The EU is realizing that collapsing economies can’t pay what is owed.
European leaders are loosening the economic shackles once demanded by Germany as the recession and mounting unemployment in southern Europe shove aside the debt crisis as the euro area’s biggest headache.
A two-day Brussels summit starting today will endorse plans for “structural” assessments of national budgets
, according to a draft statement, using code for granting countries such asFrance, Spain and Portugal extra time to bring down deficits.….
The 17-nation currency region will follow last year’s 0.6 percent contraction by shrinking 0.3 percent in 2013, the first back-to-back decline since the euro’s debut in 1999, the commission forecasts. It sees bloc-wide unemployment at 12.2 percent in 2013, with joblessness as high as 27 percent in Greece and 26.9 percent in Spain.
Pressure remains on France, Italy and the countries tapping emergency financial aid to make their economies more productive by reducing labor costs and deregulating professions. The commission, the Brussels-based enforcer of the budget rules, fended off attacks from southern Europe that it has been too strict and parried warnings from northern Europe that it is becoming too lax.
….
Eurozone employment hastens downward spiral
The fall in eurozone employment sped up in the last three months of 2012, dashing hopes that the labour market in the troubled bloc could be stabilising.
Employment in the single currency area slid 0.3pc in the fourth quarter of 2012, a 0.8pc fall year-on-year, according to official figures from the EU statistical agency, Eurostat.
Economists had taken courage from two consecutive quarter-on-quarter
declines of 0.1pc between April and September, which seemed to indicate
the sluggish jobs market could be nearing a turnaround.
However Thursday’s figures, combined with Eurostat’s most recent unemployment statistics indicating the bloc’s jobless had hit an all-time high of 11.9pc in January, paint a glummer picture.
SOCGEN: Another ‘Eurozone Shockwave’ Is Coming This Spring
Italy meets Germany.
Société Générale strategists are warning clients of another “Eurozone shockwave” coming this spring.In fact, they say it’s going to be one of the three major themes driving global currency markets for the rest of 2013.
The Italian election yielded inconclusive results, and it’s looking more and more likely that another election will have to be held. Of course, that one may not be conclusive either.
Meanwhile, Germany holds its own elections in September. If Italian bond yields rise to unsustainable levels, German politicians aren’t likely to be too supportive of their neighbors to the south while trying to secure re-election at home.
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