, bankers said after meeting the finance minister. Facing a wave of withdrawals, the banks closed two weeks ago.

    If the summit had failed, Greece would have been staring into an economic abyss with its shuttered banks on the brink of collapse and the prospect of having to print a parallel currency and exit the European monetary union.

    “The agreement was laborious, but it has been concluded. There is no Grexit,” European Commission President Jean-Claude Juncker told a news conference after 17 hours of bargaining.

    He dismissed suggestions that Tsipras had been humiliated even though the summit statement insisted repeatedly that Greece must now subject much of its public policy to prior agreement by bailout monitors.

    “In this compromise, there are no winners and no losers,” Juncker said. “I don’t think the Greek people have been humiliated, nor that the other Europeans have lost face. It is a typical European arrangement.”

    Tsipras himself, elected five months ago to end five years of suffocating austerity, said he had “fought a tough battle” and “averted the plan for financial strangulation”.

    Greece won conditional agreement to receive a possible 86 billion euros ($95 billion) over three years, along with an assurance that euro zone finance ministers would start within hours discussing ways to bridge a funding gap until a bailout – subject to parliamentary approvals – is finally ready.

    That will only happen if he can meet a tight timetable for enacting unpopular reforms of value added tax, pensions, budget cuts if Greece misses fiscal targets, new bankruptcy rules and an EU banking law that could be used to make big depositors take losses.

    German Chancellor Angela Merkel said she could recommend “with full confidence” that the Bundestag authorise the opening of loan negotiations with Athens once the Greek parliament has approved the entire program and passed the first laws.

    The secretary-general of Merkel’s conservatives said the Bundestag was likely to vote on Greece on Friday.

    Merkel’s allies rushed to defend the deal, with her chief of staff, Peter Altmaier, tweeting that Europe had won and Germany “was part of the solution — from the beginning until the end!”

    But in Greece, relief that a deal had been struck was mixed with anger at Germany. “Listen, it is some sort of victory but it is a pyrrhic victory because the measures are very strict,” Marianna, 73, told Reuters.

    Malta’s Prime Minister Joseph Muscat said Greece came out of the summit “humiliated” – mostly as a result of its refusal to take an offer made to it two weeks ago.

  • OECD: Euro zone growth gaining pace, others stable

    The euro zone is increasingly contributing to an improvement in global economic growth prospects, according to a forward-looking indicator the Organisation for Economic Co-operation and Development (OECD) has published.

    The OECD said its leading indicator, designed to detect changes in economic prospects, showed “positive change in growth momentum in the euro area and stable growth momentum in most other major economies and the OECD area as a whole.”

    The indicator, expressed as an index where 100 denotes the long-term average, rose to 100.7 for the euro zone as a whole from 100.6 in the preceding month’s report, and rose also for the OECD group of mostly wealthy economies, to 100.4 from 100.3.

    The U.S. reading was stable at 100.2 and for Japan it stayed at 99.8. In large non-OECD economies, the index rose to 99.1 in China from 99.0. It edged higher too in Brazil and India but fell in Russia to 99.3 from 99.5.

    Within the euro zone, the reading for Germany rose to 99.7 from 99.6 while in France it rose to 100.6 from 100.5. It nudged higher too in Italy, to 101.2 from 101.0.

  • Euro zone business picks on rising orders

    Euro zone business picks on rising orders

    The euro zone private sector has expanded at the fastest pace in seven months this month led by rising new orders, surveys has   showed, but firms are still cutting prices, suggesting the ECB will have a tough time spurring inflation.

    The jump in activity will provide a glimmer of hope for policy makers who have struggled to steer the monetary union towards growth with modest inflation, but may also support the European Central Bank’s decision to buy sovereign bonds.

    “For the first time since mid-2011 we’re seeing a broad-based improvement in growth,” said Chris Williamson, chief economist at survey compiler Markit.

    “This in part reflects increased confidence after the ECB announced quantitative easing, and we’ll see more improvements once asset purchases start in March.”

    Markit’s Composite Flash Purchasing Managers’ Index, based on surveys of thousands of companies and seen as a good growth indicator, rose to 53.5, its best since July, from a final reading of 52.6 last month.

    That beat even the highest forecast in a Reuters poll and marked the 20th month above the 50 level that separates growth from contraction.

    Williamson said the PMI pointed to 0.3 per cent GDP growth in the current quarter, matching a Reuters poll, adding that a follow-through in March could push it up to 0.4 per cent.

    In a positive sign for future activity, the gauge of new orders growth at services firms rose to 53.3 from 51.7. Growth in order backlogs rose to the highest level in nearly four years.

    The PMI covering the dominant service industry also beat all forecasts by rising to 53.9, while the factory PMI nudged up to 51.1, less than expected, with output increasing slightly faster.

    But continued price cutting by firms, although at a slower pace, underscored the difficulty policymakers face in bringing inflation back to the ECB’s target rate of below but close to two per cent from January’s record-equalling 0.6 per cent.

    The ECB is set to start buying €60billion worth of government bonds a month from March to ward off deflation, although the majority of economists in a poll this month said that is not likely to be enough to spur price growth.

  • Official says Euro-zone economy hasn’t entered deflationary phase

    The euro-zone economy hasn’t entered a deflationary phase, even though consumer prices in the single-currency area fell on an annual basis last month, European Central Bank executive board member Benoit Coeure said.

    “The euro zone isn’t in deflation,” Mr. Coeure said in radio interview with station France 24. Deflation refers to a persistent drop in consumer prices that threatens household spending and business investment.

    Mr. Coeure’s comments came a day after the European Union’s statistics agency reported consumer prices in the 19-member euro zone fell 0.2% in December from the previous year, marking the first negative reading since the height of the global financial crisis five years ago. Much of the decline was due to lower energy prices.

    The recent drop in oil prices is “good news for the European economy,” Mr. Coeure said, because it boosts the purchasing power of households and businesses and may lift spending. On the other hand, he said, it puts the ECB further away from achieving its inflation target of just below 2%.

    The key point for the ECB, he said, is whether weak consumer prices are temporary or more long-lasting. If they prove durable, “it becomes much more concerning to us.”

    Mr. Coeure’s comments come amid widespread expectations in financial markets that the ECB later this month will launch a broad-based asset purchase program that includes government bonds, a policy known as quantitative easing, to boost the money supply and push inflation back toward the bank’s 2% target.

     

     

     

    The ECB board member declined to comment on what the central bank will do at its Jan. 22 meeting, but said any stimulus must be fashioned in a way that creates confidence and takes into account concerns of individual ECB governing council members.

    Political uncertainty in Greece, which faces elections on Jan. 25, won’t affect the ECB’s decision making, Mr. Coeure said, noting that Greece is a “is a very small part of the euro zone,” and that it is up to its citizens to choose a government.

  • Euro zone unemployment stuck at record high

    Euro zone unemployment stuck at record high

    UNEMPLOYMENT in the euro zone was 12.2 percent in September, stubbornly stuck at a record high, signalling that the region’s faltering economic recovery is yet to be felt in the job market.

    The figure is unchanged from the previous month, according to revised data from European statistics agency, Eurostat. The number of people unemployed in the region increased by 60,000 in September to a total of 19.4 million.

    By contrast, in September 2012 the jobless rate was 11.6 percent and 12.1 percent in July 2013 — highlighting fears that the region’s employment picture is deteriorating and could thwart a nascent economic recovery.

    As the 17-country euro zone struggled to control its three-year crisis over too much debt, governments cut back on spending and introduced tax hikes. This had a damping effect on the region’s economy, with a knock-on effect on job numbers. Although the region’s economy is now starting to grow, it expanded by 0.3 percent in the second quarter, companies are still reluctant to hire.

    The euro zone’s lowest unemployment rates in September were recorded in Austria, 4.9 percent; Germany, 5.2 percent; and Luxembourg, 5.9 percent. The highest rates can be found in Greece (27.6 percent in July – the latest figures available) and Spain (26.6 percent).

    Unemployment among Europe’s under-25s, continues to worsen, with 24.1 percent out of work in September compared with 23.7 percent in August. That means that 3.548 million young people were unemployed in the euro zone in September, an increase of 8,000 from August.

    Struggling southern European countries remain worse hit, and the latest numbers show that over half of young people in Spain, Croatia and Greece are still unemployed. In contrast, the lowest youth jobless rate is currently in Germany, at 7.7 percent, and Austria with 8.7 percent.