From the Statistics Offices

The CSO have published the Statistical Yearbook of Ireland 2013.  The 20 chapters provide a useful compilation of the broad range of measures produced by the CSO.  The naming of Chapter Nine suggests we have a way to go before we “break the vicious cycle”!

The CSO have also issued the October update of the Live Register which continues to show a decline.  In the SA series it can be seen that most of this drop has been among males.

Separately, Eurostat have published updates for unemployment and inflation.  In September, Euroarea unemployment remained at 12.2%, while the flash estimate of October HICP inflation shows a drop to 0.7%.

39 replies on “From the Statistics Offices”

There was an official leak of the Live Register data to political correspondents on Wednesday evening as the unadjusted total of 397,000 was the lowest since May 2009 when the level was the same.

A curious situation is the treatment of unemployed people when they are classified as being in back to work/training or back to education schemes.

In September (latest data) there were 76,000 people in such schemes and that is likely to have risen to about 85,000 in October.

Once in these schemes, an individual signs off the Live Register and is either treated as being in education or employed. Usually the latter would amount to about 50,000 people.

So a chunk of the 12,000 drop in the unadjusted data in October likely reflects people signing off the Live Register and signing on to publicly-funded back to education courses (6,000 were added in Oct 2012).

There is evidence of some jobs growth but as these schemes expand, some of the reported jobs growth may not be real.

In May 2009, there were 45,000 in activation programmes. So by the end of October the addition is likely to have been 40,000.

CSO data shows that net emigration by Irish nationals in the period May 2009-April 2013 was 95,000.

re: Employment numbers.

I do suspect/know that there is a very recent moderate lift in the construction/refurbishment area, probably down to NAMA finally spending some money on office provision in the Dublin area. Something it should have started doing at least two ago, or have been compelled to do it.

The other and possibly principal reason for a lift, is the supply of product to a lifting UK economy, particularly UK construction in the South/South East. The exchange rate (85 cents) is still in a range that Irish producers should be able to compete.
One construction glass exporter was reported to have taken on a good number of temp (summer) staff to meet demand in the UK.

“Ireland has come a long way. They’ve fully implemented the programme, there’s never been any delay, all the reviews were always concluded as scheduled, so the programme was always on track and markets are rewarding this. 10-year government bonds are at an absolutely sustainable level of around 3,5%”

But unemployment is still ultra high, emigration is ongoing and how about the unbounded optimism of a statement such as of “following a review RBS has decided to continue to operate Ulster Bank in Ireland”.
The programme was fully implemented but unfortunately the legs may still be amputated.

Bailout loans for Ireland and Portugal were given a grace extension to 7 years in March but will that be enough to convince the markets that everything is tickety boo especially during the next wave of economic nihilism ?


I’m sure you’ll agree that it’s part of the job of government ministers to ‘accentuate the positive’ not least to build confidence and morale as far as possible amongst the public. But there is a balance to be struck. Unfortunately, in our case political representation of the live register stats is unhinged. It’s not about reassuring the public; it’s about party political desperation. The worrying aspect is – as UCD’s Niamh Hardiman has pointed to in several recent papers – that this public trumpeting of ‘falls’ in live register figures as equating to improvements in our unemployment crisis and/or an indication of general economic recovery suggests that nothing has been learned about the risks inherent in failing to analyse our problems correctly.

@Mickey Hickey

Pretty dismal article re Italy. A 40.4% youth unemployment rate is appalling by any standards. One wonders when and where the edifice will crack. Were it not for emigration, what would Ireland’s youth unemployment rate be?

Good article by Paul Gillespie in the IT. There are parts to disagree with, but he captures the essence of the problem in the following quote;

“Social policy is decided at national level, whereas the European Central Bank’s strict mandate loads the costs of adjustment on taxpayers and labour markets, stifling badly needed investment in human capital. ”

Although one could certainly argue about whether the ECB’s ‘strict mandate’ does give it the power to arbitrate as it did and does. Imho, its mandate gives it no such power, but de facto it has taken that power, so that the Gillespie comment rings very true.

[The ECB is in the business of ‘making the world safe for investors’, particularly core bank investors. Exceptions such as Cypriots, Russian gangsters etc, or any country thinking of making a run for it, will be dealt with the protection of core country investors uppermost in mind.]

I thought this quote from Paul Gillespie’s piece was an example of an ill thought-out response.

“a 21st-century Marshall plan to renew the continent’s infrastructure, decarbonise our economies and get people back to work”

Get people back to work. Great idea, but how? And what is the nature of that waged-labour employment? Manufacturing stuff? Fine, but we have computer controlled robots for that and the Asian economies have a surplus of human robots available. So it has to be in waged-labour employments that are welded and anchored in local economies. This is also fine, but someone like to venture a plausible explanation as to why we have a nasty problem with the Dublin area water supply. That’s infrastructure isn’t it?

And since it ’employments’ at the top of the thread, anyone like to venture a valid classification to describe our population and those willing and able to engage in waged-labour.

@ veronica

I’m all for confidence and I admire the sales people who can leave adversity behind and move on to their next target

The politics of jobs announcements has been a fixture a long time: brag about new jobs – some that are to materialise up to 5 years or not – but run a mile from losses unless the number is big or the losses are in a minister’s constituency.

Some announcements are jazzed up with an estimate of indirect jobs.

Like the individual who this week called the continued the rising fake services exports that will exceed €40bn this year, as a fantasy “jewel in the crown” the announcement by Enda Kenny of over 300 jobs from 9 IDA Ireland projects in recent months, which were packaged as if they arrived like manna at the Web Summit, works of course, in the short term, and media reports suggested the spinmeisters got what the desired.

On confidence and Enda Kenny, it was good in 2011 as there was always a chance there would be substance but the declaration of Ireland as the digital capital of the world comes with a hefty price tag – even though the reality is that many of the jobs in high tech are in administration.

I have a theory that Kenny’s sunny optimism is the reason why Richard Bruton has turned out to be a useless minister.

The substance to support confidence or the lack of it is illustrated by stories today that the Troika is still pushing for value for money as the public drugs’ bill has risen to €2bn from €332m in 1997; €850m in 2002; €1.7bn in 2008. That’s only part of the cost as members of the public have had to pay themselves excess prices.

As for jobs in the so-call app economy, a small few can make a decent living.

Ireland as new ‘capital of digital world’ and dreams of a jobs engine

@ Joseph Ryan

While youth unemployment rates of over 40 or 50%, are shocking, the reality is not as bad as that figure suggests – according to Eurostat, when for example youth in Greece who are in third level education are excluded from the denominator, the rate of 55.3% in 2012 becomes an unemployment ratio of 16.1%; Spain’s falls from 53.2% to 20.6%.

On a technicality, that should be “when youth not in the labour force are added to the denominator” ….

That adds most students (and some apprentices) to the denominator, as well as those neither in employment nor education/training who are not actively seeking work.

MH’s point is still valid, although a better view again might treat some of those not looking for work as discouraged unemployed, and add another 5 or 10 percentage points to the ratios for Greece and Spain to take account of this.

@Michael Hennigan

Thanks for that and the link. I struggled a bit with the rather confusing link but now I get it.
In effect, youth unemployment rates cannot be realistically compared with overall unemployment rates, because low labour participation % in the youth category reduces the denominator in the formula, and therefore increases the percentage. Still there are very significant intra-country differences when the better youth unemployment ratio is used.

Either way, it is another case of economic statistics being misleading.

I came across another one in Martin Wolf’s Canadian lecture. He used a labour productivity slide, indicating that labour productivity rates had fallen in Germany, the US and UK during the crisis, quite counterintuitive to what many would think. It sounded a bit odd to say the least.

One thought that occurred to me was that the ‘fall; in labor productivity was simply as a result of price discounting to keep both market share and keep volumes up.
That would make sense to me, and I assume that is what happened, rather than a reported ‘fall in labour productivity’.

@ Joseph Ryan

In Germany there was a peak 1.5m workers in the Kurzarbeit publicly subsidised part-time working scheme in 2009/10. So using their gross cost while working lower hours results in a fall in productivity.

Meanwhile, a UK report claims that some of the new jobs in recent years are in fact old jobs.

@ BeeCeeTee

Enda Kenny this week repeated the popular government talking point that the private sector is creating 3,000 jobs every month.

One factor in this statistic is that it appears as with the UK, that in the period prior to July 2012/June 2012 that the number of jobs were understated.

Even if that’s not the case, the CSO estimates that half the additional jobs in July 2012/June 2012 were in self employment (without any paid employee) and assisting relative categories – which in reality means that most of these people have no real jobs.

As regards part-time employment, the CSO says that the numbers of people who wanted full-time work in June 2013 was up 145,000 from 4,000 at the end of 2007.

So repeating that 3,000 jobs are being added in the private sector each month, without any qualification, is misleading.

@Brian Woods,Snr-Hi Brian delightful fall day here,perfect for gardening,hope you good,regarding the question you posed.
Its all about C A P I T A L…..and you guys ain’t got any:)
What little you have is wasted,starting with overpaid elected and non elected reps,hard to have too much sympathy for your plight when the senate is WTF!
A measly few bucks for the SME sector yet BILLIONS wasted pi**ed away on dead banks and that joke NAMA-more write downs huh!

up to date US numbers here.

@jg: Hi, there. Sitting beside my turf fire – cold, wet evening here. Some of my posts are ‘stuck in transit’ – ???

@BW,Snr have had that problem/issue myself,hopefully its gets sorted out quickly.

Hope you dont have a few bob with the credit union,this is just ugly.

On a lighter note,good fireside read,not sure about paywalls,its Charlemagne.

@jg: That Charlemagne thingy is a load of old cobblers. Shooting the wrong fish.

” … by holding down wages, as Germany did before the crisis; ”

That’s not so difficult when your economy is ‘expanding’ – in aggregate, and the income distributions are not really that inequitable – as they are in Irl and US-of-A and UK-land!

“Many urge Germany to stimulate its economy to help its crisis-hit partners.”

That’s a bad joke – on us! Its Political Economy rubbish!

“But given France’s slow progress in pension and labour reforms …”

Reforms? Eh! You mean ‘downsizing’? Next!

“Internal devaluation still has a long way to go.”

I’ll desist. My comments, at this point, would be completely profane.

Someone needs to set out a clear, definitive Theory of Income in respect of the current economic mess. Absent an income (or a diminished one) you are not a worthy consumer. It might also be useful (given the context of this thread) if we had a clear explanation of ‘work’ – not just as in waged-labour type of stuff, but in respect of the population where a significant proportion of able-bodied folk are both willing and able to ‘work’ – but where jobs are either not available or are held down by robots.

I hear the Chorus of the Challenged – “the government can ‘stimulate'”. Sure it could – if it had the moolah to do it. But it only has the moolah for the banks. Why? The Dublin area is a tad short of water (as in drinking sort). Nightly water curfew! Seems we have 1200 miles of leaky pipes. Apparently they have managed to replace only 120 miles in the last 10 years! And that’s progress? Mindboggling!

How do you classify folk whose intellects are shrouded in a persistent fog of denial and psychological displacement?

Excuse me whilst I pour myself another stiff jorum and put some logs and turf on that fire.

Enjoy the rest of to-day.

@BW,Snr a continuation would have to impact your decision to locate there.Can you shower after 8 pm.?
Yes thought you would enjoy that,difficult bill to pay,if the service is awful.
But good numbers above,is emigration that big a factor,fixing the water situation, would create some work.

I searched IE on Michael Pettis and found only a 2010 reference.

He has a very thorough paper on his 2011 predictions as well as explanations as to where he was off track. The language is technical but plain and easily understood. Search on Germany for best results if you are time constrained.


“I have a theory that Kenny’s sunny optimism is the reason why Richard Bruton has turned out to be a useless minister.”

Could you elaborate on that please? Not sure what you mean, but sounds interesting!

@ Sarah Carey

Being useless is not necessarily being the worst in the current Cabinet or compared with recent predecessors in office.

It’s in fact striking how alike Richard Bruton is with recent predecessors: mainly making jobs announcements, delivering windy aspirations but avoiding any hint that challenges could lie ahead or that any existing policy needs to be seriously retooled. Batt O’Keefe did establish a group to recommend research priority areas. It proposed 14 and that was accepted last year but this is not material in the context of the overall policy.

Meanwhile, the state enterprise agency chiefs who through their staff are in a much better position than ministers to know what’s
happening at enterprise level, continue to be silent lambs in public and likely also in private.

Bruton did make a statement last year that some may consider visionary but it is delusion that comes with a huge price tag:

“As I have said before, our industrial policy must not just be aimed at attracting the next Google or Microsoft to Ireland – we must strive to create the next Google or Microsoft here in Ireland.”

Early in the period of this government, when Bruton upset Gilmore about proposed changes in sectoral wage committees, Kenny testily suggested that it wasn’t Bruton who would be making the decisions.

Whether right or wrong in the past, Bruton used to express some original thinking but the failed leadership heave appears to have left him as a defanged pussy cat!

If he retains an aspiration to become minister for finance, suggesting a hint of some clouds to blur Enda’s sunny scenario, surely wouldn’t be welcome.


Not disagreeing with any point of your analysis, but the core issue – an absence of accountability – goes beyond the individual personality, professional capacity or media spin talents of any member of the current Cabinet.

In this scenario, the seriously ‘defanged pussycat’ is parliament, which has also been successfully declawed by this administration of any mechanisms whereby the actions and policies of Ministers and their Departments can be analysed or meaningfully called to account. For example, speaking on radio yesterday, independent TD, Stephen Donnelly pointed to the farcicality of Dail debates and mechanisms for legislative scrutiny. The Social Welfare Bill to implement the provisions of the Budget was rushed through in three days, guillotined at every stage of passage, he noted, and he was allocated a mere two and half minutes to contribute to the debate on the Bill.

Indeed, at every point in the system, including the deliberations of cabinet itself, there appears to be less opportunity for scrutiny and analysis of government policy initiatives than has ever been the case, even throughout the decades of Fianna Fail dominance. The vulgarity of play-acting in the park with giant puzzles, ( at the high-point of the Seanad referendum campaign), or emerging through a cloud of dry ice to ring the Nasdaq bell, in an effort to accumulate symbolic capital for the ‘Ewok’, as the Taoiseach was (perhaps appropriately) misnamed by foreign guests at the latter event, might not appear so egregious were they not clearly part of a political strategy to shut down any meaningful analysis or debate of the direction of government policy at every level in the public sphere, including the media.

The collapse of the traditional model of Irish politics at the 2011 general election opened up an opportunity for meaningful political reform of our system and its processes, the so-called ‘revolution’ promised in the opening lines of the Programme for Government. Instead of reform, the intention appears to be to replace the old Fianna Fail paradigm of itself as the ‘natural’ party of government with a new paradigm of Fine Gael as the natural party of government. Instead of replacing the old discredited model with a reformed polity – much of which could be achieved by simple changes in procedures and processes without any recourse to referendums – the intention appears to be to replicate and reinforce that model with a new single party dominance. Hence, Ministers can dish up fatuous nonsense about creating ‘the next Google or Microsoft here in Ireland, reminiscent of the sickening old mantras about Ireland becoming a ‘world leader’ in something or other or the frankly delusional promise, from the increasingly delusional Doctor of Health, of free primary health care for all by 2016, without fear of any challenge from any quarter. Policy failure can be attributed to the truculence and inflexibility of the EU or the legacy of ‘ the mess we had to deal with on coming into office’ etc. It will all end in high fives for some, and tears for too many others.

@ veronica

I do not think the outlook is that bad. It is no longer possible to fiddle the books. If an attempt is made to do so – by whatever party – what the country has been through in the past five years will seem like a picnic.

cf. Colm McCarthy

Restoration of the role of the Oireachtas will come about as a result of these pressures. This is what has happened in other countries facing lesser if similar crises (Sweden, Finland, Denmark being the best examples for Ireland).

@ veronica

“A long threatening comes at last,” my mother used to say and she didn’t find that line in James Joyce’s Ulysses! My father used to often say that “you cannot make a racehorse out of a mule.”

Whether on the right or left, the Irish tend to be conservative; there is no real interest in reform and as Vodafone confirms, we love to talk and anecdotally, we are bored with process.

Enda Kenny in Donegal in 2009, possibly reading someone else’s words lamented that the national accounting system was equivalent to that of a corner shop but he does nothing when he has the power to do so.

Eamon Gilmore was in a position to make a difference but in 2010 while he made a name for himself by attacking a hapless taoiseach, the only vision thing that he could conjure up was a proposed fourth official review of the Constitution since 1995.

It’s easy to be wise after the event but there was no need for prescience when I wrote then:

For an aspiring taoiseach, against the backdrop of monumental governance failures leading up to the economic crash and a system of limited accountability dominated by vested interests, it was a depressing performance.

Gilmore seems to have lost the vision thing not when the Workers’ Party abandoned communism but when the ism itself self-immolated.

He did however have leverage compared with the PDs in 1997 after a disastrous election campaign and in 2007 when the Greens were overeager to sign a Faustian Bargain while hoping to save the planet.

It will take time to achieve change and the so-called independents TDs in general, do not seem to be less clueless than their party counterparts.

In Ireland the legislature is dominated by teachers, auctioneers and farmers; in the US it’s lawyers that comprise a third of the current House of Representatives and more than half the seats in the Senate. Almost twice as many men as women make up the new Bundestag. A large number of them are aged around 50 and were “administrative professionals,” as the official statistics describe it. More than half of the total 631 parliamentarians belong to this group of professionals: administrators, teachers, lawyers.

In Ireland if individual parliamentarians wished to be more than sheep, they could force change.

Daniel Patrick Moynihan, later a US senator, wrote in 1961 on Irish governance of New York City:

In a sense, the Irish didn’t know what to do with power once they got it.

@Michael Hennigan

Power. Who has it? Where is it?

In the EZ policy is dictated, not by the needs and wishes of the EU Citizenry, but by the needs of the Big Corporations and the Financial System; little peeple don’t matter.

In Ireland, policy is dictated, not by the needs and wishes of the Irish Citizenry, but by the needs of the Big Corporations, IFSC, the Financial System and their representation in DeTroika; little peeple don’t matter: little ministers matter less.

@David O’Donnell

Ireland is but a small row boat in a world of behemoths. Our government has been trying to game the system using short sighted scams. The main one being how low can we go with corporate taxes. To make matters worse they then do side deals tailored to individual companies at less than 3%. Any lunatic country can play the how low can we go game and we are not alone or unique in any way.

Government spending since 2008 has been fueled by loans from abroad as the national debt increases quarterly with no end in sight. One cockamamie decision after another delaying short term pain for long term torture and poverty over decades. Sure boys if we only hang in ’til after the next election we can get the gravy train back on track. No one told them that the track is being washed away in a world where even an additional trillion of QE in the US is not moving inflation upward. In Japan Abe’s best anti-deflation efforts are getting poor results as the rest of the world stagnates.

In the present circumstances world economic power is fragmenting and Ireland is only a small part of the collateral damage. No doubt the next round of stimulus will tend toward massive public works funded directly by governments. Ireland of course is in no position to fund the repair of potholes not to mind embarking on major public works.


The problem goes a lot deeper than political action to resolve the fiscal deficit. That task does not pre-suppose a requirement to de-democratize our politics and our society, which is what is happening in this administration. To the contrary, debate, discussion and analysis of the issues would be of benefit to the process of making policy decisions about the allocation and distribution of available resources, however thin they may be, to the long term benefit of our society.


It’s a personal quirk, but I’ve always had an aversion to hard-line ideology, right or left, about how one ‘should’ think or live, which inevitably requires fitting the facts of any given situation to one particular frame of analysis. I think the problem for political adherents to any ‘ism’ is that when the ideology crumbles, they may be faced with severe difficulties of adjustment or bereft of anything to hold on to other than personal political opportunism. That’s tough enough, but even worse , I think, is what might reasonably be described as the traditional ‘Sinn Fein’ approach – pick a coat off the rack and if it even halfway serves its political purpose it’ll do, for the present anyway. When it’s threadbare, you can always bring it back and pick out another one…

@ veronica

“The problem goes a lot deeper than political action to resolve the fiscal deficit.”

Agreed! My point is that being forced to fix said deficit is the catalyst that will start the process. Indeed, to describe the deficit simply as a “fiscal deficit” is a euphemism. We have had deficits before but the country never went broke.

One can see the start of the process in the emerging political consensus as to whether a credit line is necessary in the context of leaving the bail-out in the sense that the debate is about the pros and cons, despite the best efforts of some involved to turn it into a party political issue.

I share your aversion to “hard-line ideology, right or left”. It is an aversion that is rather more widely shared than many imagine, I suspect.

hardly a new issue,but sure blame austerity,the troika,big corporations,neo liberals.

“Unemployment Rate in Ireland decreased to 13.20 percent in October of 2013 from 13.30 percent in September of 2013. Unemployment Rate in Ireland is reported by the Central Statistics Office Ireland. Ireland Unemployment Rate averaged 10.96 Percent from 1983 until 2013, reaching an all time high of 17.30 Percent in December of 1985…”

@DOCM-good pice in sindo,is anyone covering or looking at the credit unions,get out your check books,their business model is fatally flawed.The few remaining irish banks will pass the stress tests,but the credit unions are going to need a lender off last resort and quickly.

@ JG

I refer you to the point I made to Veronica above. This is the one weak point in the analysis by CMc. He fails to include the dynamic of the four-cornered struggle going on between (i) creditor countries (i.e. Germany) (ii) debtor countries (iii) ECB and (iv) Commission with regard to the ultimate shape of the banking union. There will be no answer to the issue of EA, as opposed to, national “backstops” until late in the overall process. The ECB has no choice but to press the point of the absolute necessity for backstops, national being the only ones available at this stage of the game.

But the ESM is not there simply as some form of decorative ornament. If it has to be used, it will be. The name of the game as far as Germany is concerned is to limit this eventuality as much as possible; a perfectly logical position.

@DOCM,the remaining irish banks are fine,with the exception off maybe PTSB.
Little bit off tilting at windmills,hard to lose money if you don’t lend it.As he said last week…you already gave at the office.
Given that some banker funded Hugh’s Folly maybe it’s a good thing…..
I doubt you will ever have the likes off Anglo again,I’d be more concerned about having almost no banking sector at all rather that what ifs.

@ JG

FYI report on the rather bizarre situation where the insistence of the CSU on the introduction of a motorway toll confined to foreigners is apparently the sticking point in the coalition negotiations in Germany.—hintergrund/koalitionsverhandlungen-nur-die-maut-sorgt-fuer-aerger,23998104,24892128.html

But there are more serious matters at issue.

Rather unhappy timing with regard to establishing the conditions surrounding Ireland’s exit from its bailout as the SPD proposes to consult its 475,000 members on December 15; a few days before the December European Council (19/20 December)!

Goes well with JG above.

Someone mentioned they could not drag this.

FT Nov. 5th
Germany is a weight on the world.
Martin Wolfe

The criticisms that hurt are those one suspects might be fair. This might explain the outrage from Berlin last week over the criticism by the US Treasury of Germany’s huge and vaunted trade surplus. But the Treasury is to be commended for stating what Germany’s partners dare not: “Germany has maintained a large current account surplus throughout the euro area financial crisis.” This “hampered rebalancing” for other eurozone countries and created “a deflationary bias for the euro area, as well as for the world economy”. The International Monetary Fund has expressed similar worries.
The German finance ministry responded that its current account surplus was “no cause for concern, neither for Germany, nor for the eurozone, or the global economy”. Indeed, a spokesman stated that the country “contributes significantly to global growth through exports and the import of components for finished products”. This reaction is as predictable as it is wrong. The surplus, forecast by the IMF at $215bn this year (virtually the same as China’s) is indeed a big issue, above all for the future of the eurozone.

Germany rebuffs US Treasury criticism
FT Long Short Germany feels US ire over war on currencies
Markets Insight Eurozone deflation
Markets Insight Debt crisis has left Germany vulnerable
Martin Wolf Carney’s big bet
Why the BoE must gamble on growth
Reality of US fiscal future
US The debt-ceiling doomsday device
Export surpluses do not reflect merely competitiveness but also an excess of output over spending. Surplus countries import the demand they do not generate internally. When global demand is buoyant, this need not be a problem provided the money borrowed by deficit countries is invested in activities that can subsequently service the debts they are incurring. Alas, this does not happen often, partly because the deficit countries are pushed by the supply of cheap imports from surplus countries towards investing in non-tradeable activities, which do not support the servicing of international debts. But in current conditions, when short-term official interest rates are close to zero and demand is chronically deficient across the globe, the import of demand by the surplus country is a “beggar-my-neighbour” policy: it exacerbates this global economic weakness.
It is no surprise, therefore, that in the second quarter of 2013 the eurozone’s gross domestic product was 3.1 per cent below its pre-crisis peak and 1.1 per cent lower than two years before. Its highly creditworthy core economy is subtracting demand, not adding to it. Not surprisingly, the eurozone is also stumbling towards deflation: the latest measure of year-on-year core inflation was 0.8 per cent. Since demand is so weak, inflation may well fall further. This not only risks pushing the eurozone into a Japanese deflationary trap but thwarts the necessary shifts in competitiveness across the eurozone. The crisis-hit countries are being forced to accept outright deflation. This makes ultra-high unemployment inescapable. It also raises the real value of debt. (See charts.)
The policies pursued by the eurozone, under German direction, were certain to have this outcome, given the demand-destroying impact of the all-round fiscal austerity. In a recent paper for the European Commission, Jan In ‘t Veld argues that contractionary fiscal policy has imposed cumulative losses of output equal to 18 per cent of annual GDP in Greece, 9.7 per cent in Spain, 9.1 per cent in France, 8.4 per cent in Ireland and even 8.1 per cent in Germany, between 2011 and 2013. Inevitably, monetary policy is going to find it almost impossible to offset this. Before the crisis, it could work by expanding credit in what turned into the crisis-hit countries – above all, in Spain. Today, it is working against the background of a weak banking system, debt overhangs in crisis-hit countries and an aversion to borrowing in creditor countries.
The most likely way that a more aggressive monetary policy would be effective is by depreciating the euro’s exchange rate. If, for example, the ECB were to undertake large-scale quantitative easing, by buying the bonds of the members in proportion to their shares in the central bank, a falling euro would be the most likely result. But that would exacerbate the tendency of the eurozone, operating under German influence, to force its adjustment on the rest of the world.
As the vulnerable countries shrink their external deficits, while the chief creditor country remains in surplus, the eurozone is generating huge external surpluses: the shift from deficit towards surplus is forecast by the IMF to be 3.3 per cent of eurozone GDP between 2008 and 2015. Given the shortfall demand in the eurozone, the shift might need to be even larger, at least if the vulnerable nations are to have much chance of cutting unemployment. This is a beggar-my-neighbour policy for the world. The US has every right to complain about it, just as others had a right to complain about past US regulatory failures.
It will be impossible, however, for the eurozone to achieve prosperity on the basis of export-led growth: it is too large to do so. It has to achieve internal rebalancing, as well. Hitherto, as the IMF’s October World Economic Outlook shows, it is mass shedding of labour that has raised competitiveness, and collapsing domestic demand that has reduced external deficits in the crisis-hit countries. Thus the adjustment successes have been the other side of the coin of economic slumps and soaring unemployment. Yet, even so, the IMF does not forecast significant reductions in net liability positions. Their vulnerability will endure.
So what, in brief, is happening? The answers are: creeping onset of deflation; mass joblessness; thwarted internal rebalancing and over-reliance on external demand. Yet all this is regarded as acceptable, desirable, even moral – indeed, a success. Why? The explanation is myths: the crisis was due to fiscal malfeasance instead of to irresponsible cross-border credit flows; fiscal policy has no role in managing demand; central bank purchases of government bonds are a step towards hyperinflation; and competitiveness determines external surpluses, not the balance between supply and insufficient demand.
These myths are not harmless – for the eurozone or the world. On the contrary, they risk either trapping weaker member countries in semi-permanent depressions or leading, in the end, to an agonising break-up of the currency union itself. Either way, the European project would come to stand not for prosperity, but for poverty; not for partnership, but for pain. This, then, is a tragic story.

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