Eurostat issued a flash indicator last Friday to the effect that eurozone inflation has fallen unexpectedly from 1.9% to 1.6%. I say unexpectedly, but of course this is, in many ways, one of the foreseeable consequences of the euro rise.
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Tag Archives: Economics: Currencies
Italy’s No-Growth Update
OK I’m on a roll, so I’m going to stick my neck out. This slide in the Italian confidence index apparently surprised the ‘experts’. Well it shouldn’t have surprised Fistful readers who have been following what I have been saying. Clearly these confidence indexes are not the last word in sliced bread. But they do mean something, and Germany’s Ifo index just turned in another bad reading too.
Ever since Parmalat, I have been asking one simple question: will Italy ever grow again? Of course, the simple answer is possibly it will: never say never. But will it ever get back to vigorous growth: this I doubt. I am even half asking myself if we will see positive numbers in more than say 50% of the forthcoming quaters. Remember, if my demographic thesis has any predictive power it should be precisely here in Italy that the Titanic starts to take in water. Parmalat was simply the iceberg. Of course my thesis could always be wrong. Any takers?
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The Euro and the Company
Now maybe David is sitting there today asking himself just what the hell that post of Edward’s on outsouring in the US had to do with a European centred blog. Well the answer didn’t take long in reaching us: the euro rose to a fresh record above $1.29 today as upbeat U.S. data yesterday failed to diminish the bearish view of the greenback and off it went to new multi-year lows against a range of other currencies (this should make us ask ourselves what may happen if we get a run of bad data).
And just what has this got to do with outsourcing? Well we seem to be on a conveyorbelt at the moment, one which stretches all the way though Asia across the US and then on over to Europe. What this is producing is ‘weakness’ in the US labour market, an intractable US trade deficit, and interest rates at historic lows. Which means of course that the dollar keeps on falling, and the euro keeps on rising. Until…….
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Of We Go Again, Ready, Set……….
After a weekend of semantic analysis the currency markets didn’t take long getting back to work – the euro was only a cent off its all time high by late morning. According to Dictionary.com the relevant meaning of volatility is: tending to vary often or widely, as in price – the ups and downs of volatile stocks. Not much danger of volatility here, not if the only way the dollar is going to go is down. Wouldn’t the more appropriate term have been secular decline? But maybe they aren’t against that, and the markets in turning the pressure back on the dollar, have read the signal exactly right.
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Europe’s Jobless Recovery?
News in today might suggest that far from obsessing ourselves with the current plight of the US economy, our attention might be better directed rather nearer home. Reading off from the results of the latest Purchasing Managers Index survey which appears in todays Financial Times, the services sector is growing, but employemnt in it isn’t. Sound familiar? Now we’d better sit down and start examining the possible causes. Of course, it might be just a temporary blip (this is what they keep saying in the US, but it’s a blip that has been running some months now) and then again it might not be.
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Living in Denial
No this is not (yet) the title of one of my new pages (although we were looking into living in sin, but unfortunately it’s already taken). No the denial I am referring to is much nearer home for most of us, since it is up there in Brussels. “European Union nations are dragging their heels in their ambitious drive to become the world’s most competitive economy by the end of the decade” or so we are lead to believe from the EU annual survey published by the Commission on Wednesday.
This foolish piece of what the Spanish would call ‘chuleria’ (no easy translation but I suppose you could try vain self-important show-off bragging) – the pledge to overtake the US by 2010 – was adopted at the Lisbon 2000 summit. It was madness in its moment, now it looks just plain ridiculous.
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Things That Can’t Go On Forever, Don’t
Ok, the sun is shining nicely down here in Barcelona right now, so maybe this is a good moment to come out and provoke a storm. The euro: something gives, but what? Actually it is perhaps ironic that I have chosen today of all days to write this, since for once it seems the euro may fall rather than rise: well to someone who is accustomed to marching out of step, this almost seems par for the course. Never mind, tomorrow, or the day after, we will be back to normal, and the seemingly unstoppable rise will continue. The only remaining question really is: where is breaking point, and what will happen when we get there?
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Methinks We’re On The Slippery Slope
OK you may be in for a bout of solid over-posting. There seem to be some signs in the air that push may be about to come to shove. Tomorrow I will try and do something on financial architecture and the euro. Meantime this is a ‘light’ warm-up post. The efficient cause is today’s news from Portugal, which suggests that the supposed Harrod-Balassa-Samuelson free-lunch-honeymoon (which has to count as one of the worst pieces of ‘justifying what there is simply because it is’ pieces of quackery where there should have been solid science known to recent history) may be about to come to an end. One of those darned ‘catch up’ economies may have just caught up so hard that’s it’s come to a dead halt. The Bank of Portugal has predicted growth of only 0.75% this year, and even that only if there is the anticipated growth in global demand (which I doubt extremely). Those who have read my Parmalat post will have seen that I am already begining to speculate about whether we are about to see the end of growth in the Italian economy, well just remember Portugal is lined up nicely in the queue to see where lunch is going to be served.
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The Dutch Auction
Following points made by both Frans and Elliott in the comments sections, the Netherlands may well in fact breach the 3% growth and stability pact limit next year. I bet Zalm is blogging away more furiously than ever. But who will be the object of his wrath this time?
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Fiscal Tickery
Thanks David for the link. I haven’t commented on this because like Dutch finance minister Zalm (who I imagine working away weblogging into the early hours under a dim light provided only by his mobile phone) I am tired. I can’t help feeling that everything that needs to be said has already been said, and many times over. Now all we can reasonably do is wait and see the consequences.
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