EU MUST "EXIT" the Euro - Pressure is mounting on the European Central Bank to boost activity in the euro area after the latest figures showed a fresh rise in unemployment, and inflation dropping sharply to a four-year low.
The jobless total for the 17 nations that use the single currency rose by 60,000 in September to 19.4 million – the 29th consecutive monthly increase. Unemployment is a million higher than in September 2012 and up by almost four million since the spring of 2011.
At 12.2%, the jobless rate was the highest since monetary union began at the end of the 1990s, according to data from Eurostat, the EU's statistical agency.
Analysts said the labour market in the euro area had yet to stabilize despite the return of modest growth in recent months. Jobless rates range from 4.9% in Austria and 5.2% in Germany to 26.6% in Spain and 27.6% in Greece, with unemployment in Italy rising to a record high of 12.5% in September. The jobless total in France also rose, up by 34,000 in September and by almost 250,000 in the past year.
Unemployment among the under-25s rose by 22,000 in September to 3,548,000 – nudging up youth jobless rate to 24.1%. In France, the youth jobless rate jumped from 25.6% to 26.1%, while in Italy it increased from 40.2% to 40.4%.
Meanwhile, separate figures from Eurostat showed the euro area's inflation rate dropping from 1.1% to 0.7% – well below the ECB's target of keeping it just under 2%.
In contrast to Britain, where dearer gas and electricity bills are pushing up the cost of living, cheaper energy was a big factor in reducing inflation across the euro area. UK inflation, at 2.7%, is now two percentage points higher than in the single currency zone.
Chris Towner, director at foreign currency specialists HiFX, said: "Inflation data from the EU this morning shocked the market as the rate fell alarmingly from 1.1% to just 0.7%, which is the lowest level seen in four years.
"With a strong currency it looks like the risks are increasing for the EU to fall into a 'Japan-like' deflationary spiral, and the ECB may need to act soon and cut rates again."
Nick Kounis, head of macro research at ABN AMRO, said: "This raises the question of whether this will prompt a response from the central bank, given that its price stability goal is supposed to be symmetrical. There is certainly a strong case for the ECB to put in place a yet more aggressive monetary easing stance to guard against risks of inflation settling at too low levels. However, there seems to be strong resistance in some corners of the governing council, especially from some of the northern states."
Howard Archer, economist at IHS Global Insight, said: "An inflation rate of 0.7% could easily be seen as warranting an interest rate cut in itself, and the rise in unemployment heaps further pressure on the ECB to act, but we doubt that the bank will do so at its 7 November meeting.
"There is clearly a strong faction within the ECB's governing council against taking interest rates below 0.5% while the bank can also point to overall evidence that the eurozone is continuing to grow modestly after exiting recession in the second quarter.
"The ECB will likely limit its action at its November policy meeting to reiterating its forward guidance that it 'expects the key ECB interest rates to remain at present or lower levels for an extended period of time'.
"However, latest developments reinforce our view that the ECB will end up cutting interest rates from 0.50% to 0.25% sooner or later. Indeed, we certainly would not rule out a cut in December, although the ECB may hold off acting until the early months of 2014." (source guardian.uk)
2 comments:
The Bank of England? In his early days the new governor, Mark Carney, talked about the need for "escape velocity" in the economy. His innovation was "forward guidance", which was supposed to reassure people that interest rates would remain low for a very long time. But already his chief economist is talking about moving to more "normal" levels of interest rates – which will be a blow to many – and speculating about the end of forward guidance when it has hardly begun.
However, the real coup for the Bourbon strategy is Carney's quite remarkably complacent attitude towards the future of the City of London. He seems to see a future in which a still largely unreformed banking system gets bigger and bigger, with even more of the leverage that made such a marked contribution to the financial crisis. True, he believes there can be reform. I wonder.
This is a dangerous game. Meanwhile, though Labour worries that Osborne may get away with his pre-election boom, the chancellor may be hoist by his own petard. It was Osborne who insisted on a five-year term. I have a feeling that by the summer of 2015 his cynical and reckless policy will have blown up in his face, and be seen for what it has always been.
There are fears James Wharton’s EU Referendum Bill, which paves the way for a 2017 vote, will be killed off in the Lords by Labour and Lib Dem peers.
It is commonly believed that, because it is not a Government measure, a Lords defeat would kill off the Bill, but a group of Tory MPs believe it could be rescued. They have discovered any Bill rejected by the Lords and then passed by the Commons in identical form 13 months later can become law.
A leading Eurosceptic MP said: “If James’s Bill does get bogged down in the House of Lords, the fallback plan is to reintroduce an identical bill the following year which would have the merit of bypassing the House of Lords.”
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