
Euro area is back on the brink of recession - theBashShell
https://www.economist.com/finance-and-economics/2019/01/22/the-euro-area-is-back-on-the-brink-of-recession
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maffyoo
Given China has seen lowest growth in almost 30 years and the US where some
positive numbers are hiding some negative stories, it would seem that there is
a wider context to take into consideration. The article seems loaded with the
premise of the Euro is bad but taking the wider global context, this premise
seems flimsy. Dont get me wrong, the Euro has proven to be a great way of
legally devaluing german currency and the opposite to southern med countries
but my issue is the finger being pointed at something when there is almost
certainly a bigger picture to be considered.

~~~
xiphias2
You're right, bonds are globally extremely inflated. It's predictable that
people are losing confidence in fiat currencies with such an asset bubble and
without a country to escape to anymore. I was proud owner of CHF as an
exception from other fiat currencies until it got pegged to EUR.

~~~
iknowstuff
Well, the peg only lasted for three years.

~~~
xiphias2
Only? I lost enough money in 1 day that I lost my trust in the Swiss National
Bank. I'm not complaining though, I started diversifying to other asset
classes and easyly made it back, so I view it as a lesson learned.

~~~
nickik
Guess what, monetary policy about managing your personal check book. The SNB
acted pretty well, one of the best in the world and the Swiss economy was much
better of then most comparable countries because we could devalue when people
like drove up the demand for CHF and almost pushed Switzerland in a deflation.
That might be good for your check book but it would be a disaster for the
economy.

~~~
xiphias2
It's bad for exporters, great for everybody else in Switzerland. Anyways I
didn't own any fiat since then, but of course living with the volatility of
other assets have their downsides. I'll move back partly to fiat, as it still
has its advantages.

~~~
nickik
Its not bad for exporter, the opposite actually. Exporters were the people
wanting expansionary monetary policy because high CHF made their products more
expensive.

In fact this was great for the majority of people as nobody profits in the
long run from a deflationary spiral.

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raiyu
A headline in search of an article.

Very little context provided, would have probably been served even better with
just a graph of the euro zone growth from 1999 quarter by quarter versus other
economies like Japan, US, China for context.

Journalism feels lazier and lazier as it constantly searches for more clicks
and ad impressions.

~~~
rossdavidh
I think there is no chart because, if you go find one, it shows EU growth in
the last ten years has been going up and down in a pretty similar fashion to
Switzerland, Japan, South Korea, and other non-EU advanced economies. This
would indicate that being in the EU hasn't really helped them all that much,
but it also hasn't hurt that much (in aggregate). So, not much of a story,
which feeds right back to your point.

~~~
kaybe
Well, the EU was not made to improve the economies of its members. Its main
goal is to intertwine them enough to make another big war way too painful.

~~~
zozbot123
No surprise there. "When goods don't cross borders, armies will."

~~~
rossdavidh
I've heard that, but there are a lot of counter-examples. The colonial wars in
China and elsewhere happened in order to force China to participate in trade.
Plenty of cases of the U.S.A. invading either to make sure their banks got
reimbursed, or to prevent Europe from doing the same.

Plenty of other examples one could give, but the chart on this article
([https://www.weforum.org/agenda/2017/01/why-the-world-
looks-a...](https://www.weforum.org/agenda/2017/01/why-the-world-looks-a-bit-
like-it-did-before-world-war-i)) may do. Free trade hit a peak in 1913, the
highest it had perhaps ever been. The period that followed was not exactly
peaceful.

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olivermarks
The Economist has historically been a big supporter of the EU and
globalization. Something has shifted in their perspective. They were also
pretty downbeat about the EU's prospects while discussing the Aachen Treaty
between France and Germany that was signed yesterday.
[https://www.economist.com/leaders/2019/01/17/france-and-
germ...](https://www.economist.com/leaders/2019/01/17/france-and-germany-plan-
to-sign-a-new-treaty-in-aachen)

~~~
zcid
Yeah, I had to double check to make sure I was actually reading the Economist.
Felt weird to be getting a perspective like that from them. Why the shift?

~~~
owengriffiths
They don't seem to make the link that maybe Brexit is not such a bad idea
after all, which seems a logical conclusion to me.

~~~
macintux
You think a recession in Europe will impact Britain _less_ after Brexit? It’s
not as if Britain will have more trading options.

~~~
makomk
The EU is actually pretty protectionist, to the point where Turkey got into
some trouble with the WTO for implementing their trade policies as part of the
customs union with the EU.

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rb808
A huge issue is the stagnating population growth in European countries. Over
the last 10 years Germany, Italy, Spain have only barely risen in population.
Of course that means lots more retirees and fewer workers. Maybe flat economy
is actually a good outcome as can be expected.

One of my favorite stats is that 100 years ago the population of Europe was
nearly 30% of the world's total. Now its <10% and falling quickly.

Finally Yes I dont think its necessarily a bad thing, but you can't expect
strong economic growth will falling working age population.

~~~
sonnyblarney
Most of this has to do with massive growth elsewhere, not so much failing
growth in W. Europe, which is more of a new trend.

I don't think the 'warm bodies arms race' is going to end well for anyone,
another perspective might be more apt.

~~~
stupidprizes
I don't think the 'warm bodies arms race' will end well either. What
perspective are you considering?

~~~
sonnyblarney
Current growth strategies are all fundamentally 'warm body growth' i.e. the
economy is grown mostly through babies or immigration, not any kind of real
industrial growth or innovation.

If you look at USA growth vs. Western Europe, the USA does better, but not so
much if you account for headcount.

As Western nations have fewer babies, there's a push for more migration, which
in some places can work, not so much in others.

Europe has quite a lot of people and there are real physical limits to that
growth - surely, it could all be as dense as Hong Kong but at some point,
there needs be some consideration.

The West should not be trying to compete with Asia by having as many babies as
them, surely.

If anything, we should maybe be trying to help tackle population explosion in
some places, which can be done even with fairly non controversial methods like
basic economic prosperity.

~~~
collyw
> which can be done even with fairly non controversial methods like basic
> economic prosperity.

Where's the money going to come from in a non-controversial way?

~~~
sonnyblarney
Well it may not come from anywhere.

But we still have a long way to go in applying technology and processes to
make our lives better.

Also, as 5B poor people in the world come online and become consumers, they're
going to need a lot of iPhones and eat a lot of KFC etc.

------
adventured
Since 2007 - broadly the great recession time frame forward - Lithuania has
had by far the best GDP per capita growth among Euro members at nearly 40%
(nominal, USD terms). Estonia is second, at around 19-20%. Latvia is third at
about 11%. Slovakia is up 10%.

A distant fifth is Germany at around 7%. Ireland is up a couple percent.

Everyone else in the Eurozone is either near flat or negative on growth over
the last ~11-12 years.

Greece is down 35%, Italy is down 15%, Spain is down 14%, Portugal is down 7%,
France is down 7%, Finland and the Netherlands are down about 5%.

While the article is criticizing the Euro, Denmark and Sweden have also seen
essentially zero per capita growth since 2007. The UK is down 20% over that
time.

Outside that group and the Euro, you've got Romania up 30%, Poland up around
23%, Czech up 11% and Russia up 18%. I've excluded Norway, just because their
figures swing wildly with oil.

There's definitely a sustained, serious growth problem in most of the
Eurozone, however the baltics are doing quite well. The Netherlands, Belgium,
Ireland, Finland, Germany and Austria are starting from quite high per capita
figures, it's not a trivial task to keep pushing those higher.

The real issue isn't growth generally, it's that the next slide backwards in
terms of recession, is going to badly damage the bunch that hasn't held their
ground or seen enough recovery yet: France, Italy, Spain, Portugal, Greece.
I'm not sure how the Euro survives if those sink lower in a recession and see
another lost decade. Which would then actually be a lost two decades - a 1/3
to 1/2 real contraction for all of them, inflation adjusted over time. Losing
that much of your purchasing power over 20 years is brutal, people won't sit
idly by and absorb that forever, they'll rebel against the institutions.

France has pretty considerable exports, equivalent to nearly 20% of their GDP
(the US is closer to 11% by comparison). If I'm them, I'd be seriously
contemplating that I'd be better off controlling my own currency, so as to
undercut the Germany export juggernaut rather than suffer from a currency that
is too expensive (while simultaneously being artificially cheap for the German
economy, spurring their exports and trade imbalance). Spain, Italy, Portual
and Greece are all similarly suffering from a Euro that is too expensive for
their situations (to varying degrees) and is harming their export potential.

~~~
antientropic
Well, looking at
[https://en.wikipedia.org/wiki/Economy_of_the_Netherlands](https://en.wikipedia.org/wiki/Economy_of_the_Netherlands),
it shows Dutch GDP per capita (in EUR, nominal) up by >14% since 2007. You
used GDP in USD, but to me that seems somewhat misleading: just because the
EUR dropped relative to USD, doesn't mean that the economy suddenly shrank.

> I'm not sure how the Euro survives if those sink lower in a recession and
> see another lost decade.

This seems like a non sequitur to me. Why _wouldn 't_ the Euro survive? If
Japan had a lost decade, would you speculate about the survival of the yen?

~~~
hemantv
Maybe Japan has more obeying population than the more enterprising population
in Europe.

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NKosmatos
Things are not looking promising and 2019 is European elections year. Greece
has financial and many other issues, Italy has also many financial and
internal issues, Germany is not holding the same powerful position as it had
with Merkel, UK is uncertain with one foot in the EU, France has already a lot
of problems and many more coming up and the same goes for other countries
(immigration, politics, economy...). Let’s see how things play out.

~~~
PedroBatista
Meanwhile, every other country in the World is smooth sailing.

~~~
NKosmatos
Certainly not, lots of issues in many other countries. It’s just that the
density/concentration of problems is higher in EU (IMHO).

~~~
Daishiman
The EU doesn't have a looming student loan crisis, or a health crisis due to
opioid epidemics. In terms of human suffering caused by these two issues alone
I have a hard time believing the EU is worse off.

~~~
hueving
I fail to see the looming student loan crisis given that they can't be
discharged in bankruptcy.

~~~
wpdev_63
It's a problem if students can't pay for their student loans. If nearly '40%'
of borrowers are expected to default on their student loans, then there will
be alot of universities shutting down in the near future and there will be
ripple effects in the economy[0].

[0]:[https://www.cnbc.com/2018/08/13/twenty-two-percent-of-
studen...](https://www.cnbc.com/2018/08/13/twenty-two-percent-of-student-loan-
borrowers-fall-into-default.html)

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novaRom
This article seems to ignore Northern and Eastern Europe which are booming.
Italy is not the whole Europe. Compare it to US where different states have
different performance at different times.

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cm2187
That I think is the saving grace of Brexit. Investor confidence in Italian
public debt will evaporate sooner or later, and I don’t see Germany allowing
and paying for a bailout of Italy, given how they reacted to the bailout of
Greece. The UK will likely look like a safe heaven for capitals when that
happens.

~~~
notahacker
How does Brexit make the UK attractive in the event of a near-term Eurozone
crisis? The grim economic outlook if the UK's major trade partners are all in
deep recession isn't _improved_ by it having lost a lot of that trade earlier
in the year for other reasons, and its economy isn't going to reinvent itself
overnight.

~~~
cm2187
Because if (or when) Italy is about to introduce capital controls to prevent
its banking system from collapsing, investors will not make a decision based
on the industrial outlook of the UK, but based on the stability of its legal
and banking system, and its independance from Italy's financial woes.

~~~
notahacker
But the stability of the UK's legal and banking system receives precisely zero
benefit from Brexit (quite the opposite) and the UK gains further
"independence from Italy's financial woes" from Brexit only inasmuch as it
would lose some of the trade it might be expected to lose in the event of a
Eurozone recession a little earlier. (I could just about see how the UK would
benefit from being less exposed to Italian financial woes if you anticipated
an EU policy response of requiring Member States to contribute to bailouts
and/or buy up Italian debt, but that's the bit you ruled out, and I'd see as
being unlikely to be applied to non-Eurozone states)

~~~
throw564d
No, they were trying to rope in even non eurozone member states.

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chpmrc
I didn't know Theresa May wrote for The Economist. /s

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BogdanPetre
[http://archive.fo/URd3A](http://archive.fo/URd3A)

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offsetr
And to think the comission was making speeches just a few months ago touting a
faster than US growth rate.

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adamnemecek
Common currency without a common monetary policy, who would have thunk that
this was a bad idea?

~~~
gricardo99
uh, the ECB sets the eurozone monetary policy[1]

1 -
[https://en.wikipedia.org/wiki/European_Central_Bank](https://en.wikipedia.org/wiki/European_Central_Bank)

~~~
isostatic
There's a lot of FUD about the EU, especially in America

~~~
NicoJuicy
Don't get me started about the American companies that rate other countries.

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zavi
We can always just keep siphoning cash from US multinationals thru bogus
antitrust claims. That's one way to stay afloat in the face of demographic
crisis, stagnant productivity, and Chinese takeover of key sectors.

