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Joblessness Edges Higher To Hit a Euro Zone Record

July 1, 2013 by Leave a Comment

The jobless rate in the 17 countries that belong to the euro zone was 12.1 percent in May, adjusting for seasonal effects, according to a report from Eurostat, the European Union statistics agency. That figure compared with 12 percent in April, which was revised down from 12.2 percent reported earlier. Based on the revised figures, May unemployment was at a record high.

Eurostat estimated that 19.2 million people in the euro area were jobless in May, an increase of 67,000 from April. For all 27 countries in the European Union, the unemployment rate was unchanged at 10.9 percent. The European bloc expanded to 28 countries on Monday when Croatia officially joined.

Joblessness in the euro zone has been rising almost without interruption since early 2008, when the financial crisis began, declining only briefly at the beginning of 2011. And analysts see little prospect for a sustained decline anytime soon.

While economists expect the euro zone economy to stabilize in the course of this year, growth will most likely remain too slow to generate large numbers of jobs.

“The measure that offers the greatest potential for job creation in the short to medium term is an easing of credit conditions,” Marie Diron, an economist who advises the consulting firm Ernst Young, said in a statement. “This would allow companies to invest and as a result recruit in the euro zone.”

The European Central Bank will hold its monetary policy meeting on Thursday, but it is not expected to introduce more stimulus to the euro zone economy. A cut in the benchmark rate, to 0.25 percent from a record 0.5 percent, is possible, but many say it would be unlikely to do much to encourage lending in troubled countries like Spain and Italy.

Banks in those countries are trying to cope with rising numbers of bad loans and are reluctant to lend no matter how cheaply they can borrow from the European Central Bank. And the central bank remains reluctant to effectively print more money, as the Federal Reserve in the United States and Bank of England have done, because of opposition from Germany to more aggressive action.

Eurostat also reported on Monday that inflation in the euro zone rose to 1.6 percent from 1.4 percent because of a surge in energy prices. While inflation remains below the central bank’s target of about 2 percent, the uptick is likely to provide a further argument against increasing the benchmark interest rate.

Compounding the bank’s challenge, the numbers released showed that there remained a big difference in economic performance among euro zone countries. These differences make it difficult for the central bank to form a monetary policy that is appropriate for all members.

Unemployment rates in Spain and Greece were about 27 percent in May, with youth unemployment remaining well above 50 percent. In contrast, unemployment in Austria was 4.7 percent and in Germany was 5.3 percent. Both had youth jobless rates below 9 percent.

If there was any good news, economists said, it was that unemployment may not go up much more. “An end to the euro zone labor market downturn is not yet imminent,” Martin van Vliet, an economist at ING Bank, said in a note to investors. “However, with the recession across the euro zone petering out, the peak in unemployment should not be too far away, either.”

Article source: http://www.nytimes.com/2013/07/02/business/global/euro-zone-joblessness-rises.html?partner=rss&emc=rss

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European Leaders Huddle on Youth Unemployment

May 28, 2013 by Leave a Comment

PARIS — President François Hollande of France called Tuesday for “urgent action” to tackle alarmingly high rates of youth unemployment across the European Union, saying that mounting disillusionment among the “post-crisis generation” threatened the very future of the European project.

“We need to act quickly,” Mr. Hollande told a gathering of government officials, business leaders and students in Paris. “In this battle, time is the decisive factor.”

Mr. Hollande spoke ahead of a series of meetings between French and German officials this week in preparation for a summit meeting of European leaders at the end of June, where youth unemployment is expected to top the agenda. The subject is also expected to figure prominently at a meeting here Thursday between Mr. Hollande and the German chancellor, Angela Merkel.

Nearly six million people under the age of 25 are unemployed across the European Union — nearly one quarter of the total, according to Eurostat, the Union’s statistical office. Youth jobless rates are now roughly twice the national average in many of the Union’s 27 member states, with the figures reaching as high as 60 percent in countries like Greece and Spain, which have been hard hit by austerity-driven cuts to social services and other benefits.

Economists say the extraordinarily high rates are in part a result of the general economic slump across the region, but are also a consequence of inflexible labor market rules that make entry into the work force particularly difficult for young people.

In recent weeks, German officials have spearheaded a series of bilateral agreements with countries like Spain and Portugal aimed at helping more young people from those countries enter the work force or to receive vocational training. Discussions about a similar agreement with France are continuing, people with knowledge of the talks said.

Those agreements, while still short on details, are being seen as part of a broader blueprint for a pan-European plan to create jobs and apprenticeships for young people across the Union.

Mr. Hollande said Tuesday that the plan would rest on three pillars: easing the access to credit for small and midsize companies; developing new job-training and apprenticeship programs; and increasing the geographic mobility of young people by offering money for language training and moving costs.

Initial financing for the plan would come from a pool of roughly €6 billion, or $7.7 billion, that has already been earmarked for this purpose from the European Investment Bank.

The European youth jobs initiative is expected to be ready in time for a gathering of the Union’s ministers July 3 in Berlin.

Mr. Hollande’s call to action was echoed by other European officials in attendance at the conference, which was held before a packed hall of university students from France’s prestigious Institut d’Études Politiques de Paris, or Sciences Po.

“We have to rescue an entire generation of young people who are scared,” said Enrico Giovannini, Italy’s new labor minister. “We have the best-educated generation and we are putting them on hold. This is not acceptable.”

Joblessness among those aged 15 to 24 in Italy is above 38 percent, according to Eurostat, on par with the rate in Portugal, which has also adopted wrenching changes. Youth unemployment is much lower in Germany and Austria, below 8 percent in both cases, a reflection both of their stronger economies as well as their centuries-old apprenticeship systems, which offer paid vocational training to students while they are still in high school.

Ursula von der Leyen, Germany’s labor minister, emphasized the need to bring to bear the resources of the European Investment Bank, based in Luxembourg, to encourage companies to invest and create jobs.

“Many small and mid-sized companies, which are the backbone of our economies, are ready to deliver, but they need capital,” Ms. von der Leyen said, noting that small firms still faced “exorbitant” interest rates from private-sector banks that remain reluctant to lend. “We want to break this vicious circle,” she said.

Werner Heyer, head of the European Investment Bank, said the deepening youth unemployment crisis, alongside obstacles to cross-border lending within the euro zone, represented the region’s two “megaproblems.” But he cautioned that politicians would be mistaken if they believed that the European bank’s resources alone would be enough to solve the unemployment problem.

“Such expectations of the bank are beyond the horizon,” Mr. Heyer said. “There is no quick fix; there is no grand plan.”

Article source: http://www.nytimes.com/2013/05/29/business/global/european-leaders-huddle-on-youth-unemployment.html?partner=rss&emc=rss

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Low Inflation and Falling Imports Confirm Slump in Euro Zone

May 16, 2013 by Leave a Comment

BRUSSELS — Falling prices in Germany and France pulled euro zone consumer inflation to a three-year low in April, while imports fell 10 percent in March, as new data showed the depth of the bloc’s downturn.

The sharp drop in annual consumer inflation to 1.2 percent, confirmed by the European Union’s statistics office, Eurostat, on Thursday, highlights the risk of deflation in the euro zone, which slipped into its longest ever recession at the start of this year.

Prices in Belgium, Germany, Greece and France fell in April from March, and Greece remained in deflationary territory for a second month, along with Latvia, which is due to become the euro zone’s 18th member next year.

Falling world oil prices are behind the drop in inflationary pressures, and the European Central Bank cut interest rates to a record 0.5 percent low this month, aware that inflation could fall further below its target of just under 2 percent.

Energy prices fell 1 percent in April from March in the euro zone, the single biggest drop in Eurostat’s index.

But falling prices also highlight how households are not spending and companies are not investing, dampening the pace of a recovery that could emerge later this year.

The euro zone, which generates almost a fifth of global output, wallowed in recession for a sixth straight quarter at the start of this year, Eurostat said on Wednesday, and economists do not expect growth until next year.

The impact of the bloc’s debt and banking crisis was evident in the euro zone’s international trade balance for March. A €22.9 billion, or $29.5 billion, surplus was due to a 10 percent decline in imports and no increase in exports compared to the same month a year ago, on a non-seasonally adjusted basis.

Demand in Asia and the Americas for the euro zone’s cars, wine and luxury goods is one of the few things that could help lift the bloc out of recession. The lack of export growth in March is likely to be of some concern to policymakers.

While Spain is regaining some of its business dynamism and exports are growing again, Germany and France, Europe’s two largest economies, have stagnated, with the French economy tipping into recession in the first quarter of this year.

Confidence in the euro zone’s economy dropped for a second month in a row in April, and morale darkened significantly in the core countries, particularly in France and Germany.

Article source: http://www.nytimes.com/2013/05/17/business/global/low-inflation-and-falling-imports-confirm-slump-in-euro-zone.html?partner=rss&emc=rss

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Euro Zone Economy Shrinks, but Little Sign of Action

May 15, 2013 by Leave a Comment

Europe, experts say, seems to be in policy paralysis. With Germany, the Continent’s economic heavyweight, in the grip of pre-election politicking, no big European policy moves are likely until after that country’s elections in September. Even then, it is not clear that anyone has any masterstrokes planned.

“The political situation in Europe is not conducive to making bazooka decisions,” said Gilles Moëc, an economist at Deutsche Bank in London, referring to an allusion by Henry M. Paulson Jr., a former U.S. Treasury secretary, to the need to have economic firepower in a crisis. “No one’s talking about creating any further jolts to the system.”

While Germany was able to barely sidestep a recession in the first quarter, France slid into one, according to the data Wednesday from Eurostat, the European Union’s statistical agency. The French president, François Hollande, marked the occasion at a news conference in Brussels by indicating that his country should not be singled out for criticism.

“Are we an isolated case?” Mr. Hollande said of France. “No, because the recession in Europe and particularly in the euro zone is greater.” But he offered no prescriptions for growth other than to say, “If Europe, member states and France organize ourselves to promote growth, then we can return to the hope of a better future.”

Organizing to promote growth, though, seems to be the mission that has long eluded the Union, whose listlessness contrasts with the performance of other major global economies.

Two weeks ago, the European Central Bank cut its benchmark interest rate target to a record low in a largely symbolic move, but gave no hint of whether it had more in store. Economists say there is a limit to what monetary policy can accomplish, in any case.

And the people perhaps most able to propose action — E.U. finance ministers — just spent two days in Brussels arguing over tax havens and debating a banking union, which is aimed at avoiding future disasters, not reviving growth.

“We don’t see policy makers lifting a finger anywhere in Europe,” Carl Weinberg, chief economist at High Frequency Economics in Valhalla, New York, said Wednesday. “But this is a depression, rather than a cyclical downturn, and there must be a policy response if things are going to get better.”

Little wonder the European public is losing confidence in the region, as the results of a poll by the Pew research organization showed Monday.

The 17-nation euro zone economy contracted 0.2 percent in the first quarter from the last three months of 2012, Eurostat reported Wednesday. That was less than the 0.6 percent decline recorded in the fourth quarter, but more than economists’ expectations of a 0.1 percent fall.

France’s slip into recession was the result of a second consecutive quarterly contraction of 0.2 percent. (At least two consecutive quarters of a shrinking economy is the widely accepted definition of recession.) Germany essentially marked time, with growth of 0.1 percent. The economy of the overall Union, made up of 27 nations, shrank 0.1 percent.

Eurostat said it was the first time the euro zone had contracted for six straight quarters since the creation of the single currency in 1999.

In annualized terms, the euro zone economy contracted about 0.8 percent in the first quarter. That is in stark contrast to the current2.5 percent annual growth rate in the world’s largest economy, the United States. China, with the second-biggest economy, reported in April first-quarter growth of 7.7 percent.

Japan, with the third-largest economy, is expected to post annualized growth of about 2.8 percent when it reports its first-quarter numbers on Thursday.

Europe’s economic doldrums are by no means the region’s problem alone. Despite its troubles, the Union remains the world’s single largest market, which means its weakness is retarding growth in the rest of the world.

Moody’s Investors Service warned in a report Wednesday that the weakness in the euro zone, combined with the mandatory budget cuts in the United States, would weigh on the world economy. Those factors will help limit growth in the Group of 20 industrial nations to just 1.2 percent this year, Moody’s said.

Article source: http://www.nytimes.com/2013/05/16/business/global/germany-france-economic-data.html?partner=rss&emc=rss

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Unemployment in Euro Zone Reaches a Record High

April 2, 2013 by Leave a Comment

The jobless rate reached 12 percent in both January and February, the highest since the creation of the euro in 1999, Eurostat, the statistical agency of the European Union, reported from Luxembourg.

The January jobless rate for the 17-nation currency union was revised upward from the previously reported 11.9 percent.

For the overall European Union, the February jobless rate rose to 10.9 percent from 10.8 percent in January, Eurostat said, with more than 26 million people without work across the 27-nation bloc.

European officials continue to hold out hope that the economy, which continued to shrink in the first quarter of 2013, will begin turning around in the second half of the year. Many private sector forecasters are more pessimistic, expecting a contraction of as much as 2 percent in the euro zone’s gross domestic product this year, after a 0.9 percent contraction last year.

While there is general agreement that the current course for addressing the euro crisis — heavily focused on budget- balancing measures that reduce overall demand — is not working, the need for emergency action like the recent bailout of Cyprus has appeared to inhibit any deep rethinking of economic policy.

In the absence of new measures to stimulate growth at the European and national levels, all attention will be focused Thursday on the governing council of the European Central Bank, which meets in Frankfurt to consider whether to maintain interest rates at their current record low or cut even further.

Britain, the largest E.U. economy outside the euro zone, had an unemployment rate of 7.7 percent in December, the latest available month.

In the United States, the jobless rate fell in February to 7.7 percent, the lowest since late 2008. The consensus among economists surveyed by Reuters is for U.S. nonfarm payrolls Friday to show a gain of 200,000 jobs in March, after a gain of 236,000 in February.

The European labor market has now declined for 22 straight months, making this the worst downturn since the early 1990s, Jennifer McKeown, an economist in London with Capital Economics, wrote in a note. In particular, she said, the rise in France’s February jobless rate to 10.8 percent from 10.7 percent in January “looks very worrying.”

“With fiscal tightening still putting downward pressure on disposable incomes and consumer confidence at very low levels, household spending is likely to fall further in the coming months,” Ms. McKeown said.

On Tuesday, a report by Markit Economics showed the euro zone’s manufacturing sector contracted again in March, with an index of purchasing managers activity dropping to 46.8 from 47.9 in February. An index level below 50.0 suggests contraction, while a level above that suggests expansion.

The manufacturing index has contracted every month since August 2011. Manufacturing activity in Germany and Ireland, which had been expanding, began to decline again.

The euro zone manufacturing sector shed jobs in March for a 14th consecutive month, Markit reported, with “steep rates of declines reported in France, Italy, Spain, the Netherlands, Ireland and Greece,” and only Germany and Austria bucking the trend.

Eurostat said Greece had the euro zone’s highest unemployment rate: 26.4 percent unemployment in December, the latest month for which data are available. A sovereign debt crisis, and the tax increases and spending cuts that followed it, have wrecked the Greek economy. An astonishing 58.4 percent of Greek youth were classified as unemployed, Eurostat reported.

Spain, where the economy has also contracted sharply following the collapse of the global credit bubble, posted the second-highest unemployment rate in the euro zone: 26.3 percent in February.

Austria’s jobless rate was the lowest, at 4.8 percent. Germany’s was near the bottom at 5.4 percent, while France’s was double its larger neighbor, at 10.8 percent.

Article source: http://www.nytimes.com/2013/04/03/business/global/unemployment-in-euro-zone-reaches-a-record-high-of-12-percent.html?partner=rss&emc=rss

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Euro Watch: Unemployment Continues to Climb in Euro Zone

January 8, 2013 by Leave a Comment

The euro zone jobless rate rose to 11.8 percent in November from 11.7 percent in October, according to Eurostat, the statistical agency of the European Union. Eurostat estimated that 18.8 million people in the euro zone were unemployed in November, two million more than a year earlier.

Germany has provided momentum to the European economy over the past three years, as strong exports protected the country from the crisis.

But on Tuesday, the Federal Statistics Office in Berlin said that German exports declined 3.4 percent while imports slid 3.7 percent in November from a month earlier. The weakness narrowed Germany’s trade surplus to €14.6 billion, or $19 billion.

German factory orders also fell in November amid weak demand from outside the euro area, the Economy Ministry said Tuesday. Orders, adjusted for seasonal swings and inflation, slid 1.8 percent from October, when they jumped 3.8 percent.

“The November numbers are not a one-off but an extension of the current trend of weakening exports,” Carsten Brzeski, an economist at ING, wrote in a research note Tuesday. He pointed out that German exports had fallen about 4 percent since May.

“Today’s data confirmed our view that exports should have turned from driver of growth into drag on growth,” he wrote.

A separate report from Eurostat showed that retail sales fell 2.6 percent in November from a year earlier, though they gained 0.1 percent from October.

The gloomy reports come as the Governing Council of the European Central Bank prepares to hold a policy meeting Thursday, followed by an interest-rate announcement. Despite a sharp decline in bank lending reported last week, which had some analysts suggesting that the central bank might try new steps to stimulate the economy, economists surveyed by Reuters said they expected the E.C.B. to leave policy unchanged in January as it waited for a clearer picture of economic conditions.

Like their counterparts in the United States, Japan and Britain, the monetary authorities in the euro zone have already opened the spigots, allowing banks to borrow essentially as much as they want at the benchmark rate. Mario Draghi, president of the E.C.B., has pledged to do whatever is necessary to ensure the stability of the euro, including, if needed, buying the sovereign bonds of Spain and Italy to hold their borrowing costs to sustainable levels.

The president of the European Commission, José Manuel Barroso, said Monday in Lisbon that “the existential threat against the euro has essentially been overcome. ”

“In 2013 the question won’t be if the euro will, or will not, implode,” he said.

The central bank’s actions have succeeded in calming markets and driving down government bond yields for embattled countries. The European Commission reported Tuesday that an index of economic sentiment in the euro zone had improved by 1.3 points in December, to 87. “Economic sentiment in the euro area improved among consumers and across all sectors, except retail trade,” the commission reported.

Gilles Moëc, an economist at Deutsche Bank in London, said the data Tuesday were consistent with expectations that the euro zone economy would remain in recession through the winter, with the unemployment rate possibly rising to as high as 12.4 percent.

“We’re still far below the level of growth that would stabilize the labor market,” he said.

But he added that the commission’s report on economic sentiments, as well as recent surveys of purchasing managers, suggested that the downturn in the manufacturing sector had “bottomed out,” making possible a return to growth later in the year.

“External demand seems to be holding up better than we had thought,” Mr. Moëc said. “Now we are to a large extent dependent on what happens in the United States,” he added, referring to the negotiations on spending.

Europe also got a vote of confidence from Tokyo on Tuesday, as Finance Minister Taro Aso said Japan would buy bonds of the European Stability Mechanism, the euro zone bailout fund, as well as sovereign debt in the currency zone.

“The financial stability of Europe will help the stability of foreign exchange rates, including the yen,” Mr. Aso was quoted by the Nikkei newspaper as saying.

Attacking joblessness may require governments to ease back on austerity measures that many economists, including some at the International Monetary Fund, say might have gone too far. In France, President François Hollande has vowed to turn around the flagging labor market, where, according to Eurostat, unemployment was 10.5 percent in November.

Eurostat said Spain, which is suffering from the collapse of a real estate bubble and the impact of a raft of tough austerity measures, had the highest unemployment rate in the bloc, at 26.6 percent. Greece, where the sovereign debt crisis began, was next at 26 percent, according to data released in September. The lowest rates were in Austria, at 4.5 percent; Luxembourg, at 5.1 percent; and Germany, at 5.4 percent.

Worryingly, youth unemployment in the euro zone continued to grow, with 5.8 million people under age 25 classified as jobless in November, up 420,000 from a year earlier.

The Greek prime minister, Antonis Samaras, who was in Berlin for talks with Chancellor Angela Merkel on Tuesday, singled out youth unemployment as one of the biggest challenges Greece faces in reviving its economy. But he said at a news conference before meeting the chancellor that, over all, he was positive.

“I see the glass half-full,” Mr. Samaras said before taking part in an economic conference in Berlin. “We’re delivering and Europe’s helping.”

It was the Greek prime minister’s second trip to Berlin since taking office. The mood appeared lighter than during his visit in August, which came on the heels of calls from within Ms. Merkel’s government for Greece to leave the common currency.

Greece is focusing its efforts on winning back the trust of Europeans, as well as the markets, Mr. Samaras said. But he emphasized that high unemployment, especially among young people, weighed heavily on Greeks.

“I would like to make it clear up front that our country is making enormous efforts and many are paying a high price, in order to get things back on track,” Mr. Samaras said.

Ms. Merkel said that Greece’s European partners must continue to support the country. She was perhaps wary of the fragility of Mr. Samaras’s three-party coalition government, which has been pushing through deeply unpopular reforms.

“We also must do everything to guarantee economic growth, security and jobs,” Ms. Merkel said.

David Jolly reported from Paris. James Kanter contributed reporting from Brussels and Hiroko Tabuchi from Tokyo.

Article source: http://www.nytimes.com/2013/01/09/business/global/daily-euro-zone-watch.html?partner=rss&emc=rss

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Euro Zone Economy Shrinks for a Second Quarter

November 15, 2012 by Leave a Comment

Gross domestic product in the euro zone fell 0.1 percent in the three months through September compared with the previous quarter, according to Eurostat, the European Union statistics agency. The downturn was slightly less severe than in the second quarter, when growth contracted 0.2 percent. But it was the fourth quarter in a row of zero growth or worse.

Perhaps more worrisome, the data showed that Spain, Portugal and several other countries remain far from the kind of recovery that would bring increased tax receipts and help them overcome their debt problems. European leaders, who have benefited from a tenuous calm on financial markets in recent months, are likely to face additional pressure to ease the government austerity programs that have undercut growth in Southern Europe.

Economists at Nomura warned of “a depressionary environment in a growing share of the region.” In a note to clients, they said, “This negative loop has the potential to threaten the stability of the whole system.”

Some analysts had forecast a bigger decrease in output. But France registered a surprise uptick in growth and the Italian economy shrank less than expected, moderating the pace of decline across the region. Considered along with sagging factory output and business sentiment, though, the numbers Thursday reinforced expectations that the euro area as a whole could remain in recession well into next year.

“An end to the recession in the euro zone is still out of sight,” Christoph Weil, an economist at Commerzbank in Frankfurt, said in a note to clients.

Germany, which has the largest economy in the euro zone, continued to defy the crisis. The country grew 0.2 percent in the third quarter, slowing from a rate of 0.3 percent in the second quarter.

But data on exports, domestic demand and business sentiment indicate that growth in Germany will slow in future quarters because of falling demand from its neighbors.

A recession is often defined as two quarters in a row of falling output, though many economists say it is important to take other data into account. But with unemployment in the euro area at 11.6 percent and nearly 26 million people out of work, few would dispute that the region is in a deep downturn.

“Leading indicators suggest that the euro zone recession will broaden and deepen in the current fourth quarter,” said Martin van Vliet, an economist at ING Bank.

The European Union, which includes the 17 countries in the euro zone plus 10 more countries primarily in Eastern Europe, managed to return to growth in the quarter as several countries, including Latvia and Lithuania, recovered strongly. Growth for the Union as a whole was 0.1 percent compared to the previous quarter, after a decline of 0.2 percent in the second quarter.

But in Western Europe the economic decline spread to Austria and the Netherlands, which had been growing in previous quarters. The Austrian economy contracted 0.1 percent, while the previously healthy Dutch economy plunged 1.1 percent, catching economists off guard.

One reason for the decline was that Dutch consumers cut back purchases of cars, illustrating how the crisis in the European auto industry is having a broader effect. Slower export growth and a decline in construction also had an effect, according to Statistics Netherlands, the official data provider.

France grew more than analysts forecast, at 0.2 percent, because of increased exports and higher consumer spending. The Italian economy shrank 0.2 percent, which was less than expected and a less severe decline than in previous quarters. Foreign demand compensated for a decline in household spending in Italy, economists said.

There had been some signs in recent months that the euro zone, now in its third year of crisis, was beginning to stabilize. The exodus of money from Spain had stopped and borrowing costs for Spain and Italy have dropped out of the danger zone, thanks to a promise by the European Central Bank to intervene in bond markets. Exports from some of the troubled countries have risen, as companies put more emphasis on foreign markets to offset poor demand at home.

Mario Draghi, the E.C.B. president, said last week that although growth would continue to slow through the end of this year, he expected a slow recovery next year. The data Thursday could raise expectations that the E.C.B. will cut its benchmark interest rate, already at a record low of 0.75 percent, when its policy makers meet next month.

But the E.C.B. has already stretched its mandate to fight the crisis, and the burden may now fall primarily on government leaders. Germany could face added pressure to ease its insistence on drastic budget cuts by Spain, Greece, Italy and Portugal, especially after large protests in those countries this week.

Euro zone finance ministers are expected to meet next week to consider whether to release the next installment of aid for Greece, which it needs to avoid defaulting on its debt. Next month, European heads of government will hold a summit meeting to continue working on ways to make the common currency area more resilient, for example by pooling supervision of banks.

“It is essential that the period of relative calm on financial markets is preserved,” said Marie Diron, an economist who advises the consulting firm Ernst Young. “This will necessitate further quick progress on key reforms, including securing Greece’s financing and moving towards a comprehensive banking union.”

But disputes remain on the future shape of the euro zone, and there is a risk that leaders will not move fast enough. Economists said that much of the slowdown in business activity reflected uncertainty among managers, who do not want to invest until they are more confident of a recovery.

“The confidence shock will therefore continue to hinder investment and hiring decisions,” Mathilde Lemoine, an economist at HSBC, said in a note.

Article source: http://www.nytimes.com/2012/11/16/business/global/daily-euro-zone-watch.html?partner=rss&emc=rss

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Deficits Higher Than Expected in Greece and Portugal

April 26, 2011 by Leave a Comment

BRUSSELS — Almost a year after it adopted sweeping austerity measures as a condition of an international rescue package, Greece has failed to get a grip on its public finances, according to new data released Tuesday, increasing fears that the country may have to restructure its huge mountain of debt.

Greece’s deficit was 10.5 percent of gross domestic product in 2010, according to Eurostat, the European Union statistics agency. The deficit exceeded the 9.6 percent target set last autumn by the government and the European Commission, the E.U.’s executive arm. Public debt swelled to 142.8 percent of G.D.P, Eurostat said.

The figures will be seen by some critics as a vindication of the argument that austerity measures — imposed as part of the €110 billion or $160 billion bailout last May by the E.U. and the International Monetary Fund — are stifling the growth that Greece needs to put its finances back in order.

The Finance Ministry said Tuesday that Greece failed to meet its targets because “the impact of the recession on G.D.P. in 2010 was larger than anticipated,” as was the deterioration in tax receipts and a reduction in social security contributions because of high unemployment.

It said the government remained “committed to achieving” its target of reducing the deficit by 2014 to below 3 percent of G.D.P, the ceiling under E.U. rules for euro zone membership.

E.U. finance ministers have sought to ease Greece’s plight by extending the maturity period of its loans and agreeing to reduce the interest rate it has to pay.

But E.U. officials have ruled out a debt restructuring, pointing out that, among other measures, Greece has committed to raise €50 billion by 2015 through sales of state assets.

“The Greek authorities have shown they are determined to do what is necessary to fulfill the elements of the program,” Amadeu Altafaj-Tardio, a spokesman for the European commissioner for economic and monetary affairs, said Tuesday. Greece’s progress will be reviewed again in mid-May, he said.

Ireland, which has also received international aid, posted a budget deficit of 32.4 percent of G.D.P. in 2010, exceeding the 32.3 percent forecast because of the country’s huge bank bailouts, Eurostat reported.

Portugal, which is negotiating its own rescue, had a deficit of 9.1 percent, higher than the 7.3 percent the commission had predicted last year.

Most other euro zone countries managed to cut their deficits faster than predicted, Eurostat reported.

Spain’s deficit was slightly lower than forecast, at 9.2 percent of G.D.P. Because of the size of the Spanish economy — the fourth-largest in the euro zone, after France, Germany and Italy — investors and E.U. leaders have watched it closely for signs of weakness.

Those fears seem to have receded as Madrid has met its deficit targets. A sale of €1.97 billion in Spanish Treasury bills was well received by investors Tuesday, although at slightly higher interest rates than a similar sale in March.

Britain, which is not in the euro zone, recorded a budget deficit of 10.4 percent of G.D.P., the third highest in the European Union behind Ireland and Greece, Eurostat reported.

Article source: http://www.nytimes.com/2011/04/27/business/global/27euro.html?partner=rss&emc=rss

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