Euro Zone

Euro zone trapped in jobs-growth doom loop

31 May 2013

The unemployment rate is up to 12.2 percent in the ageing and fully developed single currency zone. A return to GDP growth would create jobs, but where will that growth come from? Additional jobs, basically. Sadly, effective labour reform is still in short supply.

Europe yields to reality on austerity

29 May 2013

The European Commission will give France, Spain and others time to hit hair-shirt deficit targets. A retreat was almost inevitable. Harsh austerity is senseless when investors are docile and voters are restless. The snag is that gentle markets will also ease pressure for reform.

Germany finds pay balance that’s right for Europe

28 May 2013

The days of excessive German wage restraint are over, as the latest deal at Volkswagen shows. Wages are set to outpace inflation but not productivity. That’s enough to help consumer spending without harming employment. Germany’s European trading partners should cheer.

Spanish banks get spruced up for banking union

24 May 2013

The Bank of Spain says the country’s lenders face up to 10 bln euros of new provisions against ropey restructured loans. They may not need extra euro zone capital, but it will make them better placed to pass rigorous stress tests before they get supervised by the ECB.

Hollande gets serious on Europe – at last

17 May 2013

France’s president has outlined a two-year plan to give the euro zone a centralised “economic government”. Addressing a key German concern, Hollande seems ready to agree sovereignty transfers to make it more than a coordinating body. The proposal may be premature. But it has legs.

Euro zone headed for imperfect banking union

15 May 2013

A banking union will be flawed without a central resolution authority, but that may mean a cumbersome treaty change. Any compromise could only be a stop-gap. That won’t derail the project, but it will leave Europe’s crisis defences weaker for some years.

Greece’s vicious circle may be turning virtuous

15 May 2013

Yields on Greek 10-year bonds hit their lowest level in nearly three years. Investors are returning now that fears of a euro zone exit have receded and the country’s finances and politics look more stable. The economy is still in trouble, but it’s moving in the right direction.

Small-number fixation clouds euro zone picture

15 May 2013

The official data show Germany growing and France in a double-dip recession. But that’s based on a difference in GDP of three parts in a thousand - statistically meaningless for what is already a rough measure. The miniscule movements might even hide a major turn upwards.

Bini Smaghi’s call for Italy bailout is optimistic

14 May 2013

The former ECB board member thinks the Italian government should seek aid to make its reforms credible. Yet markets’ current docility makes a bailout less necessary, and politically more improbable. The comments mostly highlight the euro zone’s shortage of both carrots and sticks.

Greece offers value in distorted low-rate world

13 May 2013

German Finance Minister Wolfgang Schaeuble worries that loose monetary policy is distorting markets. That doesn’t show for Greece, whose bonds still pay a hefty yield even after risks of a euro exit have receded. Athens remains an outlier in the peripheral dash for trash.

EU needs a swift and lasting unemployment cure

9 May 2013

High joblessness rates are unacceptable but not irreversible. Governments should get serious. Tackle political obstacles, reform job markets, improve education and incentivise hiring. The EU can help by offering investment, structural funds and job guarantees for the young.

Portugal marks triumph of Draghi bluff

8 May 2013

Lisbon’s first 10-year bond since the country’s bailout makes ECB bond buying possible - but less likely. Mario Draghi’s promise to intervene has tamed markets, and central banks worldwide are forcing investors to take on risk. That virtuous circle has one weak link: politics.

ECB sticks to caution with minimum rate cut

2 May 2013

The euro zone’s central bank did as little as expected, a 25 basis point drop in its main rate, to 0.5 percent. A lack of unanimity suggests it won’t cut more soon, or start any bold initiatives. The ECB looks too divided to wage a tougher fight against a sinking economy.

Euro zone stuck in economic suspended animation

30 Apr 2013

Inflation is surprisingly low, unemployment is depressingly high and GDP remains frustratingly flat. There are ways to make the economy more dynamic, but they are either too revolutionary to be politically acceptable or too slow to matter for years. Expect more of the same.

Political heat endangers no-brainer ECB rate cut

29 Apr 2013

The European Central Bank last cut its main rate in July 2012. Since then the economy has worsened, inflation has declined, and the Bank of Japan’s actions are propping up the euro. The need for a cut is obvious, even if it’s not a miracle cure. But politics stand in the way.

Hugo Dixon: Austerity debate misses half the point

29 Apr 2013

It is true that governments, especially in the euro zone, shouldn’t chase an austerity spiral ever downwards. But they can’t just sit on their hands. They must drive even harder for structural reforms.

Euro zone spread monster is only half-dead

29 Apr 2013

The euro zone crisis has tuned to a slow burn. Government bond spreads now discipline, rather than terrorize governments. However they hurt local economies and, by several measures, are still higher than they should be. It shows the success, and limits, of ECB policy.

Europe’s austerity remorse brings long-term lesson

25 Apr 2013

European Commission leaders admit that they pushed austerity too hard. The policy’s blunt application has caused great harm. It’s not too late for pragmatism. The Commission must be less of a short-term disciplinarian and more of a long-term hawk.

Cyprus punishes the Russians and the prudent

25 Apr 2013

Nicosia wants to shield domestic depositors in the banks where uninsured savings will be haircut. The levy will only hit after loans have been deducted. Foreign customers - mostly Russian - will be penalised. That will also hurt those Cypriots who chose to stay frugal.

Italian stasis ends, mission impossible begins

24 Apr 2013

Two months after the parliamentary election, Italy’s parties are close to forming a governing coalition at last. The mission is to clean up politics and reform the economy. The new government’s first challenge will be to find a consensus on what’s really needed to move forward.