What’s Really Behind the Eurozone’s Economic Turnaround

Date: 14-08-2017
Source: The Wall Street Journal By Simon Nixon

Many economists may have underestimated the role of improvements to the supply side of the eurozone economy

It is now four years since the start of the remarkable Spanish economic recovery. Yet at the time, few saw it coming. Back in July 2013, the International Monetary Fund forecast that it would take until 2018 for Spanish economic growth to barely scrape above 1% while unemployment would remain above 25% for five years.

In fact, the Spanish turnaround had already begun: Growth exceeded 1% in 2014 and has been above 3% ever since. In that time, Spain has created more than two million jobs, bringing the unemployment rate down from a peak of 26.2% to an eight-year low of 17.2% today.

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Recovery is Not Resolution

Carmen Reinhart

Carmen Reinhart is Professor of the International Financial System at Harvard University’s Kennedy School of Government.

AUG 1, 2017 Project Syndicate

CAMBRIDGE – Earlier this year, the consensus view among economists was that the United States would outstrip its advanced-economy rivals. The expected US growth spurt would be driven by the economic stimulus package described in President Donald Trump’s election campaign. But the most notable positive economic news of 2017 among the developed countries has been coming from Europe.

Last week, the International Monetary Fund revised upward its growth projections for the eurozone, with the more favorable outlook extending broadly across member countries and including the Big Four: Germany, France, Italy, and Spain. IMF Chief Economist Maurice Obstfeld characterized recent developments in the global economy as a “firming recovery.” Growth is also expected to pick up in Asia’s advanced economies, including Japan.

Explaining Global Recovery Amid Political Recession

Michael Spence

Michael Spence, a Nobel laureate in economics, is Professor of Economics at NYU’s Stern School of Business, Distinguished Visiting Fellow at the Council on Foreign Relations, Senior Fellow at the Hoover Institution at Stanford University, Advisory Board Co-Chair of the Asia Global Institute in Hong Kong, and Chair of the World Economic Forum Global Agenda Council on New Growth Models. He was the chairman of the independent Commission on Growth and Development, an international body that from 2006-2010 analyzed opportunities for global economic growth, and is the author of The Next Convergence – The Future of Economic Growth in a Multispeed World.

AUG 1, 2017 Project Syndicate

MILAN – In the summer, as life slows down, there is space to reflect on fundamental issues. One of the key puzzles occupying my mind of late is the disconnect between widespread political dysfunction and relatively strong economic and financial-market performance.

Today, the world’s major economies are experiencing a steady recovery, despite the occasional setback. To be sure, economic performance is far from reaching its full potential: depending on where one looks, one can find output gaps, excess leverage, fragile balance sheets, under-investment, and unfunded longer-term non-debt liabilities. Still, financial markets show no signs of convulsion, even as monetary stimulus is gradually withdrawn.

Yet, at the same time, political conditions seem to be deteriorating. Polarization has intensified, owing partly to growing resistance to globalization and the unbalanced growth patterns that have resulted from it. In the United States, for example, the Pew Research Center reports that people not only disagree vehemently with their compatriots on the other side of the aisle; they also don’t like or respect them.

Europe’s Rocky Recovery

Philippe Legrain

Philippe Legrain, a former economic adviser to the president of the European Commission, is a visiting senior fellow at the London School of Economics’ European Institute and the author of European Spring: Why Our Economies and Politics are in a Mess – and How to Put Them Right.

JUL 28, 2017 Project Syndicate

LONDON – So far this year, the crisis-prone European Union has fared better than expected. Economic growth has picked up, unemployment continues to fall, and troubled Spanish and Italian banks have been resolved without sparking a panic.

Things are looking up politically, too. Europhobic populists were defeated in the Dutch and French elections earlier this year, and have lost momentum ahead of Germany’s national election in September. And, contrary to earlier fears, the political upheavals of 2016 seem to have boosted popular support for the EU, at least for now.

Britain’s decision last June to withdraw from the EU has plunged the country into turmoil, making an exit from the Union seem less appealing to other discontented Europeans. In addition, the Brexit negotiations have underscored the costs and complexities of leaving the bloc, and have rallied the remaining 27 EU governments around a common cause. The same can be said of US President Donald Trump, against whom Europeans are increasingly united.

The Global Recovery’s Downside Risks

Nouriel Roubini

Nouriel Roubini, a professor at NYU’s Stern School of Business and CEO of Roubini Macro Associates, was Senior Economist for International Affairs in the White House’s Council of Economic Advisers during the Clinton Administration. He has worked for the International Monetary Fund, the US Federal Reserve, and the World Bank.

JUN 5, 2017 Project Syndicate

NEW YORK – For the past two years, the global economy has been growing, but it has swung between periods of rapid expansion and deceleration. During this period, two episodes, in particular, caused US and global equity prices to fall by about 10%. Is a pattern emerging, or is a fitful global recovery set to stabilize?

The first episode came in August/September 2015, when many observers feared that China’s economy could be headed for a hard landing. The second episode, in January/February 2016, also stemmed from concerns about China. But investors were also increasingly worried about stalling US growth, collapsing oil and commodity prices, rapid interest-rate hikes by the US Federal Reserve, and unconventional negative-rate monetary policies in Europe and Japan.

Each deceleration episode lasted for about two months, at which point the correction in equity prices began to reverse. Investors’ fears were not borne out, and central banks began to ease their monetary policies; or, in the case of the Fed, put rate hikes on hold.

Keen, Hudson Unpick Historical Path to Global Recovery

By Michael Hudson, Wednesday, November 30, 2016 

REAL VISION INTERVIEW TRANSCRIPT:

Featuring: Michael Hudson, Steve Keen
Published date: 22nd of November 2016

Synopsis: With two renegade economists in one room in London for 90 minutes you can expect some pretty controversial opinions about the current economic establishment. This film has all the makings of a Real Vision classic, as Steve Keen interviews professor and author, Michael Hudson, sharing their radical views and an extraordinary depth of knowledge.

Discussing the complacency and complicity of traditional economic models, as taught in universities and adopted by central banks, Michael and Steve take us on a journey from a solar system to a galaxy of thought, taking in the history of economics to solutions for the ongoing global depression.

Highlights:

Michael Hudson: Killing the Host will be published in German at the end of the month of November. Basically, it’s a more popular version of The Bubble and Beyond. It shows that when the financial sector takes over, it’s very much like a parasite in nature. People think of parasites simply as taking the life blood of the host and draining the energy. But in order to do that, the parasite has to have an enzyme to take over the host’s brain. They take over the brain and convince the host that the free luncher is actually part of the host’s own body, and even its baby to be protected. That’s what the financial sector has done.

Escaping the New Normal of Weak Growth

Michael Spence

Michael Spence, a Nobel laureate in economics, is Professor of Economics at NYU’s Stern School of Business, Distinguished Visiting Fellow at the Council on Foreign Relations, Senior Fellow at the Hoover Institution at Stanford University, Academic Board Chairman of the Asia Global Institute in Hong Kong, and Chair of the World Economic Forum Global Agenda Council on New Growth Models. He was the chairman of the independent Commission on Growth and Development, an international body that from 2006-2010 analyzed opportunities for global economic growth, and is the author of The Next Convergence – The Future of Economic Growth in a Multispeed World.
 

SEP 30, 2016, Project Syndicate

MILAN – There is no question that the recovery from the global recession triggered by the 2008 financial crisis has been unusually lengthy and anemic. Some still expect an upswing in growth. But, eight years after the crisis erupted, what the global economy is experiencing is starting to look less like a slow recovery than like a new low-growth equilibrium. Why is this happening, and is there anything we can do about it?

Eurozone Recovery Belies Euroskeptic Myths

Date: 05-05-2016
Source: The Wall Street Journal

Recent data suggest recovery in the common-currency area is possible

Euroskeptics have long complained that the British economy is “shackled to a corpse”—that being part of a European Union with the dysfunctional eurozone is a major drag on the U.K.’s fortunes.

For the last six years, this charge was hard to refute: The eurozone has been mired in seemingly permanent crisis, its multiyear recession a drag on the global economy.

Yet last week, with just over 50 days to go before Britons vote on whether to quit the EU, Eurostat published preliminary estimates of first quarter gross domestic product that showed the eurozone economy grew by 0.6%, an annualized rate of 2.2%. That is faster than the U.S. at 0.1% or the U.K. at 0.4%. The corpse may not be dead after all.

This follows a string of recent data that suggest the eurozone has shrugged off what now appears to have been largely a liquidity-driven panic at the start of the year to continue its modest recovery, buoyed by low oil prices, falling borrowing costs, a weak currency and a modest fiscal stimulus.

Europe’s Economy, After 8-Year Detour, Is Fitfully Back on Track

Date: 30-04-2016
Source: The New York Times

By one measure, the economic crisis that has long ravaged Europe is finally over.

On Friday, the European Union released data showing that the overall economy of the 19 countries that use the euro advanced 0.6 percent over the first three months of the year, compared with the previous quarter.

That gain, equivalent to an annual rate of 2.2 percent, brought the eurozone’s gross domestic product for the period — the total value of goods and services produced — to slightly above the previous peak reached in the early months of 2008, before the crisis emerged and Europe’s core economy descended into a pair of crippling recessions.

“The long-awaited recovery may finally be consolidating,” said Iain Begg, a research fellow at the European Institute of the London School of Economics.

The Post-Crisis Economy’s Long Debt Hangover

Carmen Reinhart

Carmen Reinhart is Professor of the International Financial System at Harvard University’s Kennedy School of Government.

APR 21, 2016, Project Syndicate

CAMBRIDGE – The meeting of G-20 finance ministers and central bank governors in Washington, DC last week concluded on a sour note. Small wonder: Global growth prospects have dimmed amid a variety of risks now emanating from both advanced and developing countries.

The meeting’s participants addressed – yet again – the need for greater policy coordination, more fiscal stimulus, and a variety of structural reforms. And that discussion has become more urgent, given the widespread view that monetary policy may not have much ammunition left, and that competitive devaluations would do more harm than good.

But with the largest economies, nearly eight years after the global financial crisis, burdened by high and rising levels of public and private debts, it is baffling that comprehensive restructuring does not figure prominently among the menu of policy options. Indeed, for the global economy, debt restructuring is the proverbial elephant in the room.