Euro zone’s internal devaluation, my eye!

2012 11 27

The real economy continues deteriorating, in spite of tighter differences between peripheral bonds' prices and Germany's–which serve as a benchmark to check upon balance and public finances in the euro zone. The stock markets have somehow recovered slightly, too, but a look at the manufacturing and services purchasing managers' index and GDP evolution give a clear picture of how much in trouble Europe is.

“As we have pointed out before, falls in systemic risk premiums in the euro zone were mainly caused by the announcement of interventions from the European Central Bank,” Afi analysts explained in their investor note on Friday.

“Banks and peripheral public debt enjoy a better reception now, but this improvement has not yet been replicated with a stabilisation of the macroeconomic background. In fact,” they added, “the probabilities that core euro countries enter in recession are higher.”

Recession is, therefore, what most surely euro zone economies will meet with by 2014. And what did they say about the wonders of internal devaluation? In Spain, unemployment has increased by 85,000 in the third quarter of this year to 25 percent of the total active population–and long-term unemployment has reached 52 percent of all jobless workers.

Annual rate unemployed in Spain


About the Author

Miguel Navascués
Miguel Navascués has worked as an economist at the Bank of Spain for 30 years, and focuses on international and monetary economics. He blogs in Spanish at: http://