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Wednesday, August 14, 2013

It's all Greek to you

It's all Greek to you
Be "Greek for a Day." It sounds simple enough, especially with the 50th annual Greek Fest in Rochester just around the corner. Being Greek may be as much a state of mind as it is an ethnicity, according to the festival organizers. The three-day ...

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Eurozone exits recession: the view from the top ... and bottom

Our correspondents report on business life in Germany, France, Italy, Greece and Ireland

The view from the top of the eurozone


For one of the 340,000 small- and medium-sized businesses that make up Germany's renowned Mittelstand economy, Wednesday's figures proved the wisdom of sticking doggedly to long-term goals. Phoenix Contact, an electronics manufacturer based in Blomberg in central Germany, decided not to take the axe to its operations in southern Europe when the eurozone tipped into crisis.

"In Europe last year, growth was flat," said Frank Stührenberg, vice-president of global sales at Phoenix Contact. "And in southern Europe, we were seeing minus growth." Yet rather than desert Europe completely for its more profitable American or Asian markets, the firm kept its workforce and waited for recovery.

"We didn't take our people out of Spain for example, we even put more investment in. And that's paying out returns now," he said.

And as Wednesday's figures show Europe's crisis economies slowly picking up, the Mittelstand economy is set to reap the benefits. Steady increases in investment in energy and transport infrastructure in southern Europe have already bolstered Phoenix Contact in Italy and Spain this year, where the firm is finally seeing growth after years of losses, said Stührenberg.

"We're benefiting from that as a subcontractor," he said, "everybody in Germany is profiting a bit now from this."

Mittelstand companies like Stührenberg's employer have not been complacent, and have used the dead time waiting for European recovery to scan the horizon for the next big innovations. For Phoenix Contact this means focusing on Germany's future as a leading producer of renewable energy.

Now seeing annual growth of around 4.5%, the company – which supports a global workforce of 12,800 – is, like the rest of the German economy, "not about to sit back and relax," said Stührenberg.


News that the eurozone's second largest economy had exited recession came as an unexpected fillip for France's socialist government, which has based its 2014 budget on 0.2% annual growth. Official data showed that the economy grew by 0.5% in the second quarter. The French finance minister, Pierre Moscovici, said: "The figure, higher than available forecasts, confirms that the French economy has come out of recession, which was already hinted at in recent surveys and figures for industrial production, consumption and foreign trade, and amplifies the encouraging signs of recovery."

The manufacturing sector was particularly dynamic, showing 2% growth in the second quarter, with production in the automobile and aeronautic industries leaping by 8.2% in the second quarter.

The view from the bottom of the eurozone


Like many Greeks, Kostas Xexakis was left bewildered by the news that the eurozone recession is officially over. For the 62-year-old framer, working out of a two-room atelier in Athens' Kolonaki district, the downturn feels anything but over and he counts himself lucky: he still has a job and a few customers to boot.

"In no way could you possibly say the recession has ended," he said. "Everyone I know is squeezed and with unemployment at more than 27% I don't see things getting better anytime soon." The Green economy contracted by 4.6% on an annualised basis in the second quarter of 2013 – the 20th consecutive quarter of decline.

Across Athens tens of thousands of family-owned businesses and shops – once the lifeblood of the Greek economy – have been forced to close, their shuttered exteriors one of the most visible signs of the collateral damage wrought by the nation's worst crisis in modern times.

In upmarket Kolonaki, Xexakis does not have that problem. But work has dropped dramatically, and like all Greek businessmen he has been hard hit by reduced earnings, consumer prices that have remained stubbornly high, and a cascade of "emergency" taxes enforced in a bid to increase revenue.

Echoing a widely held view, Xexakis believes things will only begin to improve when international creditors propping up the economy decide to ease off on the austerity that has plunged Greece into ever deeper recession. "Our only hope, unfortunately, lies with Germany deciding to give us a break because, clearly, austerity isn't working," he insisted.


In the heart of Ireland's traditional folk music scene, in county Clare on the west coast, there are signs of a recovery in the country's struggling services sector. Donal Minihane, owner of the Hotel Doolin, has seen an upturn in European visitors for the first time in years. "We saw people coming to us from all over Europe and the UK and even the United States. But there were a huge amount of European visitors for the first time in many years."

Situated at the edge of Doolin village, the hotel has enjoyed a spike in tourist numbers this year with room rates now up by 15% and an increase in staff to 80. Having staged three festivals at the hotel this year – for lovers of literature, beer and folk music – Minihane is optimistic that business is starting to take off and that perhaps the worst of the recession in Ireland is over.

"Next year is looking very good, especially the weddings market. I have no vacancies in 2014 from May to October."


The eurozone's exit from recession comes amid cautious predictions in its third-largest economy that an eight-quarter long recession there may soon be over, too. Enrico Letta's government is predicting a return to modest growth by the end of the year. That hope was boosted by news the economy contracted less than expected in the second quarter, by 0.2%.

"For the time being we still have some domestic headwinds which are weighing on growth," said Marco Valil, chief eurozone economist for UniCredit in Milan. "But we think that in the course of the year we will see Italy exiting the recession."

He said the drivers of this modest recovery would be an easing of fiscal consolidation, low inflation and improving global growth due to improvements in Italy's top two trading partners – Germany and France.

For the moment, however, the spumante will be kept on ice. Italy's longest recession since the second world war has seen unemployment rise to over 12%, with youth joblessness at over 39%. © 2013 Guardian News and Media Limited or its affiliated companies. All rights reserved. | Use of this content is subject to our Terms & Conditions | More Feeds


Bad economic news for Europe is good news for Merkel and Cameron

These figures are proof not of a European recovery, but of the right's ability to exploit grim times in a way that eludes the left

All politicians and observers of politics agree on one thing. A reputation for economic competence matters. In modern politics, economic competence is the sine qua non. Without such a reputation political credibility is lost, and difficult to regain – and election victory is out of reach. With such a reputation, it is possible to pursue other goals and sometimes to receive the benefit of the doubt, retaining trust and votes even when things go wrong.

In Britain David Cameron and George Osborne gained a tremendous boost this week when a Guardian-ICM poll showed their economic competence reputation had soared by 12 points since June. Even if the increase only takes the proportion of the electorate saying that Cameron and Osborne are better economic mangers than Ed Miliband and Ed Balls (whose numbers also increased a little in the same poll) to a relatively modest 40%, it still remains a hefty advantage that shapes the political mood.

Admittedly, the polls' broader picture for the Tories is not so clear cut, so there is an element of self-deception in the renewed Tory optimism. Labour is still doing better overall than the Conservatives in voting surveys, and the pro-Labour advantage of the electoral system means the Tories are still eight to 10 points short of the kind of ratings that would translate into a working majority in 2015. But that economic competence rating is priceless all the same. To adapt Mr Micawber, the Tories know they have a good reputation and are therefore happy. Labour know they have a bad reputation and are therefore miserable.

Wednesday's economic figures from the eurozone will have something of the same impact on politics across the European Union as a recent succession of modest improvements in UK economic indicators (the fall in unemployment being the latest) is having for the governing parties here. To be sure, eurozone GDP in the second quarter of 2013 grew by only a relatively footling 0.3%, concealing all sorts of continuing crises and sufferings behind strong performances from Germany and France. But after six quarters without growth, it can be presented as a turn in the tide. And it comes at a perfect moment for Angela Merkel, six weeks away from a crucial German general election.

Yet you do not have to look at the economic indicators for long, and compare them with the mood of the political parties across Europe, to see that something doesn't really add up in all this. Call it, if you like, the narcissism of small economic differences.

No country in Europe is really enjoying a period of economic prosperity worthy of the name. Unemployment in the UK may be down by 4,000 in the second quarter – but it is still more than 2.5 million, which at just under 8% is very nearly the highest that it has been in 20 years.

In the eurozone the unemployment rate is much higher than here, at 11.4% in June 2013, with Greece and Spain both posting jobless rates of more than 26%. Neither in the UK nor in the eurozone is the level of growth sufficient to have a significant impact on jobs. The result is that most Europeans, and most Britons, are continuing to face a squeeze on their real incomes. Falling real wages – down 5.5% in value in the UK since 2010 – mean that Europeans will have relatively less money to pay their bills – not just in 2013, but almost certainly throughout 2014.

All this adds up to a disjunction that needs explaining. On the one hand, the economic performance and prospects of Europe are fragile. As in the UK, recovery is modest, marginal and contingent. There is no evidence yet of a sustained upward trend of recovery, let alone of a return to the levels of annual postwar economic growth to which we and our parents all became accustomed for most of the past half-century. Our region – and in this sense we are just as much a part of it as though we had been in the eurozone from day one – remains in very much the same economic crisis that has gripped us since the financial crash of 2008.

On the other hand, Cameron and Osborne are heading for the beach buoyed by genuinely strong economic competence ratings, while Merkel is serenely on course to be rewarded with a hugely important electoral victory next month. This means two things – and possibly both at the same time.

First, in grim economic conditions and with public opinion persuaded that deficit cuts take priority over protecting the public sector, even a marginal piece of "good news" wins a disproportionate political reward for the centre-right. But second, these figures are flimsy by any standards. In reality, this is neither an economic recovery, nor is it proof of economic competence. Such claims are there to be taken apart by skilful oppositions who know what they want.

Economic competence, as Andrew Gamble wrote in an important recent essay, is not fixed or tangible. There is rightwing competence and leftwing competence, and some other shades in between. Competence is made up of perceptions, including those of the media, as well as economic indicators. These perceptions are not fixed, either. They adapt in all kinds of different circumstances. Competence is more easily displayed in good times than bad. And governments have to navigate these in an international as well as a national context. Cameron and Osborne have thus been able to throw the blame for Britain's troubles on the eurozone, while Merkel can blame those of Germany on the Greeks. This makes voters thankful for small mercies.

But what can a centre-left opposition offer instead? This is the question that Miliband tried to answer by focusing on the "cost of living crisis" – before the egg hit him. It is the same question that Germany's SPD, with its programme of higher taxes, has just six weeks to answer, and the one that also faces all the centre-left parties in Europe in their own way. In the end, the question is the moral one that Gamble poses. What kind of society and what kind of economy does the centre-left value, and what are its policies for achieving them in current circumstances?

These are difficult questions, not the easy ones that some pretend. The answers do not lie in the past. But until there are answers that respond both to the current crisis and to the lessons of past failures – the current evidence suggests that both economic competence and the political rewards which flow from that reputation will remain an elusive dream for the European left. © 2013 Guardian News and Media Limited or its affiliated companies. All rights reserved. | Use of this content is subject to our Terms & Conditions | More Feeds


Obama to Greece: You know, you guys should really try growing your economy

Obama to Greece: You know, you guys should really try growing your economy
Hot Air
The two leaders stressed the need for Greece to go beyond the tough austerity program that it adopted as a condition for a $315 billion bailout from the International Monetary Fund and the European Union. “In dealing with the challenges that Greece ...


Can solar energy help save Greece?

Can solar energy help save Greece?
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The Tragedy of Greek Austerity Continues?

The Tragedy of Greek Austerity Continues…
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Eurozone climbs away from the precipice, but crisis hasn't gone away

An interest rate rise from the ECB or even the tapering of the Federal Reserve's quantitative easing programme could stir up a renewed crisis

Olli Rehn, Brussels's economy commissioner, turned to English mountaineer Edward Whymper – the first man to climb the Matterhorn – for an adage to sum up the challenge still facing the eurozone: "Do nothing in haste; look well to each step, and from the beginning think what may be the end."

It hardly augurs well, then, that on the 1865 expedition Whymper was describing, one of his companions fell to his death on the descent from the Matterhorn's summit, dragging three others down with him. Whymper himself only survived because the rope broke.

While the eurozone has finally clambered out of its 18-month recession, led by a stronger-than-expected performance from the German and French economies, the danger for the 17-member bloc is far from over.

Few details are available about the breakdown of growth in these early estimates; but the German statistics office said domestic demand – and particularly investment – was largely responsible for the country's healthy-looking 0.7% growth in the second quarter. Unemployment in Europe's largest economy is close to a 20-year low.

That will have come as a welcome boost to Angela Merkel, who faces a tough re-election battle in September. But since the eurozone's leading economy is a major market for many of its crisis-hit southern neighbours, it should be good news for everyone else, too.

Portugal, where there have been protests over the latest round of austerity measures in recent weeks, also appears to have staged an impressive recovery, with GDP jumping by 1.1% in the second quarter of the year – though analysts were sceptical about whether that can represent the true strength of the embattled economy, where unemployment is running at more than 16%. Economists at Barclays predicted on Wednesday that Portugal will need fresh debt restructuring before it can emerge from its long-running crisis.

Wednesday's data showed that bailed-out Greece, Cyprus and Ireland are still in recession, as are Spain and Italy, the two countries deemed most at risk of needing future assistance from their fellow member-states.

The question now will be whether these data mark the start of a sustained, consumption-led recovery in Germany and France, which will ripple out to their eurozone neighbours; or a return to business as usual, with the strongest countries growing at a healthy clip, and the eurozone's embattled "peripheral" members trapped in a downturn.

While Germany's prospects look strong, it can't kickstart a recovery across 17 countries all on its own. France is battling high unemployment, and rock bottom corporate profitability means firms are unlikely to go on a hiring spree any time soon – which in turn makes a consumer-led recovery look highly unlikely. Italy is unlikely to achieve much better than 1% annual growth, which is hardly likely to suck in a flood of imports from Ireland or Greece.

As Dario Perkins, of consultancy Lombard Street Research, puts it: "Without France rediscovering its 'va-va-voom' and with the rest of the Mediterranean countries struggling with too much debt, Germany is still the euro area's only bright spot."

Even if the recovery did start to gather pace beyond the industrial heartlands of Germany, financial markets would rapidly start speculating about when the hawks at the European Central Bank would agitate for a rate rise. This would be potentially devastating for the weaker countries in the pack.

Meanwhile, though financial markets have been relatively calm of late, it wouldn't take much to stir up a renewed crisis – and the trigger could even come from the other side of the Atlantic. The International Monetary Fund warned recently that the planned "tapering" of the US Federal Reserve's massive quantitative easing programme could present a serious threat to the eurozone, if it drives up bond yields worldwide, making it more costly for governments in debt-burdened Europe to borrow.

As growth returns, at least to some, perhaps this summer will mark the beginning of the end for the eurozone crisis, but a sustainable economic model for the 17-member club remains a distant prospect. Rehn may yet prove to have been right to summon up the image of a team of doughty mountaineers, roped together, picking their way along the perilous path back to safer ground. © 2013 Guardian News and Media Limited or its affiliated companies. All rights reserved. | Use of this content is subject to our Terms & Conditions | More Feeds


Eurozone hauled out of 18-month recession by Germany and France

Economic commissioner Ollie Rehn warns crisis far from over as eurozone reports 0.3% second quarter growth

Brussels warned against complacency on Wednesday after the troubled eurozone finally returned to growth after 18 months stuck in a double-dip recession.

Olli Rehn, Europe's economic commissioner, welcomed news that the 17 nations that use the single currency had expanded collectively by 0.3% in the three months to June – the first pick- up in activity since the autumn of 2011.

But Rehn said celebrations should be put on hold given Europe's jobs crisis and the wide disparity in economic performance across the eurozone.

"Yes, this slightly more positive data is welcome – but there is no room for any complacency whatsoever", Rehn said. "I hope there will be no premature, self-congratulatory statements suggesting the crisis is over. For we all know that there are still substantial obstacles to overcome: the growth figures remain low and the tentative signs of growth are still fragile."

Rehn said the average number for the bloc hid substantial differences between states, with Germany's positive performance outstripping that of Spain and Italy, who remain in recession. He added that some member states still have unacceptably high unemployment rates, with economic reforms still in their infancy, leaving the region with a "very long way to go."

"A sustained recovery is now within reach, but only if we persevere on all fronts of our crisis response: keep up the pace of economic reform, regain control over our debt, both public and private, and build the pillars of a genuine economic and monetary union," he said.

Figures released by Eurostat, the EU's statistical agency, showed that a stronger than expected performance by the single currency's two biggest economies - Germany and France - helped haul the eurozone out of recession. Financial markets had been braced for a rise in eurozone GDP following the increase in industrial production reported on Tuesday but were surprised by news that Germany grew by 0.7% in the second quarter and that France grew by 0.5%.

Along with the rest of the world, the eurozone fell into a deep slump in the winter of 2008-09 before recovering in 2010 and early 2011. But a second leg of the downturn then commenced as a result of the eurozone's sovereign debt crisis, which hit confidence, led to a mothballing of investment and resulted in the imposition of hardline austerity programmes.

Despite the growth in the second quarter, the European Commission still expects the eurozone to suffer a second full calendar year of falling output in 2013, with growth resuming in 2014.

Eurostat's figures showed that Italy and Spain - the single currency's third and fourth biggest economies - both remained in recession in the second quarter of 2013. Spain's economy shrank by 0.1% percent on the quarter, while Italy posted a 0.2% decline.

The Dutch economy also contracted by 0.2% but Portugal – one of the three countries that required a financial bailout – recorded the fastest growth of any eurozone country with 1.1% quarterly growth.

Torben Kaaber, CEO of Saxo Capital Markets, said: "So the Eurozone is finally out of recession, whilst this wasn't entirely unexpected, the strength of the growth in the second quarter 0.3% was. The growth was primarily driven by the German economy, which grew 0.7% on the back of increase in domestic private and public consumption. This will provide a welcome boost to Chancellor Merkel in the run up to the German elections, however critics will point to the continuing underperformance of southern Europe, and to Greece and Italy in particular and argue that a few select countries cannot continue to hold up the common market. As the value of the Euro climbs today, the jubilation will be short lived, as the consistent problem of the southern neighbours will weigh on the minds of investors."

Dario Perkins of Lombard Street Research said Germany would continue to be crucial to the eurozone's recovery, adding that there were signs of consumer spending and investment picking up. "But the French contribution to this recovery is likely to sag thanks to its labour market, which is still in a horrible state. Unemployment has surged over the past two years and the demand for labour has collapsed, with the level of job vacancies at multi-decade lows. Without France rediscovering its 'va-va-voom' and with the rest of the Mediterranean countries struggling with too much debt, Germany is still the euro area's only bright spot."

David Brown, of New View Economics said: "It is a tale of two very different economies. Germany is doing all the hard work in the vanguard of strong recovery as its 0.7% second-quarter GDP expansion showed. On the other side of the equation, the troubled eurozone economies are still mired down in the mud of deep recession risk." © 2013 Guardian News and Media Limited or its affiliated companies. All rights reserved. | Use of this content is subject to our Terms & Conditions | More Feeds


Power gradually returning to Santorini

The Greek island of Santorini was gradually regaining access to electricity after a 24-hour blackout, its mayor said on Wednesday.


Euro zone looks for positive growth but Greece isn't so lucky

Voice of America

Euro zone looks for positive growth but Greece isn't so lucky
Globe and Mail
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Germany, France haul euro zone out of recession

Germany, France haul euro zone out of recession
By Martin Santa. BRUSSELS | Wed Aug 14, 2013 9:04am EDT. BRUSSELS (Reuters) - The economies of Germany and France grew faster than expected in the second quarter, bettering a widely heralded expansion in the United States and pulling the euro ...
Euro Zone Returns to GrowthWall Street Journal
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