Guide to the market

According to me a national bank should not guide the market. I would think it would be much better if the National Banks took on a security and observance role.

English: The GDP growth rates of Greece betwee...

The GDP growth rates of Greece between 1961 and 2010. Data: 1961-2009: World Bank through Google public data viewer. 2010 and Eurozone average: Eurostat. (Photo credit: Wikipedia)

The European Central Bank’s Governing Council desires to see the interest rates remaining at their present or even lower levels for a long time, even perhaps more than 12 months, for the ‘safeguarding an appropriate monetary policy transmission and the singleness of the monetary policy” only can give us citizens a poor view of the situation. this with inflation dangers well anchored below 2%, the ECB practically promised to support economic growth with cheap money and ample liquidity for all Eurozone banks for the years to come.

I wonder if the solution of offering cheap money and more liquidity is giving incentives to restore or to work on the validity of the country. And Europe keeps endangering the whole union by still bringing in more countries with junk ratings by Standard & Poor’s, although they might have gone up like Latvia from BBB to BBB+, which is three levels above junk.

GDP real growth rate in Europe

GDP real growth rate in Europe (Photo credit: Wikipedia)

The Euro Area may be, according to some, the second largest economy in the world, but if it is not careful this title will be soon past glory. We can, at the moment only dream of it becoming really one union. If it was like one country today it would be the fourth most populous with 330 million inhabitants with France, Germany, Italy and Spain being the most important economies accounting for over 74 percent of the Union’s GDP.

Last year we could find in the fourth quarter a growth rate of -0.6 percent. Compared with the previous quarter, according to second estimates published by Eurostat GDP fell by 0.2 percent in the Euro Area during the first quarter of 2013. In both the Euro Area and the EU27, gross fixed capital formation contributed negatively to GDP growth (-0.3 percentage points and -0.2 pp respectively), while the contributions of household final consumption expenditure and change in inventories were neutral in the euro area (0.0 pp each) and slightly positive in the EU27 (+0.1 pp each).

As long as the media keep bringing all the negative economic news on the householdscreens, the consumers will stay too frightened to get back to consuming more, to help their country rising up again.

You would think with the low interests on the bank, people would look for a better market and would be more interested in shares. But the recent fraudulous movements of Fortis and other banks made the investors very weary and not so much interested to provide incredible high bonuses for people who made a mess of it and who did not mind to bring lots of losses to lots of people who where wanting to offer their savings to boost the economy, by providing cheaper money to the factories.

Governments not willing to let their retired people work more, giving them not many changes to consume more or to put their savings in the industry. Retired people, like me have continuously to sell their shares to be able to live reasonably well, while they have to be very careful not to go over the maximum allowed earning, so that they would not loose their ‘pension rights’ or retirement funds.

Weaker growth than previously expected in emerging markets and stiffer competition from the depreciating Japanese yen may also hit Belgium as it does Germany’s exports and GDP. Fiscal austerity and bank deleveraging hamper the recovery around Europe but in Belgium an export growth may be expected of just 0.6% in 2013, picking up to 3.6% in 2014.

When not more investors are willing to buy shares, firms will be set to cut capital spending further in 2013, and the investment recovery will then be tempered by the slow recovery in export markets. This while the Government will continue to trim spending to lower the budget deficit, but overlooking the fact that by better using the money, taking care that there would be more jobs to be done for the government, building better roads, providing enough schoolbuildings, social housing, they could provide more work in many sectors and let the economy boom, plus could take the fear away of many labourers. The attempts by Eurozone countries to address their economic difficulties have focused on fiscal policies aimed at reductions in public expenditure , which governments believe they cannot sustain in an era of low economic growth. One outcome of these attempts to achieve these reductions in public expenditure has been protest and unrest. But while there is an understandable public unease and even anger about a lot of these cuts, we should not overstate the nature of this unrest. But, Labour growth is one of the most important elements the government should look for. I do not understand why the Belgian government has every few months come together again to discuss for months a way to reduce expenditure or to get the balance, instead of spending once enough time to project the evolution of fundamentals – investment, labour inputs and total factor productivity. In the first instance confidence needs to be rebuilt quickly. Joined up policy is essential if Europe is to build a competitive economy fit for the future. Today because banks fail to provide the necessary funding, we can not find investment growth, and have to face an upcoming danger that because of no investment in new industry rapid, we shall miss the boat to catch-up with the technology leaders. Should economic policy support a faster investment recovery and swifter return to work of the unemployed, trend growth would return to something closer to that of pre-crisis levels. Allowing for convergence in productivity would also offer some pick up in productivity growth in periphery countries.

German Logo of the ECB.

German Logo of the ECB. (Photo credit: Wikipedia)

Eurozone policymakers have withdrawn support for a policy mix – in the form of rapid attempts at fiscal tightening, monetary easing providing liquidity to banks and not to end users – at a time when a large proportion of Eurozone governments (especially the most fragile ones) had engaged in structural reforms that deliver higher growth in the future but tend to dampen it in recession (Bouis et al. 2012).

People in charge of policy making in Europe should come to a point where they can proof there is a unified  will to make the best out of Europe, having a nation for all the people of that continent. They also have a unified definition of what ails Europe. are it countries which have their politicians and citizens not under control, or have too many fraudes, like Italy and Greece? Is it the burden of the Debt? Or is Europe overburdened by the same problem Belgium has, namely too much regulation? I do not think Greece is the only bad apple in Europe. All things being equal, the minimum requirement to manage this crisis is that there has to be a basic resolution on the unified definition of the crisis among the policy makers in EU.

Euro Area GDP Growth Rate

Please do find:

ECB offers plenty and cheap liquidity to support growth in all Eurozone countries

Eurozone crisis In graphics

  • Slashing Eurozone austerity could boost growth: report (belfasttelegraph.co.uk)
    Marie Diron, senior economic adviser to the Ernst & Young Eurozone Forecast, said that in the short term there is little that can help growth across the countries that have the euro.”The structural reforms being implemented could take some time to have an impact on GDP,” she said. “On the positive side, the relaxation of fiscal austerity means measures that would have otherwise been implemented that could have potentially harmed growth have been avoided. But fiscal policy will remain restrictive.” 
  • Eurozone – time for a new approach, reflections on the June 2013 Ernst & Young/Oxford Economics Eurozone forecast (markgregoryeconomics.wordpress.com)
    Businesses, especially those outside of the Eurozone, are suffering from “forecast fatigue” and are very sceptical of any suggestions that things are going to improve. The “hockey stick” forecast recovery has consistently failed to materialize and each incorrect forecast makes it even harder to convince the providers of capital that things have changed. Countries such as Greece, Spain and Portugal are implementing reform but they are receiving little credit for their efforts as this is being lost in the overall gloom.The European economic crisis is now damaging long term economic potential of the continent. Both physical and human assets are being allowed to decline and insufficient new resources are being provided. Something needs to change, and quickly. Businesses need to engage with governments to press for more radical action. 
  • Are economists naturally gloomy? (Updated) (avoidingcitation.wordpress.com)
    The European Project continues to press on, but a Gloomy European Economist (Francesco Saraceno) sees no happy end in sight for this endeavor.  The European Commission comes up with another plan…. to continue austerity, but slightly less so than usual, I guess(?).
  • Easing austerity ‘would boost Eurozone growth by 1pc next year’ (independent.ie)
    “On the positive side the relaxation of fiscal austerity means that measures that would have otherwise been implemented that could have potentially harmed growth have been avoided. But fiscal policy will remain restrictive.”Ernst& Young said the European Central Bank can do more by easing monetary policy targeted at SMEs. 
  • As the Situation in the Eurozone Only Worsens, the Concept of Austerity Has Proven a Bad Idea (stateofglobe.com)
    The European Central Bank’s (ECB) assessment of the financial system in the eurozone suggested that due to the sharp economic slowdown in the region and a hike in bad bank loans, the risk of a further banking crisis is brewing. The ECB also commented that the weakest world banks were in the eurozone nations that have high unemployment and the most stressed housing markets. (No kidding!) (Source: New York Times, May 29, 2013.)But it’s not just the small eurozone countries that are suffering; financially larger nations are experiencing an economic slowdown as well. Germany is begging for growth, and France is in a recession! 
  • Can The ECB’s Efforts Make The Eurozone A Safer Investment? (etfdailynews.com)
    Draghi said that the ECB will continue to support whatever is necessary to fix the eurozone and that the loose monetary policy will continue: “On our policy stance, let me say that it’s been accommodative in the past, it is accommodative in the present time and will stay accommodative for the foreseeable future,” said Draghi. (Source: European Central Bank web site, last accessed June 26, 2013.)Draghi is certainly making an honest effort, but sometimes enough is enough. He just has not led the eurozone to an effective economic recovery. As I have said on numerous occasions in the past, the eurozone is a major financial mess and looks only to get worse if policies don’t change.
    +the big banks have deep exposure to the eurozone; any long-term malaise in Europe will certainly affect them as well.
  • So, is it a default or not? Ask the unemployed of the EU…. (rkglobalanalysis.wordpress.com)
    Preventing capital flight from banks in crisis-hit countries has been a priority for eurozone policy makers. But have they just shot themselves in the foot?At the height of the region’s debt problems, the amounts held by foreigners in banks in Spain, Italy and other eurozone “periphery” countries shrunk worryingly.
    +The change in the eurozone bank landscape is illustrated by the decline in foreign deposits since the collapse of Lehman Brothers investment bank in late 2008. Before then, the amounts held by foreigners in banks of the eurozone countries had been rising steadily. By the first quarter of this year – the latest period for which comparable ECB data are available – the total had dropped back to levels last seen in mid-2005.
    Worst hit were the periphery countries. Unlike domestic depositors, large foreign depositors usually have easy alternative homes for their money.

About Marcus Ampe

Retired dancer, choreographer, choreologist Founder of the Dance impresario office and archive: Danscontact-Dansarchief plus the Association for Bible scholars, the Lifestyle magazines "Stepping Toes" and "From Guestwriters" and creator of the site "Messiah for all". - Gepensioneerd danser, choreograaf, choreoloog. Stichter van Danscontact-Dansarchief plus van de Vereniging voor Bijbelvorsers, de Lifestyle magazines "Stepping Toes" en "From Guestwriters" en maker van de site "Messiah for all".
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