With calls for a European renaissance and a general belief in stability through the German elections, it is perhaps worth a reminder of the structural problems that the supposedly bottoming union is facing. Nowhere is that single monetary policy-facing dilemma more evident than in the massive economic growth divergences across the EU nations and the current huge gap in unemployment rates from Greece to Austria and beyond. It seems the world is waiting for Merkel's re-election and fold on austerity (seemingly confirmed by the leaked BuBa report recently [13]) but EU stress test transparency may remove the symbiotic safety net of bank bond buying sooner than many believe. With monetary policy somewhat euthanized across the EU, what's left for the fragmented transmission channels but more promises as pension funds and banks are stuffed to the gills with their own domestic bonds [14].
GDP Change across EU Nations from 2007...
[15]
Germany is the only major euro-area economy to have recovered lost output since the 2008 recession and Germany, Belgium and Slovakia were the only three to grow in the first quarter. Cyprus’s economy shrank 1.3 percent in the first quarter during bailout negotiations, while the Greek economy shrank at an annual rate of 4.6 percent in the three months through June. Greece’s economy has contracted about 25 percent since 2008.
Unemployment Rates across EU Nations
[16]
The recession has driven up the number of unemployed in the euro area by 1.1 million in the past year to 19.3 million. Youth unemployment in Greece and Spain is at records of 58.7 percent and 56.1 percent, respectively, compared with 7.5 percent in Germany. That may further lower the long-term trend growth rate as a generation is left without the skills needed to participate in the workforce.
Source: Bloomberg Briefs