ECB’s Blunt Press Statement Today Screams One Big Idea, Stagflation Has Arrived

Link: https://mishtalk.com/economics/ecbs-blunt-press-statement-today-screams-one-big-idea-stagflation-has-arrived

Excerpt:

The Governing Council today decided to raise the three key ECB interest rates by 75 basis points. This major step frontloads the transition from the prevailing highly accommodative level of policy rates towards levels that will ensure the timely return of inflation to our two per cent medium-term target. Based on our current assessment, over the next several meetings we expect to raise interest rates further to dampen demand and guard against the risk of a persistent upward shift in inflation expectations.

Inflation remains far too high and is likely to stay above our target for an extended period. According to Eurostat’s flash estimate, inflation reached 9.1 per cent in August. Soaring energy and food prices, demand pressures in some sectors owing to the reopening of the economy, and supply bottlenecks are still driving up inflation. 

Price pressures have continued to strengthen and broaden across the economy and inflation may rise further in the near term.

Very high energy prices are reducing the purchasing power of people’s incomes and, although supply bottlenecks are easing, they are still constraining economic activity. In addition, the adverse geopolitical situation, especially Russia’s unjustified aggression towards Ukraine, is weighing on the confidence of businesses and consumers.

Author(s): Mike Shedlock

Publication Date: 8 Sep 2022

Publication Site: Mish Talk

The ECB Has a Huge Dilemma: Price stability or Bail Out Nations

Link: https://mishtalk.com/economics/the-ecb-has-a-huge-dilemma-price-stability-or-bail-out-nations

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Excerpt:

The spreads between German government bonds and those of the PIGS (Portugal, Italy, Greece, and Spain) have skyrocketed in recent weeks. 

This comes while Eurozone inflation is at a record high 8.1 percent. 

….

On June 16, Bloomberg reported Lagarde Tells Ministers ECB Plans for Limit on Bond Spreads

….

There is no single interest rate that makes any sense for Germany, Greece, Spain, Italy, and Portugal. 

The Fed is struggling to find the neutral rate, and I believe will overshoot, but at least there is a neutral rate. 

Lagarde is on Mission Impossible with 19 countries in the Eurozone, all with a different neutral. 

In theory, the sovereign bonds of Germany and Greece are the same. Default risks are the same.

In practice this is total nonsense, and for the third time the idea is being tested. 

Author(s): Mike Shedlock

Publication Date: 20 Jun 2022

Publication Site: Mish Talk

Price of Crude Jumps as EU Foolishly Doubles Down On Sanctions

Link: https://mishtalk.com/economics/price-of-crude-jumps-as-eu-foolishly-doubles-down-on-sanctions

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Excerpt:

This is surely unworkable – a carve out for Hungary, which allows its refineries to enjoy sky rocketing margins on sales elsewhere in the EU because of their access to Russian crude. It’s almost laughable,” said Jeremy Warner.

It seems the carve out for Hungary was “workable” after all, with predictable results.

Russia, China, Hungary, and energy producers are the beneficiaries of these terribly counterproductive sanctions.

This is my “Hoot of the Day” but it’s early. I may easily need bonus hoots. 

Author(s): Mike Shedlock

Publication Date: 31 May 2022

Publication Site: Mish Talk

Bidenomics Takes Root in Europe’s Economically Fragile South

Link: https://www.wsj.com/articles/bidenomics-takes-root-in-europes-economically-fragile-south-11620039617

Excerpt:

Since the 1990s, Italian leaders have tried to overhaul the sclerotic economy while also running tight budgets. Mr. Draghi is the first in decades who can deploy massive fiscal firepower to help.

Italy’s economy has rarely grown by more than 1% annually over the past quarter-century. The economy has never fully recovered from the global financial crisis and subsequent eurozone crisis, and slumped by another 9% in 2020 amid the pandemic and strict lockdowns.

Germany, France and other EU countries backed the recovery fund mainly for fear that Italy and Southern Europe could get stuck in another deep economic slump that once again tests the cohesion and survival of the eurozone.

….

Most of Greece’s debt is in bailout loans from the rest of the eurozone, with no repayments due for many years, making another Greek debt crisis unlikely for a long time.

Author(s): Giovanni Legorano

Publication Date: 3 May 2021

Publication Site: Wall Street Journal

Life expectancy decreased in 2020 across the EU

Link: https://ec.europa.eu/eurostat/web/products-eurostat-news/-/edn-20210407-1

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Excerpt:

Life expectancy at birth has been increasing over the past decade in the EU: official statistics reveal that life expectancy has risen, on average, by more than two years per decade since the 1960s. However, the latest available data suggest that life expectancy stagnated or even declined in recent years in several EU Member States.

Moreover, following the outbreak of the COVID-19 pandemic last year, life expectancy at birth fell in the vast majority of the EU Member States with available 2020 data. The largest decreases were recorded in Spain (-1.6 years compared with 2019) and Bulgaria (-1.5), followed by Lithuania, Poland and Romania (all -1.4).

Publication Date: 7 April 2021

Publication Site: EuroStat

EU life expectancy drops across bloc amid virus pandemic

Link: https://apnews.com/article/world-news-pandemics-europe-coronavirus-pandemic-covid-19-pandemic-8457898bffd5733e28eb9f566d54232c

Excerpt:

Life expectancy across much of the European Union has dropped last year, as the 27-nation bloc struggled with the impact of the coronavirus pandemic.

The EU statistical agency Eurostat said Wednesday that “following the outbreak of the COVID-19 pandemic last year, life expectancy at birth fell in the vast majority of the EU member states.” It said the biggest drop was in Spain, with a loss of 1.6 years compared with 2019.

Bulgaria followed with a loss of 1.5 years, followed by Lithuania, Poland and Romania, which all saw a drop of -1.4 years. Denmark and Finland were the only nations to see a rise in life expectancy, with 0.1 years.

Publication Date: 7 April 2021

Publication Site: Associated Press

The EU Vaccine Debacle

Link: https://www.nationalreview.com/2021/03/the-eu-vaccine-debacle/

Excerpt:

Supported by Angela Merkel, the German chancellor, the EU Commission (its administrative arm) took over the negotiations with vaccine manufacturers on behalf of all EU member-states last June. This was designed both as a declaration of EU “solidarity” and because of the belief that bargaining on behalf of the whole bloc could secure the vaccine at a cheaper price, a calculation that appeared to take little account of the economic costs of any delays, and delay was what — for a variety of reasons — Brussels delivered.

The U.K. came to its deal with AstraZeneca (the manufacturer of the Oxford vaccine) three months earlier than the EU, and its contract came with sharper teethThe EU also took four months longer than the U.K. and U.S. to sign up with Pfizer.

Making matters worse, the EU’s FDA, the European Medicines Agency (EMA), a body by definition particularly receptive to the precautionary principle that plays such a dominant role in EU policy-making (except when it comes to setting up a new currency), took its time to approve the first vaccines. Its first approval came some weeks after the U.K. and ten days or so after the U.S.

Author(s): Editorial Board

Publication Date: 25 March 2021

Publication Site: National Review

Doses of AstraZeneca’s Covid-19 Vaccine Pile Up in Europe Amid Government Restrictions

Link: https://www.wsj.com/articles/doses-of-astrazenecas-covid-19-vaccine-pile-up-in-europe-amid-government-restrictions-11614715968

Excerpt:

Europe’s reluctance to distribute millions of doses of AstraZeneca PLC’s Covid-19 vaccine is coming under pressure after the French government authorized use of the shot for some older people.

The French government announced it would allow people with comorbidities between the ages of 65 and 74 to receive the vaccine developed by Oxford University and AstraZeneca. New data from the U.K. on Monday showed just one dose of the vaccine was effective in preventing disease and deaths among adults aged 70 and older who had received it.

France’s move was a sharp departure from a month ago when President Emmanuel Macron told reporters that the vaccine was quasi ineffective for people older than 65, without providing evidence to back up his claim. The comments helped sow doubts across the European Union that still persist.

Author(s): Stacy Meichtry, Bojan Pancevski

Publication Date: 2 March 2021

Publication Site: Wall Street Journal