Europe’s Economy on Track for 7.7-Percent Contraction, 9-Percent Jobless Rate
Europe’s economy will contract by 7.7 percent this year and unemployment could linger at 9 percent unless the European Commission, or EC, takes “decisive joint action” to stop the damage, according to the commission’s spring economic forecast.
Otherwise, the situation will worsen, warned Paolo Gentiloni, the EC’s commissioner for economic matters.
The figures sketch Europe’s worst economic performance since the throes of World War II.
For example, the Great Recession shrank the Eurozone’s economy by 4.5 percent and turfed out 10 percent of the zone’s workers. A similar proportion now would translate a 7.7-percent contraction into a jobless rate above 15 percent.
The EC is crafting a trillion-euro bailout program to complement the European Central Bank’s €750-billion rescue plan.
The commission forecasts combined 6.25 growth for Europe’s economic union next year. But growth will be spread unevenly across the union’s 19 member countries, Gentiloni noted, saying it will be “conditioned by the speed at which lockdowns can be lifted, the importance of services like tourism in each economy, and by each country’s financial resources.”
European Central Bank Expands Bailouts
The European Central Bank, or ECB, has launched another new program to loan money to banks at virtually no interest costs after economic numbers released last week showed the continent in the grip of the worst economic outcomes in at least 80 years.
The bank also held its key interest rate at -0.5 percent at its 30 April meeting.
The ECB also is “fully prepared” to expand its existing €750-billion lending initiative “by as much as is necessary and for as long as is necessary,” the bank said in a statement, and to extend the program past its original end-of-year closing date.
The ECB has “firepower north of €1 trillion,” said Christine Lagarde, the bank’s president, and will use its full flexibility in policy options “to intervene where we think there is a particular risk” of financial conditions weakening.
The bank also might begin buying bonds of “fallen angels,” companies whose bonds have recently lost their investment-grade ratings.
Some analysts expect the bank to expand its bond-buying program as early as its meeting next month.
Others complain the ECB has been too slow to act and compared its €645 billion in bailout funding to the U.S. Federal Reserve’s $2.3 trillion.
Europe’s economic fate will ripple through the economies of the U.S., its’ largest trading partner, and China, its’ second-largest. Europe also is the largest foreign investor in sub-Saharan Africa, which already is in financial crisis as dollar-denominated debts come due, investors have redirected their money to safer harbors, and countries’ resource-based economies have been slammed by the global shutdown.
“It’s high time for the ECB to step up its game,” said analysts at Allianz.
ECB’s Chief Economist Forecasts Possible Three-Year Recovery
In a worst-case scenario, Europe’s economy will not return to pre-pandemic activity levels until at least 2023, according to Philip Lane, the ECB’s chief economist.
The scenario assumes a 12-percent economic contraction across the Eurozone this year.
Current trends indicate that Europe’s economy will shrink by 7.7 percent this year, according to Paolo Gentiloni, the European Commission’s economic minister.
Whether the worst case comes to pass depends on the time needed to subdue the virus and how quickly customers are able to support businesses returning to normal activities, Lane said.
TRENDPOST: For more than two years, we have been saying that the world’s economy was one “Black Swan” event away from the “Greatest Depression.”
Now, in the midst of the unprecedented economic devastation resulting from politicians shutting down most of the global economy and creating restrictive rules to reopen it, they, along with mainstream economists, still shy away from using the “D word”… but, the “Greatest Depression” has begun.
TREND FORECAST: As the European economy continues to slide deeper into depression, and tensions rise among rich and poorer nations, we forecast the beginning of the end of the alliance, both economically and militarily.
In addition, as the “Greatest Depression” worsens, and the euro continues its decline against the dollar, more Eurozone nations will abandon the currency and reinstate their own.
TREND FORECAST: As economic conditions dramatically deteriorate, social unrest will escalate throughout Europe. Established parties will be overthrown and a great intra and interstate divide will reign throughout the region.
And, whether it’s conflict between European nations or outside “enemies,” to redirect the people’s anger away from the drastic failures created by their governments, as Gerald Celente says, “When all else fails, they take you to war.”
German Court Ruling Tears at E.U.’s Fabric
The German Constitutional Court, the nation’s highest tribunal, has tentatively sided with the ECB in a lawsuit challenging the legality of the bank’s five-year-old bond-buying program. The court demanded the bank explain the program’s economic justification and demonstrate that the program’s benefits outweigh any negative effects.
The court’s skepticism casts doubt on the bond-buying program’s legitimacy as well as its future. It also could leave the bank open to further suits or lead to limits on the ECB’s activities, including bond purchases.
The court’s ruling raises the question of whether a national court has jurisdiction over any aspect of the European Union’s institutions.
In addition, the court’s action has sharpened tensions endemic to the union.
Northern Europe’s economy, and Germany’s in particular, is rooted in manufacturing. The continent’s economic lockdown, and Germany’s choice to remain partially open, affected the north less severely than southern countries, which depend more heavily on tourism.
Germany’s economy is forecast to grow 5.9 percent in 2021 after contracting 6.5 percent this year. In contrast, the GDPs of Greece, Italy, and Spain are all predicted to shrink by at least 9 percent this year.
Residents of northern countries have become increasingly resentful of demands that they fund the ECB’s ongoing loans and bailouts for nations in the south.
The disparity in the pace of economic recovery and southern countries’ dependency pose a threat to the European Union itself, noted Mr. Gentiloni, as countries that have more resources and recover more quickly may become increasingly less willing to sustain weaker nations for a long period.
PUBLISHER’S NOTE: The German court ordered the government to make sure the ECB provided a “proportionality assessment” of its bond-buying and said its “economic and fiscal policy effects” must met policy criteria.
They ordered its central bank, the Bundesbank, to stop buying bonds and begin selling the more than €500bn it has bought if, after three months, the ECB did not obey its order.
There is strong pushback from the ECB in protest of the court’s ruling. And last week, its president, Christine Lagarde, said the central bank remains “undeterred” and will continue its QE program.
TREND FORECAST: The German court might ultimately rule over Brussels and recognize that central banks do not have the authority to steal ordinary working people’s money and hand it over to banks, corporations, and other Bigs to ensure socialism for the rich and go-it-alone capitalism for the citizenry.
However, since the European Central Banksters have vowed to ignore/and or discount any court decision, as the “Greatest Depression” worsens, it will intensify regional unrest throughout the region as we forecast, with more nations demanding independence from EU rule.
Johnson Loosens Lockdown Rules, Exhorts Brits to Go Back to Work
British prime minister Boris Johnson called on the U.K.’s workers to return to their jobs if at all possible, starting 13 May.
“We now need to stress that anyone who can’t work from home, for instance those in construction or manufacturing, should be actively encouraged to go to work,” Johnson said in a broadcast address. People commuting, however, should shun public transport, he added.
The new national watchword has changed from “stay home” to “stay alert,” he noted, meaning that social distancing and other health precautions are to be maintained.
Johnson’s administration also is loosening many strictures that have defined the country’s six-week lockdown.
Previously, people with non-essential jobs were confined at home and allowed to leave once a day to exercise or buy food or medicine.
Now people will be permitted to sunbathe in public parks, play sports with members of their households, and go for a drive.
Elementary schools could welcome students again as early as 1 June under a best-case scenario, and a greater number of shops, hotels, and restaurants could be open again before August.
The governments of Northern Ireland, Scotland, and Wales – all independent nations within the U.K. – said there had been no coordination with Johnson’s administration about the changes. The three countries have extended their original lockdown orders through 28 May and will continue their “stay home” message at least until then.
U.K. To Quarantine Air Passengers for 14 Days
Beginning 1 June, anyone coming into the U.K. by air will be required to isolate themselves in a private residence for 14 days, according to a new government edict.
The only exception will be Brits arriving home and any citizen of Ireland.
Upon entering the country, passengers may be required to provide the address of the place where they will spend their two-week quarantine.
Airlines U.K., the trade organization for British airlines, said the policy needed a “credible exit plan” and a weekly review to determine its impact.
The country’s Airport Operators Association contends the quarantine “would not only have a devastating impact on the U.K. aviation industry, but also on the wider economy.” The association also said businesses and sectors of the economy damaged by the quarantine should receive government compensation for any losses.
France’s Third-Largest Bank Reports Disastrous First Quarter
Societé Generale’s investment bank division lost €537 in this year’s first quarter, compared to a €140 million profit in the same period last year. The company’s equity trading unit saw revenues collapse by 99 percent from a year earlier to just €9 million. The bank also warned that its loan losses this year could reach €5 billion.
Across all of its operations, the financial giant lost €326 million in the quarter. Analysts had expected a profit of about that amount, especially since many of its competitors posted revenue gains close to 20 percent in similar divisions.
In part, the bank’s woes arose from large exposure to oil industry loans, which have soured around the world. The bank had loaned €240 million to a Singapore oil trader that has gone bankrupt.
Many companies canceled their stock dividends, driving down revenues for the bank’s derivatives that depended on the payouts.
Societé Generale’s stock has lost half its value this year, leading analysts to speculate about the bank’s ability to survive.
The bank has promised up to €700 million in cost cuts this year.
British Airlines Acknowledge Grim Future
Virgin Atlantic is laying off up to 3,150 of its 10,000 employees and closing its 35-year headquarters operations at London’s Gatwick airport. It also is trimming its fleet from 43 planes to 36.
Virgin has asked the British government for £500 million in aid but the request was rejected because the company had not sought new investment elsewhere first, the government said.
“If we are to emerge from this crisis a sustainably profitable business, now is the time for further decisive action” to slash costs and hoard cash, Virgin CEO Shai Weiss told employees.
Virgin has said it will take at least three years for it – and, presumably, Britain’s other carriers – to return to 2019 passenger levels.
In late April, British Airways announced plans to lay off about a third of its 42,000 workers. RyanAir, the Irish budget carrier, will also trim a third of its labor force. Scandinavian airline SAS will permanently shed half its workforce.
Rolls Royce, which makes jet engines for Airbus and Boeing, is turfing out up to 8,000 employees, about 15 percent of its payroll, as part of a corporate restructuring plan to cut costs.
The cuts are expected in England, Germany, and Singapore.
Use of Health Care Apps Soars
From mid-March through April 12 in the U.K., the number of patients’ remote consultations with their medical care providers tripled, from about 25 percent to 71 percent from the same period a year earlier, according to the Royal College of General Practitioners.
The apps allow patients to send their doctors a list of symptoms with a video, have video consultations, and send their caregivers documents and text messages.
Security experts have noted that about 80 percent of telemedicine apps in use have flaws that could allow medical information to be accessed and pirated or manipulated, according to a 2019 paper in the British Medical Journal.
Still, many in medicine think the expanded use of apps will become permanent, even if not in the numbers occurring during the current lockdown.
“More and more people will start getting equipment” related to telemedicine, said Simrat Marwah, a London physician. “Maybe people will start taking their own health care into their own hands and take back responsibility.”
“Having the capability to offer remote consultations will be beneficial… most importantly for our patients long after this pandemic has ended,” noted Martin Marshall, chair of the Royal College of General Practitioners.
TRENDPOST: This shift to telemedicine is central to the future of medical care, both in reducing costs and in inspiring persons to take a more active role in monitoring and protecting their health. As Gerald Celente wrote 30 years ago in his book Trends 2000, education and other services and sectors of the economy will shift increasingly to the web.
The trend to online living and working will continue strongly, with big rewards for entrepreneurs and investors.
Warning: Trying to access array offset on value of type bool in /bitnami/wordpress/wp-content/themes/the-newspaper/theme-framework/theme-style/function/template-functions.php on line 673
Europe’s Economy on Track for 7.7-Percent Contraction, 9-Percent Jobless Rate