ECB's Draghi sees second half euro zone recovery. PRESS RELEASES - Press Release - Speech: The Single Market: Europe's path to growth and jobs. European Commission Michel BARNIER Member of the European Commission, responsible for Internal Market and Services Speech: The Single Market: Europe's path to growth and jobs Conference “Single Market and Growth in 2013” The City of London, 1 February 2013 Ladies and gentlemen, First of all, let me thank the City of London, and Lord Mayor Alderman Roger GIFFORD, for inviting me today. The EU is making headlines in the UK. Any debate on the EU project is welcome. I am not shocked either by the idea of revising the Treaty if it proves necessary. But any revision should aim at a better functioning union.
A piecemeal approach would lead to a major fragmentation of the Single Market, a Single Market which the UK has always strongly supported. And it would definitely go against the City of London’s interests – 40% of new financial institutions who chose London in the last 7 years did so because of the Single Market. And I also believe that Britain needs the EU. Including the UK. I – First, the Eurozone. Euro-Zone Data Suggest Stabilization. Www.euro-challenge.org/wordpress/wp-content/uploads/2012/11/February-2013-Newsflash-1-2.pdf. Euro challenge stuff 3234334.docx.
Austerity Europe: In depth coverage of government austerity measures aimed at reducing unsustainable budget deficits from the Financial Times. Berlin Plan Hints Future Austerity Measures for Germany. German Finance Minister Wolfgang Schäuble has an inimitable way of misleading his listeners with a torrent of obfuscating words. When asked if the Greek bailout would cost more money, he responded: "Not necessarily," adding that there was merely "a greater financial requirement on the timeline.
" It could soon be a similar story with yet another gem from Schäuble's repertoire of quotations. "Germany is clearly a gainer from the euro," as the minister likes to say. But if what his team has been writing over the past few weeks is true, Germans will soon find that their presumed winnings have transformed into losses. The government in Berlin is living in a dual reality. Strategists in the center-right coaliton parties are planning to enhance benefits for families, pensioners and the long-term unemployed in a bid to woo voters in the upcoming elections.
The Germans face a bitter déjà vu. Historic Cuts Looming There are also plans to raise taxes. Measures to Discourage Early Retirement. IMF Head Lagarde Warns Germany over Possible Austerity Plan. International Monetary Fund head Christine Lagarde has said that Germany should not be looking at measures aimed at consolidating its finances, apparently in concern over a SPIEGEL report indicating that the German Finance Ministry is working on a far-reaching package of spending cuts and tax hikes for introduction following general elections next autumn.
In an interview with the Thursday edition of the influential weekly Die Zeit, she said that Germany needs to continue to work as a counterbalance to the biting austerity programs passed in crisis-stricken countries in Southern Europe. Germany and other countries "can afford to move ahead with consolidation at a slower pace than others," Lagarde said. "That serves to counteract the negative effects on growth that emanate from the cuts made in crisis countries. " The comments come just days after SPIEGEL reported that Finance Minister Wolfgang Schäuble is working on a list of consolidation measures. Cautious Optimism Keep track of the news. Interview with European Currency Commissioner Olli Rehn on Euro Crisis. Fears of Return of Euro Crisis Plague Central Bankers and IMF. Mario Draghi has a close relationship with the world of faith. The president of the European Central Bank (ECB) was educated at a Jesuit school in Rome, he wrote articles for the Vatican newspaper L'Osservatore Romano, and when he delivered remarks on the "crisis in the euro area" last week, he chose the Catholic Academy in Munich as the venue for his announcement.
"Caring for the welfare of our neighbors is not only an ethical principle of the Christian faith," he preached, standing next to a candlelit crucifix, "it also makes eminent economic sense. " Europe's top monetary policymaker can certainly use the support of higher powers. Only a few weeks ago, he said "the worst" of the euro crisis was over. But since voters denied the proponents of the current reform policies a clear majority in Italy's recent election, providing former Prime Minister Silvio Berlusconi with a political comeback, the crisis is back. Nervousness Returns The markets reacted nervously, as expected. Growing Concern. Euro Zone Unemployment Rose to Another Record in January. Panic-driven austerity in the Eurozone and its implications. Southern Eurozone countries have been forced to introduce severe austerity programs since 2011.
Where did the forces that led these countries into austerity come from? Are these forces the result of deteriorating economic fundamentals that made austerity inevitable? Or could it be that the austerity dynamics were forced by fear and panic that erupted in the financial markets and then gripped policymakers. Furthermore, what are the implications of these severe austerity programs for the countries involved? There is a strong perception that countries that introduced austerity programs in the Eurozone were somehow forced to do so by the financial markets. Figure 1. Source: Financial Times and Datastream. There can be little doubt. The next question that arises is whether the judgement of the market (measured by the spreads) about how much austerity each country should apply was the correct one. Figure 2. Source: Datastream (Oxford Economics). Figure 3. Figure 4.
Figure 5. Current State of the EU. Germany: GDP. Germany: Employment Situation. Germany: Industrial Production. Germany: Foreign Trade. Fiscal And Monetary Policy - Germany. Fiscal Policy In 2010, Germany cut 14 million euros in taxes as agreed by the outgoing government coalition of Christian Democrats and Social Democrats. In 2011, they are aiming to cut 24 million euros in income taxes benefiting in particular low- and middle-income earners as well as families. There are still many details to go into this plan, but regardless Germany's goal is to cut income taxes tremendously. This represents an expansionary fiscal policy as Germany is decreasing taxes. Impacts With expansionary policy comes the goal to close a recessionary gap, decrease unemployment, and stimulate the economy. Monetary Policy Germany does not have its own money so they can not use their own monetary policy.
This rising of interest rates will not effect only Germany, but all the rest of the countries that are involved in the ECB. Sources. Is Economics: Encyclonomic WEB*pedia. In general, contractionary fiscal policy works through the two sides of the government's fiscal budget -- spending and taxes. However, it's often useful to separate these two sides into three specific tools -- government purchases, taxes, and transfer payments. Government Purchases These purchases are used to buy everything from aircraft carriers to paper clips, from office furniture to highway construction, from traffic lights to teacher salaries. The actual purchases are typically undertaken by individual government agencies. Contractionary fiscal policy involves a decrease in the funds appropriated to these assorted agencies. While a decrease in government purchases have been used frequently over the years to implement contractionary fiscal policy, it can be a relatively involved process.
Taxes Transfer Payments The third fiscal policy tool is transfer payments. Inflationary Gap Closing the Gap To illustrate how this occurs, consider the exhibit to the right. Other Policy Options. Expansionary Monetary Policy vs. Contractionary Monetary Policy. Soros Highly Critical of German Monetary Policy | Steel, Aluminum, Copper, Stainless, Rare Earth, Metal Prices, Forecasting | MetalMiner. Never one to mince his words, veteran investor George Soros called on Germany to change its policies or withdraw from the currency union for the sake of the rest of Europe according to a Telegraph article last week. In a hard hitting interview with the German weekly Die Zeit, Mr. Soros is quoted as saying, “Unless Germany changes policy, its withdrawal from the currency union would be helpful for the rest of Europe. At the moment Germany is pushing its neighbors into deflation: this threatens a long phase of stagnation, leading to nationalism, social unrest, and xenophobia.
It endangers democracy.” His point is that horrified by the debts built up in the southern “Club Med Economies. Germany first forced wage cuts and debt reduction on those countries and is now planning to embark on €80bn of its own belt-tightening from next year. One analyst said that Mr. Unfortunately Germany is trapped between its history and the current reality. –Stuart Burns. Effects of Increasing interest rates Economics Help. The main interest rate is set by the Bank of England. This is known as the base rate. If the Bank of England is worried that inflation is likely to increase, then they may decide to increase interest rates to reduce demand and reduce the rate of economic growth. Usually, if the Bank of England increase base rates it will lead to higher commercial rates too.
Higher interest rates have various economic effects: Increases the cost of borrowing. Therefore, higher interest rates will tend to reduce consumer spending and investment. Base rates increased in early 2007, but then cut at the start of the recession in 2008. AD/AS diagram showing impact of Interest rates on AD Effect of Higher Interest Rates Evaluation It affects people in different ways. Related. Economy of Germany. Germany is the largest producer of lignite in the world. Germany is also rich in timber, iron ore, potash, salt, uranium, nickel, copper and natural gas. Energy in Germany is sourced predominantly by fossil fuels, followed by nuclear power, and by renewable energy like biomass (wood and biofuels), wind, hydro and solar. The service sector contributes around 70% of the total GDP, industry 29.1%, and agriculture 0.9%. Most of the country's products are in engineering, especially in automobiles, machinery, metals, and chemical goods.[23] Germany is the leading producer of wind turbines and solar power technology in the world.[24] Combination of service-oriented manufacturing,[25] R&D spending, links between industry and academia, international cooperation and the Mittelstand contribute to the overall competitiveness of the economy of Germany.[26][27] Germany is the world's top location for trade fairs.
History[edit] Third Reich[edit] West Germany[edit] East Germany[edit] Berlin Republic[edit] Understanding German fiscal policy. It is a common view that governments should run a deficit in bad times, and a surplus or balanced budget — if at all possible — in good times. I have news for the people: according to the German view of the world, these are the good times. Thus they want to run a surplus. I don't see that perspective being rebutted. The Germans see themselves as having made the necessary wage adjustments, in advance, and in a manner that Keynesian economics is skeptical of.
The Germans also see themselves as having produced and maintained true credibility about future fiscal policy (how many other countries can claim that?) Did I mention that — after unification — the Germans tried (against their will, they had to) more than a decade of massive fiscal stimulus, and subsidization of consumption, starting with well under full employment, and yet with mediocre results? The Germans are well aware that most of their neighbors have not managed their finances nearly as well as they have. European Banks Pay ECB Back Early In Sign of Improving Health. In a further sign that the euro crisis is slowly starting to abate, 278 European banks said Friday they would repay the European Central Bank €137 billion ($184 billion) in emergency three-year low cost loans provided just a year ago.
The earlier-than-expected repayment shows that at least some of Europe's commercial banks are slowly weaning themselves off of indirect state support and are returning to health. For the ECB, it's the first step in a gradual unwinding of unprecedented measuresthat had been in place over the last two years in order relieve pressure on banks during the euro crisis. The ECB has issued banks more than €1 trillion euro in cheap loans in two long-term refinancing operations (LTFOs), one in December 2011 and the second in February 2012. The ultra-cheap lending measures were designed to prop up shaky banks and avoid a credit crunch as the debt crisis sputtered on and interbank lending dried up. Keep track of the news Stay informed with our free news services:
Euro Bailout Chief Klaus Regling Upbeat on Prospects for Euro Zone. As Klaus Regling opens up his briefcase inside the convention center at Davos, one could be forgiven for mistaking him for an insurance salesman. He pulls out colorful graphics meant to illustrate the improved competitiveness and budget situations in crisis-stricken European Union member states. Regling has an ambitious goal at the World Economic Forum: The 62-year-old is searching for investors for his employer, the European Stability Mechanism (ESM), the euro rescue fund. In an interview with SPIEGEL ONLINE, he explains why he's not a popular figure in Germany and why there is no alternative to tough austerity programs for the heavily indebted euro-zone countries.
SPIEGEL ONLINE: Mr. Regling: Yes, of course. SPIEGEL ONLINE: Many in Germany see you as a man who helps throw billions in taxpayer money down the drain. Regling: Yes, especially at conferences in Germany. SPIEGEL ONLINE: Why? SPIEGEL ONLINE: So Germany will get its money back? Regling: That's my assumption. Regling: Yes. ECB Chief Draghi Clashes With German Finance Minister Over Cyprus. European Central Bank President Mario Draghi confronted German Finance Minister Wolfgang Schäuble last week to criticize his stance on Cyprus and said failure to bail out the island nation could threaten the euro zone. At a meeting of EU finance ministers last week, Draghi contradicted Schäuble's view that Cyprus was not "systemically relevant," a term that implied it wouldn't endanger the euro zone if it went bankrupt. Draghi told Schäuble that he often heard that argument from lawyers, even though the question of whether Cyprus was systemically relevant or not was not one that lawyers could answer.
That, said Draghi, was a matter for economists. Schäuble is a trained lawyer. Draghi was backed by the European Economic and Monetary Affairs Commissioner Olli Rehn as well as the head of the European Stability Mechanism, Klaus Regling. The three pointed out to Schäuble that the two biggest banks in Cyprus had a large network of branches in Greece. Undo the Positive News Keep track of the news. Germany | Economist - World News, Politics, Economics, Business & Finance. German Shows Budget Surplus in 2012 Despite Slow Growth.
The German economy shrank by 0.5 percent in the fourth quarter of 2012 as a result of the euro crisis which hit exports and investment, preliminary figures released by the Federal Statistical Office on Tuesday showed. Growth for the full year slowed sharply to 0.7 percent from 3.0 percent in 2011, but that still compares favorably with much of the rest of the euro zone, which remains mired in recession as a result of austerity measures and burgeoning debt. Germany, Europe's largest economy, was able to offset part of the export declines in its core European market with strong growth in exports to the US and big emerging markets like China, hungry for German automobiles and industrial goods. "The German economy might not be an island of happiness any longer but it remains at least an island of growth in a still recessionary euro-zone area," Carsten Brzeski, an economist at ING, told Reuters.
Swing to Budget Surplus The 2012 GDP growth figure was slightly below forecasts. The euro crisis: Not everyone can be Germany. Eurostat Home. Inside Germany’s central bank: Europe’s monetary opposition. Ec.europa.eu/economy_finance/publications/publication6730_en.pdf.
Germany Consumer Confidence.