EU Daily | European Construction Output Declined for Fourth Month
Posted by WARREN MOSLER on October 20th, 2009
European Construction Output Declined for Fourth Month
Domestic housing markets still weak.
Eurozone officials say they support strong dollar
I’m sure they do- they are hoping to export their way out of their recession.
EU Ministers Agree to Start Cutting Deficits in 2011
Back to their old formula- tight fiscal to keep deflationary forces at work on labor costs, to support exports.
Except that formula requires the govt to sell its currency and buy dollars, like Germany and the rest used to do,
to keep relative costs low enough to support exports.
ECB’s Bini Smaghi Says Doesn’t See ‘Any Risk’ of Inflation
Right, the deflationary forces are so severe the ECB actually hit its inflation target for the first time since inception.
German September Producer Prices Decline on Cheaper Energy
It’s not a weak dollar, it’s a strong euro as the eurozone continues to deflate.
Bundesbank Says Germany Continued Recovery in Third Quarter
Like the US, gdp stopped falling while increased productivity keeps employment from increasing.
Merkel in stand-off over tax cuts
They need to cut taxes, increase spending, and at the same time cut the deficit.
Haven’t figured out how to do that yet.
Germany Mulls Fund to Ease Labor, Health Budget
France’s Woerth May Roll Back Tax Deductions
They haven’t figured out how to do it either.
German Bonds Advance as Stock Declines Stoke Demand for Safety
Stock declines reduce chances of rate hikes
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October 20th, 2009 at 11:15 am
I really enjoy your site and am learning a lot. Thanks very much for it. I did a mainstream economics degree 20 years ago. Sigh.
Anyway, here’s an advisor to Sarkozy, French President, who expects US deficits to touch off inflation:
Euro at $1.50 “a disasterâ€: France
Emmanuel Jarry
07:07 EST Tuesday, Oct 20, 2009
PARIS — The euro at a level of $1.50 (U.S.) is a disaster for European industry and the economy and results from the U.S. policy aimed at inflating away its debt, said Henri Guaino, a top adviser to French President Nicolas Sarkozy.
He said at some point the euro’s strength against the U.S. currency would become unbearable and Europe would have to react, most likely by printing euros that would also lead to inflation.
The euro was traded at $1.4995 at one stage on Tuesday, just shy of the $1.50 level which has not been seen since August 2008 and which is psychologically important for financial markets.
The single currency has strengthened around 7 per cent against the U.S. dollar since the beginning of this year.
“A euro at $1.50 is a disaster for European industry and the economy,†Mr. Guaino, the president’s speech writer, told reporters on the sidelines of a conference of Mr. Sarkozy’s ruling UMP party.
The head of European planemaker Airbus, Louis Gallois, has repeatedly complained the euro’s strength is hurting business.
Last year he described the weakness of the dollar as a “Sword of Damocles†hanging over Europe’s largest aerospace group, particularly its civil airline subsidiary Airbus.
Mr. Guaino said the United States was “flooding the world with liquidity†and worried this would provoke an inflationary cycle.
“When the Americans create dollars and the dollar falls, there is a point at which you cannot take it any more,†he said.
“What do you do? Either you create liquidity to bring the euro down, or you let the euro rise, rise, rise and then you are completely suffocated.â€
French politicians have traditionally led complaints in Europe about the euro’s strength but some countries face more difficulties than others.
The German exporters’ association, BGA, said earlier on Tuesday that trade prospects would brighten in the coming months despite the likelihood of a further rise in the euro.
European Central Bank President Jean-Claude Trichet on Monday said excessive volatility in currency markets was bad for the economy and repeated his attachment to comments from U.S. officials supporting a strong dollar.
Mr. Guaino said he feared a round of inflation.
“Historically, we have only ever got out of such situations with inflation. We can also get out with deflation, but it’s much more painful politically, socially,†Mr. Guaino said.
But “if we lose control of inflation and there is hyperinflation, it’s a catastrophe for everyone,†he added.
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October 20th, 2009 at 3:40 pm
feel bad for most of the people who have to live there, thanks
glad you like the website!
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