European Commission Spring Forecasts Post author By Philip Lane Post date May 11, 2012 The new forecasts have been released. The Ireland file is here; the full site is here. Categories In Uncategorized 27 Comments on European Commission Spring Forecasts ← Department of Finance Strategy Statement → ECB on the Fiscal Compact 27 replies on “European Commission Spring Forecasts” Some employment growth is expected in 2013 according to the report. This is possible because if we looked after the money supply, employment would look after itself. We have work to do done and people willing to work. All we’re missing is an adequate medium of exchange. Currently this medium of exchange is expected to originate through bank loans although we can’t expect this to happen since not many are willing or able to get a loan. We should be mindful of that fact that originating money through bank loans brings about a matching debt also. We’re not compelled to originate money through bank loans however and we could introduce a public source of debt free digital money to return to full employment. “Finally, the low-interest-rate environment may allow a smaller contraction in private consumption while still supporting the necessary household balance sheet repair.” Implicit in this sentence is everything that was wrong with the single currency project, certainly from the perspective of a small open economy like Ireland. That we have ‘a low interest rate environmnent’ is something that is purely incidentally. It is not a policy pursued or implemented to generate spending in Ireland. For Germany/France low interest rates set by the ECB would be a policy measure to tackle contracting private consumption in those countries….for Ireland we just happent to be lucky there is a correlation of ECB policy with our needs on interest rates….for now. A couple of comments on first glance: “However, strong policy actions and major advancements in the EU institutional framework have brought about an easing of financial market tensions in the beginning of 2012 and a tentative stabilisation of confidence, expected to strengthen over the forecast periode” How can anyone look at the political/social/economic situation in Europe in May 2012 – or the world for that matter – and come out with that statement? It is beyond belief. Unemployment – given the shape of the graph for the past few years, does anyone believe it’s actually going to flatline at 11% until the end of 2013? The possibility of something actually staying the same until the end of 2013 in the current environment is nil (I would even think them saying it will fall is more believable than it will stay the same). “The increase of debt-to-GDP ratios is forecast to slow down” – PR-speak for “debt-to-GDP ratios are still increasing and will continue to do so. Inflation – “Energy prices and indirect taxes have been the main drivers of consumer price inflation in recent quarters.” – er, but they’ve gone away now haven’t they? Reminds me of “green shoots of recovery” and “we have turned a corner” I know it’s a hoary old chestnut, but John Kenneth’s aphorism about astrology existing to make economic forecasting look respectable never seemed more appropriate. With a continuation of current policies – as confirmed in the DoF Strategy document, where is this growth in private demand and gross fixed capital formation going to come from? The ‘Pillar Banks’ are still deleveraging furiously. Is this Strategic Investment Fund going to bankroll all sorts of whizzo schemes? Irrespective of how or where it raids, begs, borrows or steals – or what it sells – to generate these funds, if the Government wants to keep it off its books the amounts invested will have to generate a return on investment and an annual depreciation charge. Apart from the share of output exported from these jolly ventures, that means more revenue extracted from businesses and households. I expect it’ll be the usual “don’t worry about the cost/benefit; just feel the width”. Yes, I know that, despite emigration, the demographics are favourable, but households and businesses are braced for more pain. Inflation may be low, but the principal source is increases in already excessively high sheltered sector fees, charges and prices – and property and water charges are going to be layered on. How can households increase demand when disposable incomes are already excessively squeezed and falling? In other words, do macroeconomists know their arses from their elbows? European Commission Spring Forecasts Boioioioioinnnnggg! Zzzzzzz. The 0.5% GDP growth for 2012 was expected even if it is lower than the 0.7% in the Stability Programme Update from the DoF a fortnight ago. The 1.9% projection for 2012 is down from the 2.2% the EU projected last November and the 2.2% the DoF is projecting today. Of concern is the emphasis on an export-led initial recovery. In recent weeks, both the EU generally and our largest natural trading partner the UK have seen distinct wobbles, the EU on the brink once more and the UK back in recession. Remember a 1% contraction in the UK’s GDP equals a 0.8% contraction in ours according to the latest estimates of elasticity between our two nations. @Paul “Inflation maybe low” That is a inverse money illusion of the Euro. In the past hard money advocates would declare that national currencies created a money illusion when they monetized the debt. But the euro is doing the same thing but affecting different people , working people mainly. Via wage deflation Wage deflation is inflation by other means. @Paul F You are indeed correct , we need interest free base money of some kind. But I am increasingly thinking we will get a Fall of Rome type event after a ESM period of dictatorship. http://heteconomist.com/?p=5175#more-5175. Europe cannot grow because its growth depends on Bank credit increases – this “growth” is closely tied the European car industry which dwarfs even the US car industry. To predict a European recession just look at car registrations – it follows like clockwork. Every time we get a little burst of “growth” as in 2010 less wealth is available afterwards. Why ? Because money growth through bank credit requires a vast input of increasingly rare resourses. The price of oil is now falling because Europeans are becoming poorer – they are not becoming more effiecent , they are not finding alternative energy resourses such as redirecting house , car & road capital towards Nuclear & significant rail development. This is a catostrophic industrial failure caused chiefly by the flawed nature of money in Europe and the world. The Boutique Industry of Germany structured around servicing the various financial capitals whims will be the last to fall but it will fall the hardest. Jamie Dimon got it spectacularly wrong with that 100 billion bet and he has access to the allegedly best experts that money can buy. So what hope for the Commission? @Ceter The entire derivatives Industry needs people to be paid below their productive output. That excess money must therefore go somewhere – it enters the monetary stratosphere to be farmed by the high flying / floating White Whales. But that surplus is getting smaller & smaller , Higher & higher as global capital gets destroyed on a vast scale. The Structural Deficit is growing, according to the Commission, 7.9% of GDP in 2013 compared to 7.8% in 2012 and 7.3% in 2008 when ‘austerity’ began. The actual, measurable deficit is also higher, 7.5% of GDP in 2013 compared to 7.3% in 2008. Even this has been achieved via the simple but disastrous expedient of cutting government investment from 5.2% of GDP to 2.3%. If another 2.9% were added to the deficit projected, it would elevate it to 10.4% of GDP in 2013. “Exports set to remain key engine of growth” I had one of those engines: had the name ‘Hornby’ printed on it. You wound it up and set it on a track. Nearly always careened off at the first bend! 😎 Breaking news. ICTU calling for Referendum to be postponed according to IT. About face? The Commission may as well tear up their projections as Greece tonight fails to form a government. I hope they have a realistic contingency plan for a Greek exit. Everyone else seems to be preparing for what now seems inevitable…. http://www.bloomberg.com/news/2012-05-11/schaeuble-dares-greece-exit-as-contingency-plans-begin.html Are the projected long term unemployment levels in the PIIGS sustainable politically? Spain 25%, Greece 20%, Portugal 15%, Ireland 14%, with only Italy’s (under 10%) seeming manageable. How ya Salmon! No. Is the short answer. Unless … …you like to work on a farm! There are 20,000 seasonal, ‘shovel ready’, manual labour jobs available in the rural economy, but the pay is poor and the working conditions are s***e!. It would take 24 months of dedicated organization to accomplish. But how many would apply? of Feck??? CARTOON OF THE DAY – THE GROWTH PACT Euro Stretching 11 May 2012 Trouw Amsterdam http://www.presseurop.eu/en/content/cartoon/1968481-stretching @ CP I hope the Troika cop on over Greece. the Portuguese bank run is on if Greece goes. And who knows about Eirin beag if that happens? Corporate treasuries all over the shop are already steering clear of the PIIGS. It’s a mess. Or is it all part of a grand plan ? @DoD http://www.funnytimes.com/cartoons.php?cotw_id=20120104 @Salman of Feck Employment Careers of the future 3 May 2012 Le Vif/L’Express Brussels http://www.presseurop.eu/en/content/cartoon/1919361-careers-future @seafoid The ‘grand plan’ is between the lines of both these cartoons …. MatrixsQuidesque takeover/enslavement of the Earthlings … and it is on track … (-; http://www.washingtonpost.com/opinions/tom-toles-cartoons-for-march-2012/2012/02/29/gIQA9vR7iR_gallery.html#photo=12 but comes with a Squid ad And poor Greece http://www.lacoccinelle.net/257070.html When routine bites hard Quand la routine nous ronge, And ambitions are low Et que les ambitions sont au plus bas And resentment rides high Et que le ressentiment nous envahit But emotions won’t grow Mais que les émotions ne viennent pas And we’re changing our ways, Et nous changeons nos habitudes, Taking different roads En prenant des chemins différents [Chorus] [Refrain] Then love, love will tear us apart Alors l’amour, l’amour nous séparera Again Encore http://www.washingtonpost.com/opinions/tom-toles-cartoons-for-april-2012/2012/03/30/gIQAWxRzlS_gallery.html#photo=22 http://www.washingtonpost.com/opinions/tom-toles-cartoons-for-april-2012/2012/03/30/gIQAWxRzlS_gallery.html#photo=4 @seafoid So this is permanence Loves shattered pride What once was innocence Turned on a side A cloud hangs over me Marks every move Deep in the memory of what once was…..the tiger Jigged figures again! “overall real GDP growth of 0.5%” Ahem, show me the transfer pricing, Double Dutch sandwich, google and fellow MNC repatriation of income flows into this economy on retail sales elsewhere over the globe and I’ll show you the jigged ‘GDP growth’. There was discussion here on these figures, but essentially more clarity and delving into the figures/stats involved is required. I would be very helpful if individual MNC’s given their large impact on these figures were given as separate items you could use to base conclusions on: http://www.irisheconomy.ie/index.php/2012/04/26/the-fall-in-gnp/ Spring Forecast? In keeping with the artistic theme, try this Comments are closed.