ATHENS | By Jens Bastian via MacroPolis | According to its Wikipedia article, Waiting for Godot by Irish writer Samuel Beckett is an absurdist play, in which two characters, Vladimir and Estragon, wait endlessly and in vain for the arrival of someone named Godot. The current situation in Athens has remarkable similarities with this classic piece of European literature.
MADRID | The Corner | Mario Draghi: “Some form of cross-country risk-sharing is essential to help reduce adjustment costs for those countries and prevent recessions from leaving deep and permanent scars.”/ Jens Weidmann: “Fiscal policy should support the central bank with solid state finances, so that monetary policy can concentrate on its actual mandate, and sustainably secure the value of money.”
MADRID | The Corner | A few weeks ago, Italy’s PM aide said the country had an “atomic bomb” to revive the economy, meaning a massive tax cut primarily on low to middle range wages that would help to boost domestic demand. Indeed, Rome has seen better days: GDP is expected to shrink 0.4% this year, according to the latest European Commission forecasts, far from the 0.8% growth predicted by Rome just after Mr Renzi took office in February. Its industrial sector, a traditional backbone of the Italian economy, registered a 25pp output gap to the eurozone industry since 1999. Yet the current combination of loose monetary policy, lesser fiscal drag or even outright fiscal stimulus, improving credit conditions and a weaker exchange rate leave the country far from being the sick man of Europe, as some have said.
MADRID | By Sean Duffy | The latest economic outlook from the Organisation for Economic Co-operation and Development (OECD) forecasts a bleak outlook for Europe unless action is taken. The Corner asked Piritta Sorsa, Head of EU and Eurozone surveillance at the OECD about the increased sense of urgency, sovereign bond proposals and the necessity for consensus among Eurozone members.
MADRID | By Sean Duffy | The latest OECD report is increasingly urgent in tone, with Europe the centre of attention. With continued wrangling over in the EU about how best to proceed, the Paris based think-thank has had its say on the ECB’s monetary policy too.
BRUSSELS | By Alexandre Mato | The European Commission has finally launched its promised €315bn plan to revive the continents stagnating economy. With concerns abounding about creating more debt within Members States, Brussels has turned to financial engineering to fill the investment gap with a very modest €21bn. The aim of the Juncker plan is to ultimately produce 1.3 million new jobs over the next three years.
MADRID | The Corner | Berlin is sticking to a rigid budgetary policy, prioritizing a 2015 balanced budget instead of growth. And hard liners aren’t just willing to make any move. As German Finance Minister Wolfgang Schäuble defended on Tuesday during a budget debate in Parliament: “We are not in a recession. We are not in an economic crisis,” Schäuble said, “Our economy is almost working at normal capacity.” Germany narrowly avoided a recession in the third quarter, growing by 0.1 percent, thanks to a sharp rise in private consumption (0.7 percent quarter-on-quarter, the biggest rise in three years) that compensated the lack of investment.
LONDON | By Jim McCormick and Keith Parker (Barclays) | At the start of the year, we analyzed the risks of a prolonged bout of deflation in the euro area (Japan-style deflation in Europe getting harder to dismiss). Our broad conclusion was that the risks of deflation in the euro area were probably not materially different from the risks Japan faced in the mid 1990s. Perhaps more important, we felt investors should picture 1996-97 Japan when assessing the risks of euro area deflation today.
MADRID | The Corner | Internal demand is recovering within the euro area, activity is getting back on track and experts believe that companies are about to start investing, hiring more workers and boosting consumption. However, credit flow, the production gap and unemployment are still major challenges. Analysts at Cortal Consors think that Spain and Portugal are the Eurozone countries most at risk of a “prolonged period of low inflation or mild deflation.”
MADRID | Álex García.