France Jobseekers Hit Another All-Time Record
28 June, 2013
Despite the jump in French PMI (though still in contractionary region), the number of French Jobseekers rose once again (up 11.5% year-over-year) to a new all-time record. As the nation struggles with near Depression-era activity, it seems the green shoots that Draghi's jawboning once again provided today remain a long way off in real-world land.
Italy Seeks to Fight High Youth Unemployment
28 June, 2013
Italy's government unveiled a package of measures aimed at bringing down Italy's high youth unemployment, fulfilling one of the signature promises of the shaky government.
With the measures introduced on Wednesday, Prime Minister Enrico Letta hopes to persuade the European Union at a summit this week to grant Italy new tools that could help it boost growth and employment.
The stakes are high, with pressure building on Mr. Letta's young and fragile coalition to take bolder action, as Italy's economy continues to deteriorate and the cost of servicing Italy's enormous debt soars.
Mr. Letta's coalition, which includes his own center-left Democratic Party and Silvio Berlusconi's conservative People of Freedom party, is racing to push through critical reforms aimed at shaking up Italy's sclerotic economy, changes that Rome has for years tried and failed to pass. Mr. Letta must navigate conflicting demands from his coalition partners, with some political analysts predicting the government could fall by early next year.
In turn, Italy's economic weakness -- the current recession is the longest in decades -- is raising fresh concerns that it will struggle to service its 2 trillion euro ($2.6 trillion) debt pile.
Expectations that central banks could shut down the country's flood of liquidity has pushed up the extra premium demanded by investors to hold 10-year Italian debt instead of the euro zone's gold-plated standard, German bunds. That spread has widened by nearly a half-percentage point since early May, when Federal Reserve Chairman Ben Bernanke hinted the Fed could soon scale back its bond-buying program.
Wednesday's job measures, which are valued at a total of 1.5 billion euros, include training measures as well as incentives that would cut payroll taxes for companies that hire people age 18 to 29 on permanent, full-time contracts. Italian unemployment stands at a record 12%, with youth unemployment exceeding 40%, national statistics agency Istat says. The youth rate covers only those actively seeking work, not those in school.
The government expects the new measures to help 200,000 young people find jobs -- a small portion of the total jobless youth. The funds to cover the new measures would partially come from untapped EU funds.
The measures are included in a decree, which is immediately effective but needs parliamentary approval within 60 days.
Mr. Letta hopes the job measures will strengthen his hand at the EU summit starting Thursday in Brussels, including the possibility of finding fresh funds aimed at stimulating growth. The euro zone is split on whether to ease austerity measures that have weighed heavily on the Continent's south.
"These measures allow us to go to this EU summit with a stronger voice to turn this battle into a European battle," Mr. Letta said.
The government also froze a planned value-added tax increase of about 1 billion euros for just three months. The debate over the VAT has heightened tensions with Mr. Berlusconi, who has insisted on definitively shelving both the VAT increase as well as an unpopular property tax
Euro-Zone Lending Falls Further in May
Euro-zone credit conditions worsened in May, as lending to both households and businesses fell sharply, data from the European Central Bank showed Thursday
27 June, 2013
Loans to the private sector fell 1.1% in May, after falling 0.9% in April, the ECB said.
Lending to non-financial firms fell another 17 billion euros ($22.18 billion) in May, after registering a EUR17 billion decrease in the previous month, the data showed. Meanwhile, loans to households dropped EUR8 billion on the month, after a EUR1 billion increase in April.
It is clear that the euro-zone is suffering from a combination of limited supply and muted demand for credit, Howard Archer, chief European and U.K. economist for IHS Global Insight, said in a note.
"It is likely that banks believe the economic situation and outlook in many euro-zone countries continues to provide a risky backdrop in which to lend," he added, noting that euro-zone economic activity is still generally weak.
Growth of M3, the ECB's preferred measure of broad money supply, slowed to 2.9% on year in May from 3.2% in April, matching analysts' expectations.
On a three-month average from March to May, M3 growth was also 2.9%. The three month average remains below the ECB's " reference value" of 4.5%, which it considers to be consistent with the price-stability mandate.
New EU Plan Will Make Every Bank Account In Europe Vulnerable To Cyprus-Style Wealth Confiscation
By Michael Snyder, on June 27th, 2013
European Union finance ministers approved a plan Thursday for dealing with future bank bailouts, forcing bondholders and shareholders to take the hit for bank rescues ahead of taxpayers.
The new framework requires bondholders, shareholders and large depositors with over 100,000 euros to be first to suffer losses when banks fail. Depositors with less than 100,000 euros will be protected. Taxpayer funds would be used only as a last resort.
The European Union spent the equivalent of a third of its economic output on saving its banks between 2008 and 2011, using taxpayer cash but struggling to contain the crisis and - in the case of Ireland - almost bankrupting the country.
But a bailout of Cyprus in March that forced losses on depositors marked a harsher approach that can now, following Thursday's agreement, be replicated elsewhere.