EU - Inflation Sutge: ECB's Rehn warns of risk if inflation surge lasts much longer

The surge in inflation in the euro zone is still mostly temporary but households and firms will start to lift their price expectations if it lasts much longer, European Central Bank policymaker Olli Rehn said on Tuesday.

Inflation in the euro zone hit 3.4% last month according to flash estimates amid higher energy prices and supply constraints pushing up the price of a range of goods.

Read more at: ECB's Rehn warns of risk if inflation surge lasts much longer - Metro US

EU Economy: As eurozone records 3.8% slump ECB chief warns of worse to come

Former ECB president Mario Draghi claimed last year that the majority in favour of further loosening was so large that it was unnecessary even to count the votes. Never mind that the countries opposing the decision hold 56% of the ECB’s paid-in equity capital and account for 60% of eurozone output. Counting their compatriots on the ECB governing council, however, they have only seven out of 25 potential votes (subject to a rotating limitation). Draghi did have a majority, then, but it represented a very clear minority of the ECB’s liable capital. This raises considerable concerns about the governing council’s decision-making process.

Todays head of the ECB Christine Lagarde has warned that the eurozone could be on course for a 15% collapse in output in the second quarter as evidence of the economic toll caused by Covid-19 pandemic started to emerge, with France and Italy falling into recession.

After news that the 19-nation monetary union area had contracted a record 3.8% in the first three months of 2020, Christine Lagarde said much worse was possible in the April to June period, when the impact of lockdown restrictions would be most severe.

 Read more at:

As eurozone records 3.8% slump ECB chief warns of worse to come

EU - Summit Coronavirus Bailout Fund: Spanish vs Dutch views on the EU Recovery Fund - by Monika Sie Dhian Ho and Charles Powell

Dutch PM Mark Rutte being stingy

The Netherlands and Spain are at opposite ends of the debate about the EU's recovery package. But they must realise they are in the same boat.

The Covid-19 pandemic has triggered an unprecedented recession in Europe which has hit the EU at a delicate moment. It could be the toughest test for European integration yet. A strong, fast and coordinated, response is essential.

The European Central Bank has deployed an unprecedented asset-purchase programme, the European Commission has for the first time ever lifted restrictions on fiscal expansion and state aid, and the Eurogroup agreed new European Stability Mechanism credit lines, emergency measures to support those unemployed, and new funds for the European Investment Bank. Now it is time for the heads of state and government to rise to the challenge

The internal market, the monetary union and the Schengen travel zone are at risk, and populist anti-EU voices stand ready to exploit disagreements that have emerged among member-states.

A piece of unfinished business is the so-called EU Recovery Fund.

It is based on a Commission proposal, and is integrated into the EU's draft seven-year budget. It would allow for investment in the EU of almost two trillion euros, some of it in the form of debt issued by the Commission.

The sooner a deal is reached, the quicker the money can be The sooner a deal is reached, the quicker the money can be released and the faster the recovery will be.

Read more: 
Spanish vs Dutch views on the EU Recovery Fund

Netherlands Headed For Unprecedented Crisis?: Millions Of Retirees Face Pensions Cuts Thanks To The ECB - "This Report is Questionable say Dutch Government insiders" - by Tyler Durden

When one thinks of pensions crisis, the state of Illinois - with its woefully underfunded retirement system which issues bonds just to fund its existing pension benefits - usually comes to mind. Which is why it is surprising that the first state that may suffer substantial pension cuts is one that actually has one of the world's best-funded, and most generous, pension systems.

According to the FT, millions of Dutch pensioners are facing material cuts to their retirement income for the first time next year as the Dutch government scrambles to avert a crisis to the country's €1.6 trillion pension system. And while a last minute intervention by the government may avoid significant cuts to pensions next year - and a revolt by trade unions -  if only temporarily, the world finds itself transfixed by the problems facing the Dutch retirement system as it provides an early indication of a wider global pensions funding shortfall, not to mention potential mass unrest once retirees across some of the world's wealthiest nations suddenly finds themselves with facing haircuts to what they previously believed were unalterable retirement incomes.

At the core of the Dutch cash crunch is the ECB's negative interest rate policy, which has sent bond yields to record negative territory across the eurozone, and crippled returns analysis while pushing up the funding requirements of Dutch pension funds.

Ahead of a parliamentary debate on Thursday on this hot topic issue, the Dutch minister for social affairs and employment, Wouter Koolmees, will write to lawmakers to outline his response to the pension industry’s problems, the FT reported.

Read more: Netherlands Headed For Unprecedented Crisis: Millions Of Retirees Face Pensions Cuts Thanks To The ECB | Zero Hedge

EU-Brexit chaos is lesson to other EU states, ECB governor says

British chaos over Brexit has dampened other member states' potential appetite for leaving Europe, Villeroy de Galhau, a French governor of the European Central Bank (ECB), said Tuesday. "It is a gratitude we have to the British today," he said at an event in the London School of Economics, Reuters reported, in comments which risked giving ammunition to British claims the EU was trying to punish the UK for leaving.

 

Read more: Brexit chaos is lesson to other EU states, ECB governor say

 

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European Economy: The ECB goes Rogue - by Sylvester Eijffinger

The European Central Bank has done it again. At its recent meeting in Frankfurt, the ECB Governing Council decided to increase bond purchases further, from €60 billion ($67 billion) to €80 billion per month, with corporate bonds now also eligible for purchase. The deposit rate, too, was reduced once again, and now stands at -0.4%. This is far from a neutral policy – and it takes the ECB far beyond its mandate of preserving monetary stability.

The motivation behind the recent policy moves is clear: ECB President Mario Draghi is committed to curbing deflation, a serious threat to economic growth. After all, in a deflationary environment, it is more difficult to repay debt, so companies will tend to postpone investment. Recent Eurostat figures, which show that the annual consumer-price index fell by 0.2% last month, heighten concerns.

But while what is happening is technically deflation – that is, sustained price-level decreases that may be reflected in employment or other contracts – it is not structural deflation. Instead, it largely reflects low oil prices, which have fallen by more than 70% since June 2014. In fact, if we discard energy and food prices, the eurozone is in a situation of structural low inflation. That, together with the oil price, should actually benefit the economy, as it gives a boost to consumption and investment.

So why has the ECB’s massive quantitative easing (QE) program, which has put plenty of money into circulation, failed to stimulate demand for goods and services? One problem is that banks are reluctant to pass the negative deposit rate through to the savings rate, for fear of losing depositors. They are thus forced to increase further their margins on mortgages and loans to small and medium-size enterprises. As a result, contrary to the goal of QE, they are extending less credit to households and companies.

Meanwhile, banks, households, and small and medium-size enterprises are still excessively leveraged, and need time to pay down their debts. While this might seem to suggest that the ECB’s focus on boosting inflation is the right one, the reality is that a straightforward expansion of the bond-purchase program ignores the underlying structural issues afflicting the eurozone’s weaker economies. Worse, by enabling those economies to borrow cheaply, QE permits them to avoid implementing difficult structural reforms.

Draghi and the doves on the ECB Governing Council – namely, the presidents of southern European countries’ central banks – seem to think that they can get a car moving simply by giving it more gas, even if its clutch is broken. The hawks in the ECB Governing Council, such as Bundesbank President Jens Weidmann and De Nederlandsche Bank President Klaas Knot, see the folly in this approach, but they are in the minority.



The ECB goes Rogue - The New Times | Rwanda

Greece: Eurogroup approves third bailout for debt-ridden Greece

Eurozone finance ministers agreed on Friday to approve a third bailout programme for Greece, with the first tranche of aid to be worth €26 billion. Eurogroup chairman Jeroen Djisselbloem said that "of course there were differences, but we have managed to solve the last issues."

To recapitalise Greek banks €10 billion will be made available, while a second tranche of €16 billion will be paid out in several installments, starting with a €13 billion installment by August 20 when Greece must make a new debt payment to the European Central Bank (ECB).

"On this basis, Greece is and will irreversibly remain a member of the Euro area," said European Commission President Jean-Claude Juncker after the deal was sealed.

Read more: france 24 - Eurogroup approves third bailout for debt-ridden Greece - France 24

Greece says NO to austerity demands by Wall Street dominated financial sector and their IMF brainchild

The Greek No Vote has shown the rest of the EU that democracy is what counts and not the dictatorial rule of the Wall Street dominated global financial markets and its brainchild the IMF.

It will hopefully only hasten Europe's need to take a more independent route on a variety of issues, presently controlled by Trans-Atlantic financial and political forces.

Europe must choose for Greece, after all, aren't they one of us?
EU-Digest

EU-US Trade Pact: Poll shows majority of Europeans not in favor of all aspects potential EU - US trade agreement

A recent EU-Digest poll conducted from  May through June as to EU citizens concerns related to a potential Trans Atlantic Trade Pact  (TTIP) between the EU and the EU shows that all respondents in this poll voiced concerns about the possibility that this EU-US trade pact could be providing US corporations access/controls over EU Public Health, Communications, Education, Insurance, Water and Energy services.

A new EU-Digest poll, which runs from the 27th of June till the end of July focuses on the overall state of "health" of the EU, given the challenges it faces and its ability to tackle these problems,

The new EU-Digest poll is also quite relevant, given the possibility of a Greek economic default and the impact it could have on the EMU and the EU as a whole.

EU-Digest 

ECB chief Mario Draghi unhurt after protest during speech - by Everton Gayle

European Central Ban (ECB) President Mario Draghi was unhurt after a press conference was disrupted when a woman jumped on to the podium.

The protester, dressed in black, shouted: “End the ECB dictatorship.”

Draghi was visibly shaken and held his hand up in defence before the women was removed by security officials.

A Feminist activist group called Femen later claimed responsibility on Twitter for the protest. The press conference resumed shortly afterwards.

Note EU-Digest:  fortunately for the woman  representing Femen that she did not decide to do this protest at a US Central bank meeting, where she would have certainly been shot by "trigger happy" security there.

Read more: ECB chief Mario Draghi unhurt after protest during speech | euronews, world ne

ECB ups the pressure on Greece and its promises to renegotiate its debt

Pressure is growing on Greece and it finance minister to toe the line and stick to its financial commitments.

The European Central Bank on Wednesday brought forward a ban on the debt-stricken country using its bonds as collateral for cash.

It means that a waiver that allowed Greece to swap its junk-related debt for money will now expire on February 11, weeks earlier that the previous deadline of February 28.

Greek banks will still have access to funds through the ECB’s emergency lending programme but even here there are moves to tighten up conditions for access to that financial mechanism.

Read more: ECB ups the pressure on Greece and its promises to renegotiate its debt | euronews, world news

EU: Austerity is not working around Europe - Time for change?

The Guardian notes in an editorial that at a stroke, the Greek general election of 2015 has destroyed the post-recessionary political norms and assumptions of Greece and shaken those of the European Union to the core as well.

For six years, Greeks have protested against harsh eurozone disciplines, but the nation’s eventual, though resentful, readiness to put up with the resulting hardships has been a source of stability. In Sunday’s vote, however, Greek patience finally snapped, particularly among the middle classes, ousting the pro-austerity government of New Democracy and electing the anti-austerity left-coalition Syriza in its place.

As a consequence, the past is no longer much of a guide to the future, at least in Athens, and perhaps elsewhere in Europe.

For the complete editorial  from the Guardian click here 

Global Economy: The Politics Of Economic Stupidity - by Joseph Stiglitz

In 2014, the world economy remained stuck in the same rut that it has been in since emerging from the 2008 global financial crisis. Despite seemingly strong government action in Europe and the United States, both economies suffered deep and prolonged downturns. 

The gap between where they are and where they most likely would have been had the crisis not erupted is huge. In Europe, it increased over the course of the year.

Developing countries fared better, but even there the news was grim. The most successful of these economies, having based their growth on exports, continued to expand in the wake of the financial crisis, even as their export markets struggled. But their performance, too, began to diminish significantly in 2014.

In 1992, Bill Clinton based his successful campaign for the US presidency on a simple slogan: “It’s the economy, stupid.” From today’s perspective, things then do not seem so bad; the typical American household’s income is now lower. But we can take inspiration from Clinton’s effort. 

The malaise afflicting today’s global economy might be best reflected in two simple slogans: “It’s the politics, stupid” and “Demand, demand, demand.”

Read more: The Politics Of Economic Stupidity

QE ECB: Germany wary of ECB quantitative easing, World Bank warns reforms needed as well

European stock markets were boosted by the European Central Bank’s bond-buying scheme with several share indexes hitting seven-year highs on Thursday.

Banks and car makers were among the best-performer companies as they are likely to benefit from cheap lending rates and a weaker euro.

But the head of the World Bank, Jim Yong Kim, told euronews that on top of the bond purchases, eurozone governments also need to do more to reform their economies.

Referring to the bond buying he said: “This is a tool and it should be used, because the potential to have a self-fulfilling and continuous deflationary cycle was very real. The other half of this is that there’s still not enough to really solve the problems. You know, the countries that are in the most trouble, have to move forward with their reform agenda.

What an opportunity! We have historically low oil prices and now we have a quantitative easing. This is now the time to really jump in.”

Germany was the least enthusiastic with economists, politicians and business leaders there warning this is taking the euro system deeper into unchartered territory.

Hans-Werner Sinn, the head of the influential Ifo economic think-tank, called it “illegal, unsolid state financing by printing money”.

Note EU-Digest: Mario Draghi the ECB Chairman who used to be a Goldman Sachs employee is going on a slippery slope with QE financing - Given Draghi's US related banking experience and link with the Goldman Sachs Financial corporatio - whose financial history is not one of sound and honest practices puts up a lot of red flags.

Read more: Germany wary of ECB quantitative easing, World Bank warns reforms needed as well | euronews, economy

EU-Economy: EU selects projects worth 1.3 trillion-euro to revive economy and jobs

The European Union has drawn up a wish list of almost 2,000 projects worth 1.3 trillion euros ($1.59 trillion) for possible inclusion in an investment plan to revive growth and jobs without adding to countries' debts.

Investment has been a casualty of the financial crisis in Europe, tumbling around 20 percent in the euro zone since 2008, according to the European Central Bank.

Following a call by European Commission President Jean-Claude Juncker, EU governments have submitted projects ranging from a new airport terminal in Helsinki to flood defenses in Britain, according to a document seen by Reuters.

"Almost 2,000 projects were identified with a total investment cost of 1,300 billion euros of which 500 billion are to be realized within the next three years,'' said the document, to be discussed by EU finance ministers on Tuesday.

Read more: EU selects projects worth 1.3 trillion-euro to revive economy and jobs

Global Economy: European economic figures far more accurate than those from the US - by RM

Transparency key to success Atlantic Alliance

When listening to or reading US financial reports there are some remarkably disturbing facts popping up.

One of these is the fact that it was actually the US which caused the 2007/2008 financial crash but this has been completely swept under the mat by the US.

Keep in mind though that all the media outlets in the US, except very few, which are "not for profit organizations" (who mainly get their income from public/private donations and grants) are mostly profit based multi-national corporations. This should immediately raise a red flag as to the impartiality and balance of the news/financial reports they release.

Possibly, this is also the reason that at the same time there is this constant barrage of attacks coming from those same US media circles bashing and critizicing the EU/ECB for not adopting the US QE financial policies (printing more money and pumping this" monopoly money" into the marketplace) in order to get the EU economy going again.

As to the US QE policies,  many economists believe this could eventually be a recipe for future US economic disaster.

Also, looking at some of the official figures put out by the US Government and reading between the lines, the attentive reader will quickly find a lot of nebulous statistics on a variety of issues and items, including employment, trade, debt, infrastructure, military and security expenditures.

In this volatile scenario Wall Street is a special "Chapter" by itself.  Some critics call Wall Street a financial "fairyland" where words and phrases as versatility, headwinds, optimize, boldness, performance, choices, transparency, bubbles, wealth, growth, state of the art, profitable, opportunity are used in different ways as shares go up and down and traders turn out the big winners in dividing up the spoils.

Obviously without any doubt there are also "forces" in Europe ( Britain) who are following and would love to have the EU adapt this "flawed" US financial model.

Fortunately, and maybe unfortunately for some,  the EU is a Union of 28 countries with 28 central banks.  Of these 28 countries 18 belong to the so called European Economic Zone (Eurozone) that have adopted the euro (€) as their common currency.and sole legal tender.

The ECB is the central bank for the euro and administers monetary policy for the whole Eurozone.

Any report or statistic on or about the state of the EU economy issued by the ECB  is scrutinized very carefully by all 18 members of the ECB before they become public.Canada which is a Federated country also applies similar rules.

Official EU financial reports and statement are therefore without any doubt far  more accurate and reliable than those coming from US government agencies.

Isn't it time for the EU to get to the point with our friends across the other side of the pond on this issue? And what better venue to do it than during the ongoing EU-US trade negotiations?

EU-Digest

European Banking System: One fifth of EU banks fail stress test - with twenty-five European banks in trouble

Twenty-five European banks have failed stress tests of their finances, the European Banking Authority has announced.

The banks now have nine months to shore up their finances or risk being shut down. No UK banks are included.

The review was based on the banks' financial health at the end of 2013.

Ten of them have taken measures to bolster their balance sheets in the meantime. All the remaining 14 banks are in the eurozone.

The health check was carried out on 123 EU banks by the EBA to determine whether they could withstand another financial crisis.

The list of 14 includes four Italian banks, two Greek banks, two Belgian banks and two Slovenian banks.

The worst affected was Italian bank Monte dei Paschi, which had a capital shortfall of €2.1bn (£1.65bn, $2.6bn).

Read more: BBC News - Twenty-four European banks fail

EU Economy: Visco Says ECB May Not Need to Add Stimulus Amid Euro - by Jana Randow Decline

The European Central Bank may not need to add stimulus measures after steps in the past three months pushed down the euro, said Governing Council member Ignazio Visco.

“Inflation expectations have to be back where they were,” Visco said Sept. 20 in an interview in Cairns, Australia, where he attended a meeting of Group of 20 finance chiefs. “This doesn’t mean that there will be a next step. We have been bold enough to reduce interest rates to a level that was unexpected to the market.”

The single currency has dropped about 6 percent since early June, when the ECB introduced a negative interest rate on excess reserves and presented a four-year lending program to fuel credit. Policy makers reduced borrowing costs further earlier this month and committed to buying asset-backed securities and covered bonds to boost the ECB’s balance sheet by as much as 1 trillion euros ($1.3 trillion).

Read more: Visco Says ECB May Not Need to Add Stimulus Amid Euro Decline - Bloomberg

European Economy: Why Europe is terrified of deflation - by Paul Ames

From Putin’s hordes massing over the eastern borders of Ukraine to the army of home-grown Islamic State fanatics threatening a murderous return from the Middle East, Europe has a lot be frightened of right now.

Yet there’s another nightmare haunting Europe’s economic policy makers: a monster called deflation that’s already clawing at the continent’s financial fundaments.

“We are meeting here at the time when Europe is facing a great threat,” Polish Finance Minister Mateusz Szczurek warned in a recent speech. “We are on the verge of deflation,” he told a Sept. 4 conference in Brussels. “As Europeans we should never forget that it was depression and deflation … that brought to power the totalitarian regime that devastated our continent through the world war and unspeakable atrocities 75 years ago.”

At first glance deflation doesn’t sound so bad.

“Anybody who doubts how bad it could get should look back to the last time the US caught a serious dose of deflation. They called that the Great Depression.”

Prices go down, what’s not to like?

Yet the cold economic reality means that when prices fall people stop spending, hoping things will get even cheaper. In response, businesses cut production and lay off workers. That means even less demand, and prices drop further.

By then, your economy’s in a vicious downward spiral.

Making things worse, those falling prices bring declining wages and worsening debt burdens.

Anybody who doubts how bad it could get should look back to the last time the United States caught a serious dose of deflation, from 1929-33. They called that the Great Depression.

Why Europe is terrified of deflation - Salon.com

EU Economy: Europe fears deflation as Ukraine stays centre-stage

The eurozone's growing fears of deflation will be stirred again on Friday when preliminary consumer price data for August will be issued with signs that the European Central Bank (ECB) could be looking at bolder steps to help the region's stagnant economy.

Analyst polled by Reuters forecast the annual inflation rate to slip to 0.3 per cent from 0.4 per cent in July, falling even further below the ECB's target of below but close to two per cent and mired deep in what the bank calls the "danger zone." The ECB cut interest rates in June and promised banks cheap long-term loans starting in September and any new measures before those loans kick in had been considered unlikely.

However, in remarks that opened the door to possible policy action at the bank's next meeting in September, ECB President Mario Draghi said on Friday that the bank is prepared to respond with all its "available" tools should inflation drop further.

Speaking at a global central banking conference in Jackson Hole, Wyoming, Draghi said he is confident that the steps already announced, helped by a weaker euro would boost demand in the ailing economic bloc. But in stronger language than he has used in the past, he stressed the central bank stands ready to do more. "The (ECB's) governing council will acknowledge these (economic) developments and within its mandate will use all the available instruments needed to ensure price stability over the medium term," he said.

The main weapon at the bank's disposal, printing money to buy bonds, known as Quantitative Easing (QE), is still opposed by Germany's Bundes bank which plays down the danger of deflation. In his remarks on Friday, Draghi did not mention the policy specifically, but a growing number of analysts believe it is only a matter of time before the ECB follows the path already trodden by the Federal Reserve and the Bank of England.

"The ECB will ultimately move to QE unless the euro weakens appreciably," said Riccardo Barbieri, chief European economist at Mizuho, adding that, "In the near term stagnation and near-zero inflation in the eurozone are almost a certainty. Developments in Ukraine will continue to be a major focus for markets, with the negative headlines of recent weeks having pushed German bond yields to new lows."

Read more: Europe fears deflation as Ukraine stays centre-stagEU Economy: Europe fears deflation as Ukraine stays centre-stag