Euro-zone Remains A Dysfunctional Mess

Europe Is A Dysfunctional Mess!

To say the Euro-zone is a dysfunctional mess is an understatement. Proof is apparent in the many articles such as the one appearing on October 5th indicating Italy has asked fellow Euro-zone members to back a common unemployment insurance scheme to shield the continent’s jobless from future economic shocks as part of Rome’s broader push to deepen integration in the single currency. Pier Carlo Padoan, Italy’s finance minister, who unveiled the plan in Luxembourg, said it would mark “big progress towards solidarity — or risk sharing” across the Euro-zone that suffered deep divisions during this year’s tense negotiations over a new Greek bailout.

The economy of the 19-member union grew 0.3 percent in the third quarter, slowing from 0.4 percent in the prior quarter is the report from Eurostat, the trade bloc’s statistics office. “So far the message coming to most of the citizens of Europe from monetary union is that it’s about banks and fiscal tightening, not about growth and jobs,” Mr Padoan said in an interview in his office. “This proposal is part of trying to convince Europeans that Europe is part of the solution, not the problem.” Again the reality is that a pan-European jobless scheme would struggle to gain traction because several Euro-zone members will be wary of funding a policy that requires the bloc’s healthier labor markets to support its weaker ones. Just last month, supporters of deeper financial integration hit a roadblock from Germany in their efforts to secure agreement on a common scheme to protect bank deposits.

Leaders Address Crisis With Vows Not Plans

Meanwhile according to a report from the ECB lending to the private sector slowed in September, suggesting the bank’s stimulus measures have yet to spark a significant turnaround in the region’s economy. According to the ECB report, lending to households was 1% higher than one year ago, a slight acceleration from August, but this occurred as lending to businesses slowed to 0.1% last month from 0.4% in August. The fact remains the Euro-zone economy is going nowhere despite all the over the top efforts by the European Central Bank to stimulate the economy. As usual difficult structural reform is lacking and the only real effort being made by politicians is to give the impression that leaders are hard at work trying to arrive at how to correct the problem. It has become the chief pastime of those in power to meet and talk, then meet and talk some more, but action is seldom seen.

Adding to the Euro-zone's woes of economic stagnation is contagion flowing from slowing economies across the world, a October 20th article in the Guardian is an example of what they face. The piece delves into how about half of the 1.6bn tonnes of steel made globally comes from China and why firms operating in the UK simply can’t compete. Guardian contributor Karl West, wrote; The latest grim chapter in the long, slow death of Britain’s steel industry may have been decided in India, but it was scripted in Beijing. He then continues saying, Tata Steel, owned by the Indian conglomerate Tata Group, just announced it has been forced to cut 1200 jobs in Britain.because it has been hammered by a toxic cocktail of high green taxes on emissions, a strong pound, slowing demand coupled with cheap Chinese competition and over capacity.

The Euro-zone Has Failed To Take Action In This Crisis

Stories like those above are all over the place and this is even before we get to the issues growing from a massive flow of refuges into the Euro-zone. While the boost in population would cause a person to envision eventual economic growth from increased demand for goods and services, near term concern is over the cost of assimilating more than a million people into society. It should be noted these people arrive with nothing and often do not even speak the language. This has created conflict between not only countries already beleaguered by slow growth, high unemployment, and deficit budgets and their better off neighbors, but groups within many of its members.  

Gypsies in Italy have been considered by many Italians to be a problem for years and in several other countries unemployment coupled with worry over terrorist threats have raised concerns. This means it may be difficult for some countries to get enthusiastic about the refugees and migrants flooding the area. It has become common place to see pictures of poorly dressed refugees huddled in the rain and cold at the borders of countries denying them entry, this usually is complete with wire fences and armed guards. As usual the meetings of leaders in Brussels and other cities yield little other than more meetings and photo opportunities. The pledges to address the crisis as a common force produces little accept the promise of money and action to come, but nothing seems to get done. Mix in a few gems of unrest, such as the independence movement by Catalonia gaining strength in Spain, and it is easy to understand how fragile the Euro-zone really is. The frustration at just how inept and dysfunctional governments can be is not a unifying force that would make the people of Europe pass more power to those in charge.




Footnote; Currently the thought of taking a holiday in Europe seems daunting. Attempting to travel through the area when facing closed borders, strikes, and homeless refugees has offset the excitement of tourist enjoying the weaker euro.
As always articles on many subjects may be found in my blog archive, thanks for reading, your comments are encouraged.