It hasn’t taken the guns of armies or the march of soldiers to drag Europe into its longest recession in 70 years. Instead an ill thought out single currency and the inability of the Eurozone’s leaders to agree on a way forward has sent millions of European citizens out of work and onto the breadline.
This week economists concerns were confirmed. Austerity, banks that will not or cannot lend money and high household debts have prevented any signs of recovery coming into view. Despite the insistence of the European Central Bank and national governments that the Eurozone economy will pick up at the end of 2013 many are left unconvinced, the economic data just doesn’t add up to the official conclusion.
The Eurozone is in the grip of a depression. Southern Europe continues to take a battering. Unemployment continues to rise and growth is nowhere in sight. The debt crisis contagion that has crippled the likes of Greece, Italy and Spain is now seeping into the Eurozone’s heart. France has entered its second recession in four years and Germany, the regions success story barely grew at all in the first quarter of the year.
“The ECB’s recurrent predictions of an imminent recovery are the triumph of hope over wisdom,” said Willem Buiter, chief economist at Citigroup Inc. ‘Euro-zone countries will face a mix of recession and tepid recovery for “two or three more years,” he said.
Austerity is being blamed as the main cause for the regions non-existent recovery. Fiscal austerity has led to millions of Europeans losing their jobs and forcing them onto benefits, reducing a nation’s tax income. Hiking taxes has also crippled many households ability’s to spend their hard earned income on non-essential goods and services. Austerity in effect has created a vicious cycle that the European leaders cannot figure out how to escape from.
The threat of a breakup of the Euro-zone has been reduced thanks to the actions of the European Central Bank. Its imposition of low interest rates, liquidity for banks and its pledge to prevent the collapse of Eurozone government bonds has saved the troubled currency. The question now is, just how long will the ECB’s initiatives keep the bandage in place over the wound?
Southern European countries still have to drive down their wages and other business costs, relative to Germany, if they are ever to restore their competitiveness. That process, which economists call “internal devaluation,” is slow and agonizing compared with the alternative path, which Euro members no longer have, which is to devalue a national currency.
“Financial markets have become more sanguine than a year ago, but the underlying problems of the Euro zone haven’t been fixed,” said Simon Tilford, chief economist at the Center for European Reform, a London-based think tank.
As the crisis and weakness continues in Europe its member nations have seen the rise of increasingly vocal anti-EU detractors. The UK, and other nation, including Germany have seen support for anti-EU political party’s rise as citizens grow ever more disillusioned with the lack of growth and the seemingly never ending depression.
France’s (one of the main founders of the EU) slide into recession since late 2012 is fuelling public discontent and political pressure on President François Hollande, who was elected last year on a promise to turn away from austerity and create growth.
“There is no one in the streets” in the posh shopping district around Avenue Montaigne, says Patrick Lifshitz, who runs three Hobbs Cashmere boutiques in Paris. “The French people have lost all their hopes,” he says. “We live because of the foreigners that come to Paris and buy, because the French don’t buy anymore.”
Unless the leaders of the EU can agree on taking drastic action the peoples of Europe will continue to wallow in recession for the foreseeable future, false promises of a turnaround can only be said so many times.
Current Euro (EUR) Exchange Rates
The Euro/US Dollar Exchange Rate is currently in the region of: 1.2903
The Euro/Pound Sterling Exchange Rate is currently in the region of: 0.8448
The Euro/Australian Dollar Exchange Rate is currently in the region of: 1.3106
The Euro/ New Zealand Dollar Exchange Rate is currently in the region of: 1.5768
The US Dollar/Euro Exchange Rate is currently in the region of: 0.7773
The Pound Sterling /Euro Exchange Rate is currently in the region of: 1.1823
The Australian Dollar/Euro Exchange Rate is currently in the region of: 0.7622
The New Zealand Dollar/Euro Exchange Rate is currently in the region of: 0.6329
(Correct as of 15:00pm GMT)