Why does the ECB need to keep its rates higher than the Fed and the Bank of England?

Both the European Central Bank (the central bank of the Eurozone17) and the Bank of England have today decided to keep their interest rates (on rhe Euro and on the Pound) stable.

But whereas the 0.5% interest rate of the BoE has been stable since the bank decided to react to the effects of the 2008 economics recession (and so has the Fed, with a 0-0.25% rate), the ECB has already raised the Euro interest rate twice this year, from the 1% it had moved to in order to address the global recession.

The situations with Italy and Spain are being addressed by various measures that are beyond the scope of this post/analysis.

The issues are:

1) Why does the ECB insist with this anti-inflation obsession? It should have lowered its interest rate back towards 1% as a policy measure to ease the tension on Greece, Portugal and Ireland as well as Italy and Spain and the whole of the Eurozone. Especially since Eurostat data released on August 2 (2 days before) showed that in June 2011 compared with May 2011, the industrial producer price index remained stable in both the Eurozone and the EU. In May prices fell by 0.2% and 0.3% respectively.

In a June 2011 - June 2010 comparison, industrial producer prices gained 5.9% in the Eurozone and 6.9% in the EU, down from 6.2% and 7.1% respectively in the May 2011 - May 2010 comparison. The Eurozone figure had peaked at 6.8% in March 2011-March 2011 and April 2011-April 2010 comparisons. Thus it was in June 2011 900 basis points below the peak. Since producer prices are an indication of the inflation (consumer prices index) a few months down the line, one can appreciate that the high annual industrial producer prices were a cause for inflation concern down the line in the Eurozone. And coupled with the inflation obsession of the ECB, the Bundesbank and a few other circles in Europe and globally, one can see why the ECB raised its rates 2 times this year. See but not fully appreciate, because those hikes had significant effects on other key socio-economic parameters, in some states more than others, but in all.

2) Which brings one to the following issue:

Why does the ECB have to offer such a premium for the Euro interest rates compared to the Pound and the USD?

It was already a premium at 1%, compared to the Pound's 0.5% and the USD/Fed's 0-0.25%, ie +50 bps to +75 to +100 bps (basis points). Now it is at +100 bps vis-a-vis the Pound and +125 to 150 bps vis-a-vis the USD!!!!

What on Earth (or in the systemics of the EU - Eurozone economy) requires such a premium, other than a premium of inflation-obsession?

Is it the cost of the absence of genuine economic and political union that translates into a Eurozone economy that lacks key elements that the US and UK economies have? Eg movement of labour? And in general the sub-performance in the functioning of the Single Market? The absence of EU or Eurozone economic policy? Tha forces the ECB to use interest rates and a premium to keep the Euro in balance with the USD and the Pound?

Time to rethink global trade (and save the Euro & the US economy as well as Earth)?

Whereas more and more ("national") economies are becoming Services economies (ie with Services yielding 65-70% or even more of GDP) most of international trade is still in manufactured goods. So whereas "intellectual products" such as film, TV content, music, even porno (by the way, its main global "manufacturing" cluster is in California too, much like the Silicon Valley and Hollywood) and Services such as finance, telecoms, insurance, and of course tourism, provide valuable export revenue to some economies, the world superpowers of exports are driven by manufactured goods!

Be it "complex products", for consumer or business use, as is the purported German key to exporting success, or innovative tech products (America's niche) or low price - low quality manufactured goods (as is the case for China, at least for now, will it follow Japan's example and upgrade, gradually, into quality products?), manufactured goods are the bread and butter of trade. Portugal, Spain, Greece, Italy and others are being advised to adopt the German approach to manufacturing quality/complex goods as a way of solving their competitiveness and balance of payments issues!

Side Note: But, as I have asked in previous posts (see eg here), what would happen to the world market prices for complex goods if the PIIGS and other Eurozone members decide to follow Germany's example (thus increasing supply of such goods in the Eurozone, the EU and globally)?
So, manufactured goods of all origins, sizes, qualities, prices, etc are travelling around our planet everyday in the process of what we call global or world trade, the No. 1 world sport of our era, more crucial than football (aka soccer), basketball, even rugby or cricket! The one that makes or breaks economies as we are seeing in recent months (hence a "Rollerball" of sorts, if you recall the movie, especially the original, starring James Caan).

But does all this trade (and transport) "jazz" make sense? In addition to burdening the planet's environment?

Some would say that it is transport that has become too cheap in recent decades, thus allowing for "irrational" transport and trade to occur, in the name of Ricardo (David (see Wikipedia) not Ricky). But cheap transport is not necessarily the problem, is it, unless of course one believes that markets and the prices they set provide the best allocation of resources, but I am not a believer in that worldview. Are you?

So should there be a central planning body, global, that determines which manufactured products should have a "right" to be transported across the "7 seas" (via air, sea, etc or comb0 thereof) ie a right to burden the planet's eco-system (eco not econ; well that one too, actually)? Does one have to believe in global warming to agree that shipping of many types of goods across thousands of miles/kms or nautical miles is simply irrational use of resources?

No, I am not proposing the establishment of such a central trade/transport licensing body. Of course not. Unless China takes over the whole world, of course. In which case it won't matter what I or you think, anyway!

A few years ago, a few well known leaders, 2 from South America and 2 from Europe, if memory serves me right, had the brilliant idea to strap a "globalisation levy" on (believe it or not) passenger air transport!!! The European Commission's Services were even forced to look into it. Why on earth charge the movement of people instead of goods? To promote tele-conferencing? Or virtual sales aka e-commerce? To bring the travelling salesmen a break (see the movie Up In the Air with George Clooney as an excellent case study)? Not likely!

But the problem still exists and calls for a solution.

End of Part 1

(Not to be completed over 6 seasons)

Read next part

In view of 2.7% stable Eurozone inflation, was the ECB rate hike needed after all?

According to the Eurostat:

June 2011 Eurozone annual inflation stable at 2.7% (ie same as in May).

In the EU (27( it is down to 3.1%

Was the ECB new rate hike from 1.25% to 1.5% needed last Thursday then?

Why?

Note: Maybe the May industrial producer prices? See my "What is driving Eurozone prices up?" post July 7.

What is driving Eurozone prices up?

What is driving Eurozone inflation up?

a) Global energy & food prices

or

b) a deficient EU Single Market for goods, services and jobs?

Here's a hint:

UK (11.9%), NL (10.7%) and Belgium (9.7%), continued in May 2011 to lead the EU in the hike of industrial producer prices (when compared to May 2010 prices) along with Bulgaria (10%) and now Denmark (10.8%), Lithuania (9.9%) and Latvia (9.7%)

France (6.1%) and Germany (6.0%) seem to be in somewhat of a convergence - cohesion as one would expect even in domestic market, since a domestic market of an EU member state is open to competing products from other EU member states (not to mention China, et al).

Due to proximity and the resulting alleged close economic links, one would expect at least NL, Belgium (partners in the Eurozone17 with Germany) and maybe Denmark (outside the Eurozone but Northerly neighbour of to Germany) to have similar figures to Germany. Yet, they do not!

What does this indicate?

See also my previous posts:

Industrial producer prices in April, Eurozone vs USA and
What are the high Industrial Producer Prices in April (EU, Eurozone) a sign of? plus

Updated! Industrial Producer prices hikes among Eurozone members: Cause for concerns

(Source of stats: Eurostat, July 4, 2011 - see PDF)

If all Eurozone industry became like the German industry, then ....

I posted the following thoughts at the end my "Germany's competitiveness: Beyond myths and inside the systemics" post on June 8, but I think it is worth posting it separately as well, because it is, IMHO, important food for thought:

I read a lot of commentators, some German, some other EUropean, some from other parts of the world, urging the PIIGS to become (in terms of economic modeling) more like Germany.

My question is the following simple (and maybe dumb) one:

IF

All of the Eurozone moved from production (and export) of simple to complex goods a la Germany, then that would increase up to 300% the volume of such goods produced in the Eurozone (80 x 4 = 320) and 500% in the EU (90 x 6 = 480).

ie

for each German complex good produced by Germany now, there would be 3 more of the same produced in the rest of the Eurozone and 2 more in the rest of the EU. Making the total volume of German type complex goods produced in the EU 6 times the existing one.

THEN

What would be, via the "law" of supply and demand, the effect on the equilibrium price for German+rest EU "complex' goods?

To use a Marketing term, if the rest of the economies of the Eurozone or the EU would produce German type of goods, then there would be cannibalisation in the (EU and world) markets.

Leading of course to much lower prices for these goods.


Food for thought, huh?
Where is the ELSE?

Industrial producer prices in April, Eurozone vs USA

In my June 7 post "What are the high Industrial Producer Prices in April (EU, Eurozone) a sign of?" I noted that according to Eurostat (June 6) in April 2011 compared with April 2010, industrial producer prices gained 6.7% in Eurozone and 7.8% in the EU! With UK, +13.1% in April, having the highest hike in the EU27!

Producer prices are an indication what the retail/consumer prices will look like a few months down the line. And of course they worry economists. Yet last Thursday, both the Bank of England and the ECB chose not to raise their interest rates (yet the ECB did raise its rate 2 months ago, from 1.00% to 1.25%).

For a wider picture see my post of June 10 "While the ECB and the Bank of England kept their rates stable: ECB, BoE and Fed, 3 different central banking philosophies".

Today, I decided to have a look at what is happening on other side of the Atlantic, in the USA.

I found a table: Producer Price Index, Industrial Commodities (1982=100) in PDF format at the site of the Bureau of Labor Statistics of the US Department of Labor (US Bureau of Labor Statistics, PPI Program, last update: May 12, 2011).

I note that the index for April 2011 is 203.9 whereas the index for April 2010 was 187.0. I assume that by the operation: (203.9-187.0)/(187.0 x 100) I can get a number that I can compared with the UK, Eurozone and EU ones. That number is: +9.04%

Assuming the above assumption is correct, then the Eurozone industrial producer prices hike in April 2011 (compared with April 2010), +6.7%, is quite lower than the US one, +9.04%. That seems to imply that inflationary pressures from industrial goods at the producer stage are less strong in the Eurozone than in the USA. But I am not an expert in those things.

But remember, the USD (Fed) rate is 0 to 0.25% and the Euro (ECB) one 1.25%. And that the Fed, like the Bank of England, and unlike the ECB, has to raised its rate for a long time!

By the way, the US April inflation year-on-year was 3.2% (see: Reuters, May 14) whereas the April one in the Eurozone was 2.8% and the flash estimate of the Eurostat for May is 2.7%. The 3.2% US inflation is the highest since October 2008.

The US GDP: Compared with the first quarter of 2010, US GDP in the 1st quarter of 2011 grew by 2.3% in the United States (source: Eurostat) while in the Eurozone and the EU it was 2.5%.

This is all, for now.
What do you make of all the above?

Germany's competitiveness: Beyond myths and inside the systemics

On June 8, the German national statistics agency announced that in April (2011) German exports fell by 5.5% to 84.3bn euros compared with March 2011 (see eg BBCnews report).

The March 2011 German exports had been Euros 98.3bn which were:
1) +16% from March 2010
2) the highest monthly total since 1950 when record keeping began!

The April drop surprised analysts, according to the BBC. But it did not quite surprise me.

In my May 9 post, "German exports record high in March vs Euro/USD rate", I had wondered:

"But what was Euro/USD in March compared eg to last week (the week before "the weekend"? See a chart eg here and draw your own conclusions!"

The "here" was (and is) a EUR/USD Elliott Wave Analysis chart (May 9)(here is the latest one, June 6). They show that the price of the Euro vis-a-vis the USD not only had reached a "local" low in March 2011 but had been within the 1.35 - 1.30 USD per Euro range (roughly) from late 2010 until March 2011. One does not expect a country's exports to be correlated with the same month's currency value because after all, orders, especially international, do take some time, depending on the type of good or service (eg in tourism many bookings are made many months ahead).

But the fact that the Euro by March 2011 had been in a range lower than its local 1.5+ high that had been reached around Jan 2010 (then sliding from that 1.5+ high from roughly Jan 2010 to June 2010, when in reached a less than 1.2 "low", and the started to go up again), did pose some questions as to the factors/drivers behind the super duper German export record of March 2011.

Notably, after the March 2011 local low of approx. 1.3 USD per Euro, the Euro climbed somewhat steadily up to the 1.5 territory in the next 2+ months. Did that affect the April exports performance? That I do not know. Does someone? Feel free to comment!

In other words, German exports, which are said to be mostly manufactured "complex" goods, said to be mostly produced by sophisticated small and medium German manufacturing firms to quality levels that justify a higher price (be it due to "national" costs or the expensive Euro (successor of the expensive/hard DM or profit margin) in the world's markets was/is allegedly the "key" to Germany's export success (formerly No 1 in the world and now second only to China of the 1.3 billion people compared with 80+ million Germany).

Maybe it's my MIT education that taught me to ask questions such as "why" and "how" even for things that are pretty much taken as "facts of life" or "given" by many others, maybe it's my systemics analysis - operations research - decision science education as well as an MBA, but in any case, I was and still am eager to get to the bottom of the systemics of the German competitiveness model, beyond the myths and inside the mystique that surrounds them.

A myth that says that hard working Germans, working smart and with quality equipment and a knack for organisation and engineering, produce goods and achieve export power that the likes of Spain, Portugal, Ireland, Italy, Greece (aka PIIGS) and most of the other EUropean and other economies cannot (and should?) achieve!

Not being a believer in national stereotypes, but being a believer in systemics, I am willing to accept, after more research that there may be systemic conditions that render Germany a more competitive economy than eg the PIIGS (and if possible isolate and examine those conditions or, if you prefer, parameters or factors). But I need much more info and data than the ones offered by the analyses of German competitiveness that I have read so far. Feel free to recommend ones (via e-mail) if you are aware of.

One thing that IMO does not bode too well with the myth is the datum that 60% of German exports are to its EU Single Market partners. That means that the rest of the world, outside the EU, only buys 40% of Germany's exports. So 60% of these largely complex and 'expensive but worth it; manufactured goods are bought by a market of roughly 0.420 billion inhabitants, while the rest 40% by the rest 6.4 billion non-EU market of this planet!

And when at least 120 million of those 420 million (ie the PIIGS) are in some kind of austerity, hitting a record month in exports (March 2011) seems quite unsustainable unless there are data that other markets (eg the developing BRIcs etc) are picking up the slack one expects from the "austeritised" PIIGS (and to some extent the rest of the Eurozone and the EU).

More on this in the near future as I will be trying to dig deeper and deeper into the system/model of German competitiveness.

For now, one last note:

I read a lot of commentators, some German, some other EUropean, some from other parts of the world, urging the PIIGS to become (in terms of economic modeling) more like Germany. My question is the following simple (and maybe dumb) one:

If all of the Eurozone moved from production (and export) of simple to complex goods a la Germany, then that would increase up to 300% the volume of such goods produced in the Eurozone (80 x 4 = 320) and 500% in the EU (90 x 6 = 480). Ie for each German complex good produced by Germany now, there would be 3 more of the same produced in the rest of the Eurozone and 2 more in the rest of the EU. Making the total volume of German type complex goods produced in the EU 6 times the existing one.

In such a case, what would be, via the "law" of supply and demand, the effect on the equilibrium price for German+rest EU "complex' goods? To use a Marketing term, if the rest of the economies of the Eurozone or the EU would produce German type of goods, then there would be cannibalisation in the (EU and world) markets. Leading of course to much lower prices for these goods. Food for thought, huh?

What are the high Industrial Producer Prices in April (EU, Eurozone) a sign of?

This is a follow up to my post of May 4: "Updated! Industrial Producer prices hikes among Eurozone members: Cause for concerns"

According to Eurostat (June 6)

April 2011 Industrial producer prices when compared with March 2011 are up by 0.9% in Eurozone and up by 1.0% in EU27.

But the worrying picture becomes more clear when one looks at the April 2011 figures compared with 1 year ago, ie April 2010:

In April 2011 compared with April 2010, industrial producer prices gained 6.7% in Eurozone and 7.8% in the EU!

Eurozone (April 2011 compared with April 2010):
Total industry excluding construction +6.7%
Total industry excluding construction and energy +4.4%
Intermediate goods +7.3%
Energy +13.3% (yes 13.3%!!!!)
Capital goods +1.3%
Durable consumer goods +2.0%
Non-durable consumer goods +3.4%


Industrial producer (or wholesale) prices are a sign of upcoming inflation (consume price index) trends (a few months later).

Let's look at the figures for some EU member states (April 2011 compared with April 2010):

No 1 (highest in the EU): UK +13.1% in April, vs +8.1% in December 2010 (compared with Dec 2009) and only +5.1% in November 2010 (compared with November 2009).

No 2 (and No 1 in the Eurozone): NL +11.7
No 3: Bulgaria +10.7%
No 4 (and No 2 in the Eurozone): Belgium +10.6%
No 5: Lithuania +10.5%
No 6: Denmark +9.9%
No 7: Poland and Latvia with 9.4%
No 9: Romania +8.8%
No 10 (and No 3 in the Eurozone): Finland +8.5%

Germany's and France's are both +6.4%! How about that!

See full Eurostat figures by country

Note that the Eurozone17 average in 110 basis points below the EU27 average!

Whereas international energy (oil) prices and the prices of some staple foods are said to be pushning industrial production costs up (and thus leading to higher wholesale prices) these high numbers seem to indicate that industries in the EU and the Eurozone seem to think that they can afford to pass these prices on down to the intermediaries and the final consumer (whether consumers (b2c) or other companies (b2b). Of course, some of the sales will be made inside the EU some outside.

But with the Euro being at a relatively high price vis-avis the USD, the Yuan etc, one wonders what makes those industries think they can afford not to absorb more of the extra costs of the ebergy and other inputs.

a) Are their products that unique, in the EU, EUrozone and global markets?
b) Is competition not working well in certain sectors and/or member states or the EU Single Market?
or
c) Are they merely desperate (cannot internalise more of the extra input costs, pass them on and prey)?

I have no clue as to whether it is one of the above or something else. But I am wondering.

But I cannot help wonder, more generally, whether the way to best curb inflation in the Eurozone that the ECB is gung-ho for (2% target) is via "tightening" (ie raising interest rates) or by removing barriers to more competition intra-EZ or intra-EU or both! Any views?

Bank of England keeps its rate at 0.5%. Lessons for the ECB?.

Yesterday (Thursday) the Bank of England decided to keep its interest rate at 0.5% inspite a March 4% annualised inflation rate and a whopping +10.7%. in March 2011 compared with March 2010 in the UK industrial producer prices gained (see Eurostat stats)

But it should be noted that 4% March inflation according to Eurostat stats (released back in April 15 annualised, ie March 2011 compared with March 2010), was down from 4.4% in February, (it was 4% back in J.anuary too).

According to economists, Producer Prices are an indication as to what inflation will be a few months later. Thus the 10.8% IPPI figure for March seems cause for concern.

Taking into consideration that in March 2011 compared with March 2010, industrial producer prices gained 6.7% in the Eurozone and 7.4% in the EU27 and in February 2011 vs February 2010 the corresponding numbers were 6.6% and 7.1%, that causes concerns re the systemics related to the UK industry.

Yet the Bank of England decided to keep interest rates that a) aid growth b) keep the Pound at reasonable exchange rate (impact on exports and incoming tourism).

Food for thought: Compare and contrast BoE and ECB policy/decisions/philosophy.

Updated! Industrial Producer prices hikes among Eurozone members: Cause for concerns

The update include some comparison of March 2011 compared with March 2010 IPPIs with March 2011 compared with March 2010 inflation numbers (as released by Eurostat back on April 15).

Eurostat published today (May 3, 2011) the stats re Industrial Producer Prices (Industrial PPI) for March 2011.

Along with the stats published re February 2011 vy Eurostat on April 2011 (a few days before the ECB rate hike from 1.00 to 1.25%), these stats, for the EU27, as well as the Eurozone and individual members should cause IMO much concern. I have partly already tweeted and blogged some of my concerns.

1) These include a concern of mine that these stats show low integration and lack of adequate competition at least with respect to industry in the EU and its Single Market and even more importantly, in the Eurozone and among its members. Because while the prices of industrial inputs are higher due to hikes in world prices of energy and some foods, the very high Industrial PPIs show that firms choose to pass on a very large part of those down the line, ie to the whole-sellers and these may eventually reach the consumer thus a major concern re CPI (ala inflation) which is already high in the Eurozone by ECB standards (ie 2% target).

What is also notable, and I have to trying to understand why, is that the IPPI for NL and Belgium, ie two economies with a strong industrial capacity and quite integrated, one would think, to their neighbour Germany, are exhibiting, compared with same month last year (February 2011 to February 2010 and now March 2011 to March 2010) very high numbers.]

Let's have a closer look, trying to think systemically:

In March 2011 compared with March 2010, industrial producer prices gained 6.7% in the Eurozone and 7.4% in the EU27. For February 2011 vs February 2010 the corresponding numbers were 6.6% and 7.1%. Note that the IPPI is higher for EU27 than the Eurozone16 and the increase compared to February in March is higher for the EU27!

Also note that (Eurostat, April 15) Eurozone annual inflation (provisional) was 2.7% in March 2011up from 2.4% in February and EU annual inflation (again provisional) was 3.1% in March 2011, up from 2.9% in February.

What will these high Industrial PPI numbers for the Eurozone and EU mean for inflation in a few months from now? And why are they so high?

But what do the IPPI numbers show re the EU single market for industrial goods, especially at the Eurozone's core (Germany, NL, Belgium, etc)? Note that whereas Germany's IPPI was Feb2Feb 6.3% and March2March 6.1% (ie without any effect by ECB rate hike later, in April), the NL's IPPI was respectively 10.3% and 10.8%! For Belgium, another close neighbour to Germany, only the Feb2Feb stat is available for now: 10.2%!

At the same time February annual inflation in Germany had registered at 2.2% and 2.3% in March (Eurostat, April 15). Thus head to head annual Industrial PPI for March stood about 380 basis points above annual March inflation in Germany (down from 410 bp in February).

In NL, annual inflation stood at 2% in February and again a privisional 2% in March. Ie 830 and 880 basis points when compared to the NL annual Industrial PPI for February and March!

Thus the NL spread is about double the Germany one! Why?

In Belgium, inflation was 3.5% both in February and March, ie 670 bps (not IPPI available yet for March in Belgium)! Again, why such large NL and Belgian spreads compared to Germany?

Now add Denmark, another close neighbour yet not fellow Eurozone member, the IPPI jumped from 5.8% Feb2Feb to 9.3% March2March!

What could be driving these large hikes and the wider differences even between neighbouring economies except, I assume, inadequate Single Market integration and inadequate competition? If you have a different explanation, feel free to add it via the comments or a tweet @nppolicyanalyst!

2) Most hikes are largest in the EU27 than in the Eurozone

Industrial producer prices on the domestic market, % change compared with March of 2010

Eurozone (vs EU27)

Total industry excluding construction 6.7% (in the Eurozone) vs 7.3% in EU27
Total industry excluding construction and energy 4.5% vs 4.6% in EU27
Intermediate goods 7.9% same as in EU27
Energy 13.0% (in the Eurozone) vs 14.1% in EU27
Capital goods 1.2% vs 1.3% in EU27
Durable consumer goods 1.8% vs 1.9% in EU27
Non-durable consumer goods (in the Eurozone) 2.9% vs 3.4% in EU27

Note the 3 areas of major differences between the Eurozone and EU27:
1) Total industry excluding construction 6.7% (in the Eurozone) vs 7.3% in EU27

2) Energy 13.0% (in the Eurozone) vs 14.1% in EU27
3) Non-durable consumer goods (in the Eurozone) 2.9% vs 3.4% in EU27

Can you offer an explanation why?

March 2011 UK Industrial Producer Prices up 10.8% compared with March 2010!

According to Eurostat stats released yesterday, in March 2011 compared with March 2010, UK industrial producer prices gained a whopping 10.7%.

That is the 3rd largest hike among the EU27 for which data are available (NL's was 10.8% whereas Bulgaria's 12.1%) and 2nd among the non-Eurozone EU member economies! The February 2011 compared with February 2010 number had been lower but still quite high, 9.8%!

According to Eurostat stats (released back in April 15) re inflation in March 2011, UK's was 4.0% (annualised, ie March 2011 compared with March 2010), down from 4.4% in February, but same as in J.anuary

According to economists, Producer Prices are an indication as to what inflation will be a few months later. Thus the 10.8% IPPI figure for March seems cause for concern.

Taking into consideration that in March 2011 compared with March 2010, industrial producer prices gained 6.7% in the Eurozone and 7.4% in the EU27 and in February 2011 vs February 2010 the corresponding numbers were 6.6% and 7.1%, that causes concerns re the systemics related to the UK industry.

Nationalism vs Cosmopolitanism or Earth Sovereignty

"May you live in interesting times" was actually an Ancient Chinese curse! These days, since Friday, we are all Japanese (to paraphrase JFK's "Ich bin ein Berliner"). Shocking events since Friday, the earthquakes, the tsunamis and last but not least, radiation! News these days are more dramatic than most scary film scenarios.

Among many other things, they have prompted protests re the use of nuclear energy in France, stress tests of the plans in Germany demanded by Angela Merkel and an EU stress test of nuclear plants initiative.

Can the EU work as "one" on this? Or is it losing whatever community spirit it had in previous decades due to the emergence of nationalism in recent years?

National vs Natural:

"Splitting up? The re-nationalization of Europe" is the topic of a most interesting article in Eurozine based on a discussion between Andriy Shevchenko and David Van Reybrouck. A must read, IMO!

1-2 points from the article (which I fully recommend as food for thought):

1) On the 23 languages in the EU: "And it means that there is no common forum. There is no European public space"

2) Also read how France managed to create French identity in less than 64 yrs!

Via the imposition of French as the single/only language in France, in the 1850s!

IMO, Cosmopolitanism will be "enforced" in EUrope and the rest of the world by Earth's Nature & its "events", ie Nature will defeat nationalism. Because earthquakes (like the ones the Japan) and the resulting tsunamis, volcanos (eg as the one in Iceland and its recent effect on most of Europ), birds (that the flu they may carry), CO2 and radiation pollution etc do not require passports or visas, they have no "respect" for national borders, sovereignty or identities. They remind us that we all 6.9 billion live on the same vessel. These realisations will defeat nationalism and re-activate universalism or cosmopolitanism (citizenship of the world).

Plus what good is one country's no nukes policy if a few miles across the water or land, its neighbour has located one of its own nuclear energy plants?

Plus IMO the issue of use of nuclear energy in the EU could be the topic of the first ever EU citizens initiative. The kind of topic that will unite the EUropean public opinion or Society. Energy: The answer is in the wind and under the sun!

Real catastrophes:

On Monday, FN President Marine Le Pen toured a centter for illegal migrants on Italy's Lampedusa island. "I have come to express my real concern on the ground. The European Union does not have any solution. We are going to see a real catastrophe and the EU is impotent" she said, inter alia (Yahoo! xtra news, AAP).

My comment re "real catastrophe": The ageing EU has capacity & wealth enough for citizens & immigrants. Real catastrophes are earthquakes, volcanos, nuclear pollution etc!

Real internationalists:

"Euroscepticism: liberal, modern, internationalist, moderate and cross-party" is the title of Daniel Hannan's opinion piece in the Telegraph on March 15! For sure!!!!

According to tweet today by the EU Commissioner Mrs Viviane Reding, there are about 16 million international couples (13% out of 122 million couples) in the EU. Maybe they and their children are the main drivers of EUropean identity.

In the meantime, "World braces for Japan economic hit" is the title of an insightful article by Ben White in Politico (politico.com) today. Inter alia, he points out that in January Japan held nearly $886 billion in Treasury securities while China $1.2 trillion US (some 4 times the ones held by UK investors). But IMO this is no time for Economics. As humans, we must focus on Japan and the Japanese people and all others in Japan, the heroes working inside the tainted plants, and maybe also think how some technology is good for humankind whereas other is not. And how for an economy to exist, humans are needed. IMO our era is too financial. Is it also too technological?

Only one economics piece: According to RTE Business today, "The European Commission has proposed a common system of working out the tax base of businesses operating in the EU".
Plus also today, the ratings agency Noddy's downgraded Portugal's sovereign debt rating from A1 to A3.

Not very human-centered times!

Approx. 205 million of the world's population were out of work in 2010, according to recent figures from the United Nations. This means that the EU has 11% of the world's unemployed while it has 7% of the world population (0.5 vs 6.9 bn)

Recent Eurostat stats:

Eurostat 1st estimate: Q4 of 2010 Eurozone and EU employment up by 0.1% vs Q3 2010. +0.3% in both vs Q4 of 2009.

Eurostat: January 2011 compared with December 2010 Industrial production up by 0.3% in Eurozone. Up by 0.6% in EU

Industrial Relations, what Industrial Relations?

The Industrial Relations in Europe Conference. The conference, 17-18 March in Brussels, aims to present and discuss the issues raised in the 2010 Industrial Relations in Europe report with an audience of social partners, academics and representatives of the Member States.

Every two years the European Commission produces an Industrial Relations in Europe report, which provides an overview of industrial relations developments in Europe for the previous two-year period. The 2010 edition is the sixth report in the series.

Around 150 participants will be invited to the event, which will consist of four panel sessions each devoted to one aspect of the report:

Session I - Industrial Relations in Europe in the 21st century's first decade
Session II – Negotiating the crisis: the actors of social dialogue
Session III – Industrial relations outcomes: overcoming the crisis
Session IV – The possible contribution of social partners to the Europe 2020 strategy

The conference, as the report itself, will focus on a review of industrial relations in times of economic crisis and on the role of social dialogue in achieving the objectives of the Europe 2020 strategy for smart, sustainable and inclusive growth.

IMO, with a conservative majority in the European Parliament (EPP plus the ECR (Tories etc)) & the EU Commissioners' College and the various deficit and inflation hawks around Europe (not least in Germany), industrial relations are bound to be suffering in the EU and many national levels these days. See also the Eurozone "competitiveness pact".

EU and Eurozone industrial production in Dec 09

According to a Eurostat release (February 12) industrial production was down by 1.7% in Eurozone and down by 1.9% in EU (compared to November).

Compared to December 2008, industrial production declined by 5.0% in the Eurozone and by 4.9% in the EU.

Compared with 2008, the average production index for 2009 fell by 14.9% in the euro area and by 13.9% in the EU27.

The full Eurostat release

Industrial new orders in November 2009 in the EU and Eurozone

Eurostat issued on January 25 revised data (compared to January 22 release) due to receiving corrected German data on New Orders. These new figures were revised significantly upwards, and had an impact on the European aggregates. As a result, Eurostat published on January a revised News Release, which takes into account the new data from Germany:

November 2009 compared with October 2009
Industrial new orders up by 2.7% in the Eurozone, up by 2.6% in the EU

In November 2009 compared with October 2009, the Eurozone industrial new orders index rose by 2.7%. In October the index fell by 2.1%.

In the EU, new orders increased by 2.6% in November 2009, after a decrease of 1.5% in October.

Excluding ships, railway & aerospace equipment, for which changes tend to be more volatile, industrial new orders rose by 2.7% in the Eurozone and by 2.9% in the EU.



In November 2009 compared with November 2008, industrial new orders decreased by 0.5% in the Eurozone and by 1.2% in the EU.

Total industry excluding ships, railway & aerospace equipment 4 dropped by 0.8% in both zones.

These estimates are released by Eurostat, the statistical office of the European Union .

Figures and graphics available in PDF and WORD PROCESSED


Monthly changes

In November 2009 compared with October 2009, new orders for intermediate goods increased by 2.3% in the Eurozone and by 2.1% in the EU. Capital goods rose by 1.1% and 2.8% respectively. Durable consumer goods gained 0.6% in the Eurozone and 0.3% in the EU . Non-durable consumer goods grew by 0.8% and 1.6% respectively.

Among the Member States for which data are available, total manufacturing working on orders rose in fifteen and fell in eight. The highest increases were registered in Austria (+10.3%), Estonia (+7.4%) and Greece (+7.3%), and the largest decreases in Hungary (-9.6%), Ireland (-4.4%) and Bulgaria (-4.1%).

Annual changes

In November 2009 compared with November 2008, new orders for non-durable consumer goods rose by 1.6% in the Eurozone and by 4.3% in the EU . Capital goods increased by 0.8% in the Eurozone, but fell by 1.9% in the EU. Intermediate goods decreased by 2.1% and 1.8% respectively. Durable consumer goods declined by 5.3% in the Eurozone, but grew by 0.1% in the EU.

Among the Member States for which data are available, total manufacturing working on orders rose in nine, fell in fourteen and remained stable in Italy . The highest rises were registered in Slovenia (+10.6%), the Czech Republic ( +7.9%) and Finland (+6.9%), and the largest falls in Ireland (-26.5%), Lithuania (-24.8%) and Estonia (-16.3%).

Good news for UK exports!

According to the CBI, the Confederation of British Industry (member of BUSINESSEUROPE), manufacturing production rose for the first time in two years, as overseas demand for UK made goods increased and stock reductions eased.

According to the CBI's latest quarterly Industrial Trends Survey (note: The January 2010 CBI Industrial Trends Survey was conducted between 10th December 2010 and 6th January 2010; 461 manufacturing firms replied) there was a stronger-than-expected rise in output in the three months to January.

But the CBI warned that the outlook for the sector remains uncertain, with domestic demand still weak, and some firms still struggling to access finance.

Of the 461 manufacturers surveyed, 31% said output rose during the three-month period, while 20% said it fell. The resulting balance of +11% is the strongest figure since January 2007 (+19%).

Export orders rose for the first time since January 2008, boosted by the relative weakness of Sterling and improving global demand. 30% of firms said exports grew during the quarter, while 24% reported a fall, giving a balance of +6%. Exports are expected to grow more strongly in the next quarter (+13%), and firms are the most optimistic about export prospects for the coming year (+19%), since July 1995 (+21%).

Firms are continuing to de-stock, but at a slower rate, which also helped lift output. A balance of -11% indicated that stocks of finished goods fell in the quarter, compared to a balance of -29% in the October survey.

Domestic demand, however, was weaker than expected with 18% of manufacturers reporting a rise, and 26% a fall, giving a rounded balance of -9%. That compared with a balance of -16% in October. Total new orders were broadly unchanged (+1%).

Ian McCafferty, the CBI’s Chief Economic Adviser, said:

“After nearly two full years of falling output, manufacturers are seeing a return to modest growth, thanks in part to improved overseas demand and much slower stock reductions.

“It is encouraging that the weaker pound is now providing firms with some respite as global demand improves. Exports are rising for the first time in two years, as UK-made goods are looking more attractive in overseas markets. Manufacturers are also feeling upbeat about export prospects for the year ahead.

“However, the manufacturing sector is not out of the woods. With domestic demand still weak, and credit remaining constrained for some companies, firms expect growth to be more modest in the next quarter. This underlines our view that the UK’s economic recovery will be slow and protracted.”

According to the same survey, the availability of finance remains a concern, and is cited by 13% of firms as a factor likely to limit output, and by 12% as likely to limit export orders.

Despite that, sentiment about the overall business situation is continuing to improve, with a net 12% more optimistic than three months ago.

The rate of job losses across the sector is slowing. A balance of -13% indicated a drop in staff numbers during the quarter, an improvement on October’s balance of -34%.

Investment intentions for the year ahead are stabilising. Firms are planning on spending more on training and retraining (+11%) and on innovation (+15%). Investment in buildings will be cut back further (-18%) and little change is expected in spending on plant and machinery (+1%).

Domestic prices are expected to rise for the first time in six quarters (a balance of +8%). 66% of firms report that they are working below capacity, compared to 76% in October.

EU and Eurozone industrial production up in November 2009

These estimates are released by Eurostat, the statistical office of the European Union.

In November 2009 compared with October 2009, seasonally adjusted industrial production1 grew by 1.0% in the Eurozone and by 0.9% in the EU.
In October production fell by 0.3% and 0.7% respectively.

In November 2009 compared with November 2008, industrial production declined by 7.1% in the Eurozone and by 6.4% in the EU.

the full press release by Eurostat

Industrial producer prices in November in the Eurozone and the EU

According figures from Eurostat, the statistical office of the European Union:

In November 2009 compared with October 2009, the industrial producer price index rose by 0.1% in the Eurozone and by 0.2% in the EU.
In October, prices increased by 0.3% and 0.6% respectively.

In November 2009 compared with November 2008, industrial producer prices dropped by 4.4% in the Eurozone and by 3.2% in the EU27.


Details:

1) November 2009, compared with October 2009:

In November 2009, compared with the previous month, prices in total industry excluding the energy sector fell by 0.1% in the Eurozone and remained stable in the EU.

Prices in the energy sector rose by 0.8% and 1.1% respectively.
In both the Eurozone and the EU as a whole, capital goods and durable consumer goods remained stable.
Non-durable consumer goods declined by 0.1% in the Eurozone and remained stable in the EU.
Intermediate goods decreased by 0.2% in the Eurozone and remained stable in the EU.

Among Member States for which data are available, the highest increases in the total index were recorded in Denmark (+1.4%), Lithuania, Portugal, Finland and the United Kingdom (all +0.6%), and the largest decreases in Latvia (-1.6%), Cyprus (-1.1%) and the Netherlands (-0.4%).


2) November 2009, compared with November 2008:

In November 2009, compared with November 2008, prices in total industry excluding the energy sector decreased by 3.1% in the Eurozone and by 2.4% in the EU.
Prices in the energy sector fell by 8.7% and 5.7% respectively.
Intermediate goods declined by 5.0% in the Eurozone and by 4.3% in the EU.
Non-durable consumer goods dropped by 2.9% and 1.8% respectively.
Capital goods fell by 0.7% in the Eurozone and by 0.4% in the EU.
Durable consumer goods rose by 0.5% and 1.0% respectively.

Among Member States for which data are available, the largest decreases in the total index were observed in Latvia (-11.0%), Lithuania (-9.7%) and Malta (-8.1%).
The only increases were observed in Romania (+1.9%), Poland (+1.8%), Greece and the United Kingdom (both +0.8%).

October 2009 industrial new orders in the Eurozone and the EU

According to estimates by Eurostat, the statistical office of the European Union:

In October 2009 compared with September 2009:

The Eurozone industrial new orders index fell by 2.2%. In September the index rose by 1.7%.

In the EU new orders declined by 1.6% in October 2009, after an increase of 1.4% in September.

Excluding ships, railway & aerospace equipment, for which changes tend to be more volatile, industrial new orders fell by 0.4% in the Eurozone and by 0.8% in the EU.


In October 2009 compared with October 2008:

Industrial new orders decreased by 14.5% in the Eurozone and by 14.1% in the EU.

Total industry excluding ships, railway & aerospace equipment4 dropped by 14.4% and 14.1% respectively.


Details:

October 2009 compared with September 2009:

In October 2009 compared with September 2009:
new orders for intermediate goods increased by 1.5% in the Eurozone and by 1.0% in the EU.
Durable consumer goods rose by 0.6% in the Eurozone, but fell by 1.7% in the EU.
Non-durable consumer goods remained stable in the Eurozone, but declined by 1.4% in the EU.
Capital goods dropped by 4.6% and 1.8% respectively.

Among the Member States for which data are available, total manufacturing working on orders rose in ten and fell in thirteen. The highest increases were registered in Hungary (+7.4%), Slovenia (+5.1%) and Latvia (+4.4%), and the largest decreases in Denmark (-14.8%), Ireland (-14.2%) and France (-9.2%).

October 2009 compared with October 2008:

In October 2009 compared with October 2008,
new orders for non-durable consumer goods fell by 6.4% in the Eurozone and by 5.9% in the EU.
Durable consumer goods declined by 14.2% and 9.5% respectively.
Capital goods dropped by 15.0% in the Eurozone and by 15.4% in the EU.
Intermediate goods decreased by 16.4% and 15.4% respectively.

Total manufacturing working on orders fell in all Member States for which data are available. The largest falls were registered in Lithuania (-35.2%), Estonia (-33.6%) and Greece (-27.4%), and the lowest in Slovenia (-3.0%), Slovakia (-8.7%) and the United Kingdom (-8.8%).

COP15 fail: BUSINESSEUROPE in favor of legally binding agreement because companies need predictability

European business is disappointed by the limited outcome of Copenhagen summit, according to BUSINESSEUROPE (*) which points out that companies need predictability to develop the new green solutions on which a future low-carbon economy will depend.

BUSINESSEUROPE welcomes that the Copenhagen Accord reinforces the political commitment by international leaders to limit global warming to 2 degrees Celsius and, what is IMO very noteworthy, believes that it now has to "quickly lead to a legally binding agreement because companies need predictability to develop the new green solutions on which a future low-carbon economy will depend"

It strongly regrets, however, that the EU's major economic partners only repeated their limited mitigation commitments.

It notes that "therefore the Copenhagen Accord has not brightened the prospect for a global level-playing field in the future. On the contrary, European companies have to pay for their emissions under the EU Emission Trading Scheme and are as exposed to carbon leakage as they were before Copenhagen. More predictability should have been given on the future of private financing schemes like the Clean Development Mechanism"


(*) BUSINESSEUROPE (formerly UNICE: Union of Industrial and Employers Confederations of Europe) has 40 member federations from 34 countries, including the European Union countries, the European Economic Area countries, and some central end Eastern European countries.

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Note: The author was a permanent delegate at BUSINESSEUROPE (then UNICE) from 1991-1994, representing (and employed by) its member from Greece.

UK car production in November (10% of total UK exports)

The automotive industry has £51 billion turnover and £10 billion value added. Over 800,000 jobs are dependent on the industry which accounts for 10% of total UK exports and invests £1 billion each year in R&D.

According to The Society of Motor Manufacturers and Traders (SMMT) car output was 112,948 in November, up 15.7% compared to November 2008. This is the first rise since September 2008, reflecting the positive impact of the UK scrappage schemes and economic stability in a number of major European markets. Yet production from Jan-Nov 2009 was 914,117 cars, -34.4% compared to Jan-Nov. 2008.

Commercial vehicle output was 9,186 in November, -16.2% compared to November 2008. It continues to fall, although the pace of decline has slowed. Production volumes have fallen in every month since September 2008. In the first 11 months of the year, production was 83,408, -57.6% compared to Jan-Nov 2008.

Thus, production is still well below previous levels,997,525 units from Jan-November, which is -37.2% compared to same period in 2008, and 2010 is set to be another tough year with considerable uncertainty at home and abroad. "It is essential that governments continue to sustain and strengthen economic recovery, improving access to credit and encouraging investment in new technologies and products” said Paul Everitt, SMMT chief executive. “Whilst the November figures represent the smallest recorded fall in the past 14 months, the sector is still down almost 60% on the year-to-date.”

The SMMT supports the interests of the UK automotive industry at home and abroad, promoting a united position to government, stakeholders and the media.

Improvements in production processes mean energy used to produce cars is down 24%, water use is down 45% and 57% less waste enters landfill sites. Average car tailpipe CO2 emissions have also been slashed and are down 20% compared to 1999 levels.