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EU PMI Up but Economy Still Fragile

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The Germans will be getting out the beer and drinking a double dose of the amber nectar not only because MuttiMerkel as she is known (otherwise known as ‘Mother’ Angela Merkel) was reelected on Sunday 22nd September, but also because new reports issued today show that the Eurozone is doing better than expected. Let’s just hope that it’s not going to be the Oktoberfest for the European Union this time round, they could well do without having more beer corpses lying on the ground. The question is whether or not Angela Merkel can actually get Germany back on its feet and at the same time drag the rest of the EU with it. If that does happen, then Mother Merkel may be asking the rest of the members of the EU to buy the next round of drinks, so they had better get ready for some serious drinking bouts.

Mutti Merkel and the EU


Mutti Merkel and the EU

Purchasing Mangers’ Index

Businesses are doing better today according to new surveys released today that show that there haven’t been as many orders as there are today for over two years in the EU. There is growth showing through in Germany and in France and that means that the EU’s two largest economies are stabilizing, albeit by little.  Germany’s economy picked up at a faster rate of growth than in August and France increased its economic growth for the first time for just over one and a half years.

Last month the Eurozone had a Composite Purchasing Managers’ Index of 51.5. Anything that is over 50 will indicate growth. This month the Composite Purchasing Managers’ Index stands at 52.1 and that is the highest level that it has been at since 2011.

In the services sector, the Eurozone has a Purchasing Managers’ Index that stands at 52.1 this month and this is a vast increase on August 2013, when it amounted to 50.7.

Fragility and Infancy for the EU

Some believe that this is at last the sign of better times to come. However, the Eurozone is far from out of the crisis. The EU is still fragile and it needs to improve the considerably high levels of unemployment. The European Central Bank President Mario Draghi stated on September 16th 2013 the self-same thing and that it was necessary to keep interest rates low in the Eurozone still to try to combat those two points. The recovery he stated was only “in its infancy”, which is the least that can be said. Draghi went on to comment about the possibility of inflation and interest rates in the EU: “Given the overall subdued outlook for inflation extending into the medium term, the ECB's Governing Council expects the key ECB interest rates to remain at present or lower levels for an extended period of time”.

Unemployment

Europeans might well have the impression that their leaders are prematurely celebrating and back-slapping each other over the economic recovery that is supposedly taking place, but the Greeks still have 27.6% unemployment and the Spanish 26.3%. The Euro area has 12.1% unemployment across the board, but we should remember that there is no government and no state that will admit that the figures are a lot higher than the general public is being led to believe.

For example, the British invented their special zero-hour contracts whereby the workers get no fixed minimum number of hours to work in any given day or week. They can be called in for as little as the employer likes and still get paid the pittance that they have been accustomed to. That way, with zero-hour contracts it’s the best of both worlds. The employer gets all the benefits of having workers on tap just when and where he wants them. Secondly, the government gets to remove those people from the unemployed list and bring the figures down. A contract (even if it’s a zero-hour one) means goodbye state benefits for the unemployed (sorry, job seekers; think positive, we are told). Isn’t that always the way? When the stuff hits the fan, we get rebranded and the marketing guys get paid millions to come up with a new name. We are no longer ‘unemployed’ we are ‘job seekers’. So positive, it certainly does have the result of getting people into job, I’m sure.

Eurostat has recently also released figures stating that the balance of trade of the Eurozone countries showed a surplus of 18 billion euros in July 2013. For all of the European Union that surplus stood at 10 billion. The Eurozone has increased by a third on the 12-billion-euro figure for July 2012. The surplus for the entire 28-state European Union stood at only 1, 300 million in July 2012.

The Eurozone debt crisis might have been the bane of the lives of every single European over the past few years, but, it looks as if at least the Germans believe either that Angela Merkel has been doing the right thing steering the country through some tough times, or otherwise perhaps she was the best last resort and nobody was any better. You choose. It’s still no time to celebrate and any beer drinking that gets done should be to drown the sorrows of the Greeks and the Spanish; caught up in the austerity that has been dished out to them; they’re the bad siblings of the European Union.

But is it any wonder that the Germans are actually in favor of the bail-out program concocted by the troika (EU, ECB and IMF)?  The European Stability Mechanism gets less money from Germans (per capita) than other nations in the EU today. Germany provides 27% of the euro fund used to provide bailouts in the future. That is the largest percentage by any other EU member. However, it works out to less per capita than 4 other countries (Luxembourg, theNetherlands and Ireland as well as Finland) that all come in ahead of Germany. The German taxpayer makes a contribution that stands at $358.46 per person at the present time. Luxembourg pays more than anyone at a rate of$503.81 per person. Admittedly Luxembourg thrives on its banking system and there are more banks there than hot dinners that get served, so they will be first in line for the money. But, Germany has the biggest economy and the largest population in the EU. Why should Finland pay more than the Germans? The European Stability Mechanism stands at €48 billion today and that is expected to almost double, reaching €80 billion by the middle of 2014.

Some might argue that the Germans use the fund less than anyone else, so why should they pay more. Yes, there are countries in the EU that have treated their banks like casinos and have gambled far too much on their cards coming up trumps. But, why shouldn’t Germany pay more than it does today or at least the same as others? That’s the principle of the Union, isn’t it? Joining forces and putting money together rather than opting out of this and that.

Merkel had better watch out, otherwise Germany will be following in the footsteps of the anti-European British.

Then where would the EU be?

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