This may seem obvious, but it’s worth repeating: Economic policy in Europe has been a complete failure. Everything was done and done correctly.
This Thursday released the latest report on the euro area GDP, and its forecast – pretty grim.
Carl Weinberg of High Frequency Economics says so explicitly. If you do not want to read the whole paragraph, read only the first sentence.
The European economy is suffering its seventh year of depression.
“According to the forecasts, the GDP for the second quarter will be reduced by 0.7% and will remain the same at 3.2% lower than in the first quarter of 2008, when the depression started. In the first quarter of the Eurozone economy declined, unless you consider an unexpected jump in Germany to 3.3% on an annualized basis.
Only those who are misled unverified and unconfirmed reports by Markit PMI (PMI), were convinced that this was a real economic growth and stable. We expect that in the euro area GDP in the second quarter will be considered a reduction of Germany’s economy by 2% per year, which neutralizes the effect of a sudden rise in the index of the first quarter. If this forecast will be correct, GDP growth in Germany in the first half, on average, up 0.7% on an annual equivalent, which is much below the desired, but corresponds to the dynamics of the past few years. French economy expects a disastrous reduction of 1.1% for the quarter, or 4.3% – for the year. “
In 2010-2012 there was a crisis in Europe, which is almost completely gone through, and it was the sovereign debt crisis. The problem was solved when the ECB offered to help each of the countries, which resulted in reducing the cost of loans and nullified the concerns of countries, because of a default, they will be forced to leave the area of the single currency.
However, apart from that, nothing else has worked. Countries are still in the mode of austerity (despite the fact that the debt burden continues to grow), and the ECB is idle, allowing the decline in inflation and the growth of debt.
And it is hardly the second quarter put an end to this.
Here’s the forecast for Citi to reduce GDP growth and inflation, which is below the target level of the ECB.
“We cut its forecast for GDP for 2014 and 2015, by 0.1 percentage points for each year, to 1.1% and 1.7%, respectively, as well as inflation expectations for 2014 to 0.5%.
Our analysis of the business cycle has revealed a risk that the initial stage and the most powerful improvements in the cycle may have already left behind. Recent events in Ukraine and the strength of the euro suggests that the balance of risks and economic activity is shifted down, despite the favorable indicators the United States and China.
Turning to inflation, the effect of a strong base is likely to result in a lower euro-zone to a new multi-year low of 0.3% in July, while the prospects for recovery before the start of the fourth quarter remains limited. Our forecast for the weak dynamics of wage growth suggests that core inflation will remain low, despite the expectations of the ECB. “