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This
is what a world economy “in reoovery” looks like!
Housing Lows and Hiring Laws Feed a Disaster
No Hope
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Coffers
draining, Egypt knocks on world's door for loans, aid to tune of $30
billion
During
a meeting in a Black Sea resort city, Egypt's president and members
of his government turned to Russian President Vladimir Putin and
asked for a sizable loan, according to a Putin aide.
Egypt's
Mohammed Morsi appealed to Moscow and Cairo's past ties, recalling
how the former Soviet Union stepped in to finance the building of the
Aswan High Dam in the 1950s after the United States abruptly withdrew
from the project, according to Russian media.
Still,
the Russians' response seemed rather equivocal: We'll talk later.
Egypt
has been knocking on doors around the region seeking billions of
dollars in loans, bond purchases and grants, trying to fill rapidly
draining coffers so it can keep power stations running and bakeries
churning out cheap bread for the country's millions of poor.
The
drive appears to have accelerated ahead of the summer, when the
country's fragile electricity network often breaks down under
increased energy use and when officials have predicted a drop in
wheat supplies....
Greece
starts firing civil servants for first time in a century
The
Greek government began its first mass-firing of public-sector workers
in more than 100 years this week, part of an effort to lay off
180,000 by 2015 under Europe-imposed austerity.
Pushed
by its European creditors amid its crippling economic crisis, Greece
began this week to do something it hasn't done in more than 100
years: fire public-sector workers en masse.
Following
weeks of tough negotiations with its lenders – the "troika"
of the International Monetary Fund, the European Union, and the
European Central Bank – the Greek government started laying off
public-sector workers in an effort to implement the austerity that
the troika has demanded. The first two civil servants were let go on
Wednesday under a new law that speeds up the process – one, a
policeman, for stealing debit cards, and the other for 110 days of
unexcused absence.
The
mass layoffs were announced last week in a televised address by the
Greek prime minister himself, Antonis Samaras. Despite the massive
unemployment in Greece, the goal of the government has become the
laying off of 180,000 civil servants by 2015. “This is not a human
sacrifice," said Prime Minister Samaras. “It’s an upgrading
of the public sector and it’s one demand of Greek society.”....
In France, more than 3.2 million unemployed, a record
A
record 3.2 million persons in France were unemployed in March with an
additional 36,900 out of work in the month, the government said.
Radio
France Internationale reported the number of unemployed rose for the
23rd consecutive month in March.
An
official unemployment rate was last posted at the end of 2012. At
that point, the unemployment rate was 10.2 percent, below the 1997
peak of 10.8 percent.
Every
French minister should "engage in the battle for jobs,"
Socialist President Francois Hollande said while on a visit to China,
where he is pursuing business deals for French companies.
Fallen
Italian nobles turn castles into B&Bs
Italian
princes and countesses, struggling under the European economic
crisis, are converting their dream-like castles into bed and
breakfasts and luxury vacation rentals. The wealth of the aristocracy
has shrunk across centuries and heirs, unable to live-off what
remains of family fortunes and assets, have become entrepreneurs.
While
noble titles haven't held legal value since Italy's monarchy was
abolished in 1946, a loophole in the Republic's 1947 constitution
allowed them to be retained as part of a family name. The titles
still carry cachet, however, when it comes to attracting tourists to
rent out the spare tower....
Spain
Is Beyond Doomed: The 2 Scariest Unemployment Charts Ever
This
is what a permanent underclass looks like.
26
April, 2013
Spain
is in a great depression, and it is one of the most terrifying things
I have ever seen.
Five
years after its housing boom turned to bust, Spanish unemployment hit
a record high of 27.2
percent in
the first quarter of 2013. It's almost too horrible to comprehend,
but 19.5 percent of
the total workforce has
not had a job in the past six months; 15.3 percent have not in the
past year; and 9.2 percent have not in the past two years. You can
see this 1930s-style catastrophe in the chart below from the National
Statistics Institute.
(Note:
The "already found work" category refers to people who did
not have a job at the time of the survey, but did have a job lined
up).
Here's
the story of Spanish unemployment in three acts. During the boom,
joblessness was relatively high due to persistent
structural problems.
Then it shot up fast and faster as Spain's building bust and then
Lehmangeddon hit in 2008. But it has kept climbing up since the panic
abated, albeit at a less catastrophic pace, due to the toxic
combination of too tight money and budgets.
In
other words, austerity hasn't been the path to prosperity. It's been
the path to perma-slump.
But
the real story of the Spanish depression has been the story of
theindignados:
the mostly young, long-term unemployed. It's a bit hard to see just
how dramatic it's been in the chart above, so I converted it to a
line chart below. Almost all of the increase in unemployment since
2010 has been due to the increase in long-term unemployment of two
years or more.
In
other words, unemployment is a trap people fall into, but can't fall
out of. Indeed, the rate of new unemployment has
stabilized at a terrible, but not quite-as-terrible, level, as you
can see with the flat blue, red, and green lines. But the steadily
rising purple line shows us that the rate of job-finding for the
jobless has collapsed.
That is what a permanent underclass looks like.
That is what a permanent underclass looks like.
Housing Lows and Hiring Laws Feed a Disaster
Why
has Spain's jobs depression been so great? After all, its GDP is
"only" 4.1
percent below its
2007 level, compared to 5.8 percent below for Portugal, 7 percent
below for Italy, and 20 percent below for Greece. But despite this
better (negative) growth, unemployment is higher in Spain than the
others. In other words, Spanish unemployment isn't just about
inadequate demand. Part of it is structural.
Spain's
labor market problems fall into two big buckets: too much regulation,
and not enough education. It's almost impossible for companies to get
rid of older workers, which creates a horribly bifurcated labor
market. There are permanent workers who can't be fired, and temporary
ones who can -- and are. Indeed, as Clive
Crook points
out, about a third of Spain's workforce are temporary workers who
enjoy few protections and fewer opportunities. Companies go through
these younger workers without bothering to invest much in their human
capital, because why would they? These temporary workers will be let
go at the first sign of economic trouble. Young people get stuck in a
never-ending cycle of under-and-unemployment since firms are always
hesitant to hire permanent workers who will always be on their books.
But
it gets worse. The housing bust hasn't just cast a shadow over
household and bank balance sheets; it's cast one over young people's
educations too. At its peak, building made up a whopping 19 percent
of Spain's economy, which, asTobias
Buck of
the Financial
Times points
out, lured many young men into dropping out of school for well-paying
construction gigs. But now that building has gone into hibernation,
all of those young men are left with no work and no education to fall
back on. And, again, even if they can find temporary jobs, it's not
as if the companies will spend money to develop their skills.
No Hope
It's
hard to see anything resembling a case for optimism. Even though the
Spanish government's borrowing costs have fallen since the ECB
introduced its backstop, Spanish
business borrowing costs have not.
Small and medium-sized enterprises can't get capital except on
prohibitively expensive terms. As Ryan
Avent of The
Economist points
out, this broken monetary transmission mechanism means austerity is
hurting Spain more than it otherwise would -- which is clear enough
in the data. Despite its cuts, Spain's deficit actually worsened from
9.4 percent of GDP in 2011 to 10.6
percent of GDP in 2012,
because its economy fell more than its borrowing costs. The only hint
of good news here is Spain just announced it will take two
more years to hit its deficit target.
But less (self-defeating) austerity isn't enough. Spain needs
stimulus. And it might need bailouts too (or, if Cyprus does turn
out to be a "template",
bail-ins). Indeed, The
Economist calculates
Spanish housing prices are stillovervalued
by 20 percent or
so -- which will be even more bad news for its banks.
I
wasn't exaggerating when I said this is one of the most terrifying
things I have ever seen. Spain needs shock therapy for its labor
markets, but that's an impossible political sell when more than a
quarter of the population is unemployed. In an ideal world, Spain
would pair major reforms with major stimulus; in the real world, it
will drag its feet on reforms, try to cut its deficit, and fall
deeper into depression.
Let
me leave you with this, well, depressing question: Assuming
everything goes perfectly, how long will it be till Spanish
unemployment gets below 20 percent?
Don't
answer that.
Spain
revises down its economic forecast
Spain's
government has revised down its forecast for the Spanish economy this
year, saying the level of contraction is likely to be worse than
previously predicted.
Madrid
now expects the economy to contract by 1.3% in 2013, compared with
its earlier estimate of -0.5%.
The
announcement came as the government presented its economic programme
for the next three years.
Spain's
unemployment rate hit 27.2% in the first three quarters of 2013.
This
was the highest level on record in the country. The government
expects the unemployment rate to remain at about this level this
year, before falling to 26.7% in 2014.....
Eurozone
crisis drying up credit to households: ECB
Bank
lending to private households in the euro area contracted again in
March as the region's long-running debt crisis continues to choke
demand for credit, data showed on Friday.
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Eurozone
bank loans to the private sector declined by 0.8 percent in March
compared with the same month in 2012 after already shrinking by the
same rate the previous month, the European Central Bank said in a
statement.
The
ECB has long argued that falling loans to the private sector reflects
weak demand for credit rather than tight lending conditions, given
the pessimistic view of eurozone growth prospects and heightened risk
aversion during the crisis.
The
ECB also published eurozone money supply data, which suggest that
growth in the money supply -- a key guide to future inflation --
slowed last month.
Growth
in the M3 indicator, which measures the amount of money in
circulation, grew by 2.6 percent in March, compared with 3.1 percent
in February.
The
ECB regards the M3 figure as a key guide to inflation pressures and
uses it to set interest rates accordingly.
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