Jobless in Europe
If you want to read depressing news, read not more. The unemployment situation in Europe is continuing, and countries like Greece ans Spain are in deep trouble. From Europa.eu.
What are the recent labour market trends?
The economic and employment outlook is bleak and has worsened in recent months and is not expected to improve in 2013, although a more positive outlook for the labour markets is still expected in 2014. The EU is currently the only major region in the world where unemployment is still rising.
The general picture covers a very diverse situation across Member States. There is a growing divergence between unemployment situations. Some MS have weathered the economic crisis well and are recording very low unemployment rates, as low as 4.4% in Austria or 5.4% in the Netherlands and Germany. This is the result of the generally good economic situation in these countries but also because they are reaping the benefits of previous reforms initiated long before the economic crisis hit. In other Member States unemployment is high or rising. Usually these are the countries that were hit hardest by the sovereign and financial crisis, such as Greece or Spain where the unemployment rate is above 25%. But these are also countries with well-identified problems in their labour markets, such as segmentation, insufficiently effective active labour market policies or ineffective links between school and work. These shortcomings have amplified the effects of the crisis though they were not the cause.
Spain Will be Forced to Choose
Spain has a few choices in order to start dealing with the pain the country is experiencing. None of the choices look very attractive, but something must be done in order to start fixing the economy. Mr Rajoy, what u gonna do? Via the think tank Carnegie Europe
In the great debate over the economy we sometimes forget the simple arithmetic of economic rebalancing. This arithmetic, like it or not, severely limits the options open to Spain.
For many years, thanks partly to bad policies in Spain but mainly to aggressive attempts by Germany to achieve growth by forcing a trade surplus onto its European neighbors, Spain, and many other countries in Europe, ran enormous trade deficits. It is easy and popular to blame the greed of the Spanish and the stupidity of the government for the mess in which Spain has found itself, but the policies Germany put into place in the late 1990s guaranteed that Germany, a country that had run massive trade deficits in the 1990s, would run equally massive trade surpluses in the subsequent decade.
Weakness Begets More Weakness
Guest post by Eric Sprott and David Baker of Sprott Asset Management.
Other than some obligatory arrests for disorderly conduct, the Occupy Wall Street movement celebrated its one year anniversary this past September with little fanfare. While the movement seems to have lost momentum, at least temporarily, it did succeed in showcasing the growing sense of unease felt among a large segment of the US population – a group the Occupy movement shrewdly referred to as “the 99%”. The 99% means different things to different people, but to us, the 99% represents the US consumer. It represents the majority of Americans who are neither wealthy nor impoverished and whose spending power makes up approximately 71% of the US economy. It is the purchasing power of this massive, amorphous group that drives the US economy forward. The problem, however, is that four years into a so-called recovery, this group is still being financially squeezed from every possible angle, making it very difficult for them to maintain their standard of living, let alone increase their levels of consumption.
One of the central themes that arose out of the Occupy movement was the growing sense of unease among the average American citizen with regard to growing imbalances in wealth within the US. The rich are getting richer while the poor get poorer. That feeling is entirely legitimate. According to the US Census Bureau, in 2011 the median income of US households, adjusted for inflation, fell to $50,054. This is 4.9% below its 2009 level, and 8.9% below its all-time peak of $54,932 in 1999.1 This is not encouraging data. It implies that the average American household is almost 9% poorer today than it was thirteen years ago.
New Headaches for Spain, Rajoy and Rato
Another blow out number by Spain. Unemployment is now above the magic 25% level. Uncharted territory…From Bloomberg.
Spanish unemployment climbed to a record in the third quarter as a deepening recession left one in four workers jobless, adding pressure on Prime Minister Mariano Rajoy to seek a second European bailout.
Unemployment, the second highest in the European Union after Greece, rose to 25.02 percent from 24.6 percent in the previous quarter, the National Statistics Institute said in Madrid today. That is the highest since at least 1976, the year after dictator Francisco Franco’s death ledSpain to democracy.
“The situation is serious,” Ricardo Santos, an economist at BNP Paribas SA in London, said by telephone. “There is still room for a deterioration in unemployment. Activity is weak and the government will reduce jobs as there are strict targets to adjust the number of public-sector temporary workers, especially in health and education.” (Full read here).
Meanwhile, the not so popular Mr Rato is about to get some uncomfortable questions with regards to the collapse of Bankia….
Spain’s Robin Hood
Interesting story on the Spanish situation, and their own Robin Hood. From Bloomberg Businessweek.
Claiming Mahatma Gandhi, Karl Marx, and Che Guevara as inspirations, but also “anonymous people who think differently,” Sánchez Gordillo defends his protest actions as “symbolic, designed to show who is to blame and who is the victim” in the country’s deepening crisis. He rails against the supermarket practice of throwing out food when people are going hungry and accuses the stores of setting artificially low prices for farmers’ produce to reap huge profits. He claims that Spain’s current financial woes, in general, stem not from “excessive debt, but from excessive theft” with, in particular, “the banks buying money [from the European Central Bank] at 0.75 percent and lending it to the state at 7 percent.” This, he says, constitutes “a swindle within a swindle” and is abetted by both the main political parties. (He’s slightly out of date as the lending rate has shrunk to 6 percent.)
Fernando López Noguero, a professor in the sociology department of the University of Pablo Olavide in Seville, says protests such as theirs “with great media resonance” are needed. But he’s concerned that if the crisis worsens, “they could slip into ‘the law of the jungle’ where the domain of law is no longer respected.” He worries that “violent demands may begin to spread, thanks to the breach opened by the crisis.”
Carlos Slim on Europe – “It is time to make some adjustments to this welfare state”
By now everybody knows Europe is in big trouble. Carlos Slim shares some thoughts on what Europe needs to “fix” in order to come back. For starters, forget the sunbathing at 60. From El Pais.
Slim, founder and honorary chairman of the business conglomerate Grupo Carso (Telmex, América Móvil, Sears Mexico and others) and declared by Forbes magazine the wealthiest person alive since 2010, has this piece of advice for Europeans: “What Europe must do is two things: sell assets to reduce its debt and deficit levels, and also invite the private sector to make the kinds of investments that the state no longer needs to make.”
Question. You recently stated in an interview: “You read the numbers, and the numbers tell you what’s going on.” So what do Europe’s numbers tell you? What’s happening there?
Greece is the Word and OMT isn’t a Word
Guest post by Peter Tchir.
For now we can ignore the brutal statistic of 25% unemployment. That sounds callous, and I guess it is, but that is not why Greece is going to become a key issue in the ongoing battle of European bailouts.
There is growing talk of some official sector losses for Greece. We see the denials, but the reality is the only real place for debt reduction is in the official sector.
This isn’t the easiest chart in the world to read, but as I think I can walk you through it and explain why it is so important.
Official Greek Debt is €288 billion. I don’t think this includes every bilateral loan made by the EU and certainly doesn’t deal with any national central bank loans.
It does include the entire Public Sector debt. That is bonds held by actual real people or institutions and not government entities. The PSI bonds total just over €62 billion. There is about €4 billion of Greek legacy bonds documented under non-domestic law. So of the €288 billion, at most, €66 billion is held outside of the official sector.
The PSI bonds trade with an average price for the “strip” around 22.5. So there is about €14 billion in PSI market value.
Spain – Towards stability (or not)
The Kingdom of Spain’s path towards stability and growth.The Unstimulus
Guest post by Azizonomics.
If your predictions are wildly out-of-whack with reality, you need to change your approach.
Here’s a 2009 Obama administration graph authored by Jared Bernstein and Christy Romer showing their calculations for future unemployment levels with and without the Obama stimulus, updated by James Pethikoukis to show the actual figures:
These predictions have been an unmitigated disaster. Not only did the real figures not match up to the advertised ones, but they are also much worse than the baseline expectations. Romer and Bernstein appear to have both severely under-estimated the depth of the crisis, and over-estimated the effectiveness of the stimulus package.
Scary Europe
Still the most scary chart in Europe.
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