Euro Zone Booming !

[pricemazda]

But pulling out of the euro will only help if Italy devalues the Lira which it has done repeatedly since 1945 to try to artificially boost competitiveness, it doesn't solve the problem and only increases inflation.

The only way to resolve this issue for Italy is to sort out its fiscal mess, stop spending huge sums of money which it doesn't have and sort out its pension problem which is the worst in Europe.

Pulling out of the euro isn't the answer.

[Swede]

^Plus, pulling out of the € would incur a huge cost from having to introduce the new coins and notes.

[The Dear Leader]

Minting new coins and printing new bills isn't that expensive. I don't think they should leave the Eurozone either but it's certainly been debated in Italy.

[pricemazda]

It will never happen the economic and political costs are too high for the euro to fail. It would have such a huge impact on the currency markets and therefore on the eurozone economy, and therefore the global economy.

Lets not forget that about 1/3 of the world's currency reserves are in euros

[The Dear Leader]

This is just about Italy though. Even before the Euro was introduced, plenty of people thought that Italy should stay on the outside.

[Exarchus]

Yeah well, they have the same problem than Romania had until they changed of currency.

Their currency was so worthless with inflation they had to use bills with a lot of 0s, they had the impression to be rich, and now they have small numbers... (semi J/k)

[one very bored guy]

Originally Posted by The Dear Leader

Minting new coins and printing new bills isn't that expensive. I don't think they should leave the Eurozone either but it's certainly been debated in Italy.

No, it is incredibly expensive to change currency's. Not only does it require the physical new currency that needs to be minted. It also requires large scale changes on the financial markets. Every business in the country will have to change their books, documents, price tags and software. Every person would have to be re-educated in the new currency (it will not come back as 1:1). It is something that should only be done when there is a positive reason for it.

[The Dear Leader]

The beginning of the end of Germany's "recovery"?

German ZEW indicator plunges to -22.2 in September

MANNHEIM, Germany, Sept 19 (Reuters) - Investor sentiment in Germany fell more sharply than expected in September, the latest survey by the ZEW economic institute showed on Tuesday.

The Mannheim-based think tank said it economic expectations indicator for Germany, based on a survey of 307 analysts and institutional investors, fell to -22.2 from -5.6 in August.

The mid-range forecast in a Reuters poll of 46 economists last week was for a September reading of -7.8 <ECONDE>. Predictions ranged from -19 to 15.

A separate gauge of current conditions for Germany rose to 38.9 from 33.6 in August, above a consensus for 35.0.

The ZEW's euro zone expectations indicator registered -10.2 for September after 1.3 in August.

http://today.reuters.com/news/articl...&from=business

[The Dear Leader]

Originally Posted by pricemazda

It will never happen the economic and political costs are too high for the euro to fail. It would have such a huge impact on the currency markets and therefore on the eurozone economy, and therefore the global economy.

Lets not forget that about 1/3 of the world's currency reserves are in euros

It's actually just around 1/4 (and the pace of diversification has slowed). Besides, these countries can always switch to Deutschmarks.

[Nexus6]

Originally Posted by The Dear Leader

Investor sentiment in Germany fell more sharply than expected in September, the latest survey by the ZEW economic institute showed on Tuesday.

That is only investor sentiment though and investors change their mood very randomly, plus they tend to exaggerate trends, just look at what investors said about the oil price just a few weeks ago and how the situation is now.

Currently they are all gloomy about the US economy and rising sales tax in Germany. Well, the problem I see with that notion is that some fundamental things have changed in recent years, most notably the US ain't not running the world economy anymore. But many investors seem to be so stuck with that idea (which was correct for decades) that they are unable to realize the new world we live in now. To give you some figures, German exports to the US are now at an all time low in percentage of total exports, 8% that is. So much has world trade diversified, that the importance of the US for the German economy has gone from dominating (we used to export over 50% of hour goods to the US at the peak) down to minor. Second problem is with the salex tax. Investors often only have a background in business administration but not in economics. Let's examine what happens to the 3% increased sales tax (according to the investment community they go into some black hole and dissapear forever from this universe and thereby weaken the purchasing power of consumers). Thruth though is that one half of it will be used to lower social security contributions which increases net wages (higher purchasing power) and lowers gross wages (more employment). The other half will be used to lower the amount of new credit the state has to request on the money market. Since the state is the single largest requester of credits, the demand for credit will be lowered significantly and that will in turn lower real interest rates which makes it easier for private companies to get credit and to invest. Therefore I don't expect much of an impact through the increases sales tax.

[Fabb]

Eurozone Sept CPI drops to ECB target,confidence up
Fri Sep 29, 2006 4:43am ET177

By Jan Strupczewski

BRUSSELS, Sept 29 (Reuters) - Lower oil prices helped cut September euro zone inflation to its lowest in 3-1/2 years and price growth expectations eased too, data showed on Friday, but this is unlikely to stop further ECB rate rises.

The European Union's statistics office estimated prices grew 1.8 percent year-on-year in September -- the lowest rate since March 2003 -- down from 2.3 percent in August and below market expectations of 1.9 percent.

But although it is now at the European Central Bank's target of "below, but close to 2 percent", economists said inflation would rebound in a few months as the oil price effect wears off, Germany raises Value Added Tax and the economy powers ahead.

"Over coming months, headline inflation will push back above 2 percent and remain there on average over 2007. The data should therefore have little impact on ECB policy," said Mitul Kotecha, head of global foreign exchange research at Calyon in London.

Markets expect the ECB to raise interest rates next Thursday by 25 basis points to 3.25 percent and price in a good chance for them to reach 3.75 percent by mid 2007.

Hawks on the ECB board are likely to get a boost from the European Commission's euro zone economic sentiment indicators which hit multi-year highs in September, against expectations of a small decline, pointing to a continued economic upswing.

"As this fits nicely with the ECB's optimistic projection for GDP growth in the second half of 2006, central bank rates are likely to rise further," said HVB economist Marco Kramer.

But hard data for the euro zone's two biggest economies added a note of caution to the upbeat sentiment indicators.

German retail sales, which show household demand, were unchanged in August against July despite expectations of a rise, pointing to weak private consumption in the euro zone's biggest economy.

The data followed a smaller than expected decline in unemployment in September. In France, unemployment rose in August instead of the expected decline.

Yet ECB Governing Board member Axel Weber said in Berlin growth in Germany could get a boost this year and next thanks to falling oil prices.

ECONOMY GOING STRONG

The ECB is worried that with the economy growing strongly, unemployment falling and borrowing costs low, there is potential for an inflationary upswing in wages and prices.

While the drop in inflation is likely to be welcomes by the ECB, the bank's Executive Board member Jose Manuel Gonzalez Paramo said on Thursday that monetary policy could not respond to short-term changes in price trends, such as oil.

A critical factor to the ECB's goal of keeping inflation in check is anchoring inflation expectations at low levels, because expectations affect price behaviour and could help keep inflation below 2 percent on a sustained basis.

The monthly European Commission survey showed some success in that respect with consumer inflation expectations down to 24 points from 26 points in August and selling price expectations among manufacturing industry unchanged at 13.

"One of the ECB's major objectives is to keep inflation expectations in check to avoid second round effects, and today's release goes into the right direction, albeit not being an 'all clear'," said Astrid Schilo, economist at HSBC.

ECB policymakers have made it clear that a few months of relief will not deter them from raising rates.

Economists are now asking whether the bank will keep on raising rates in 2007, when a global growth slowdown, the German VAT hike, higher interest rates and a stronger euro are likely to slow euro zone growth.

Sentiment data from the European Commission showed both businesses and consumer confidence was still on the rise in September after an earlier dip.

Economic sentiment in the euro zone rose to 109.3 points -- its highest level since February 2001 -- from an upwardly revised 108.3 points in August, thanks to higher confidence in industry, construction, the retail sector and among consumers.

The Commission's euro zone business climate indicator jumped to to 1.46 points in September, its highest level since June 2000, pointing to a third-quarter pick-up in industrial output.

"For the ECB it means they need to go to sort of neutral, because with good growth you don't need low rates. But whether they need to go beyond 3.5 percent in the absence of inflationary pressure is a very open question and I think they will stop at 3.5 percent," said Holger Schmieding, economist at Bank of America.

© Reuters 2006. All Rights Reserved.

[pricemazda]

From today's Times Newspaper

[FREKI]

Originally Posted by pricemazda

We need a eurozone recovery before the doubters in the UK, Sweden and Denmark will consider joining the euro.

The Euro-Zone will need a hell of a lot more before anyone here is convinced!

When it comes to surplus on the public finances in the EU, no one is above or next to Denmark. 5 per cent of the GNP is a clear record – and almost double amount of number two in Europe, Sweden

http://www.copcap.com/composite-9457.htm

Being locked to the damn Euro is more than enough!

[Fabb]

Originally Posted by Mr D

The Euro-Zone will need a hell of a lot more before anyone here is convinced!

Plenty of people are already conviced. Only, they don't form a majority.

[Fabb]

German Exports Dropped in August as Demand From U.S. Declines

By Simone Meier

Oct. 9 (Bloomberg) -- German exports unexpectedly fell in August as slowing U.S. growth damped demand for products such as cars from Europe's largest economy.

Sales abroad, adjusted for working days and seasonal changes, slipped 0.1 percent from July, when they increased a revised 2.2 percent, the Federal Statistics Office in Wiesbaden said today. Economists predicted a 0.2 percent gain, according to the median of 14 estimates in a Bloomberg News survey.

The German economy is showing signs of losing momentum, after expanding at the fastest pace in five years in the second quarter, as a global slowdown hurts exports and executives become more concerned about the growth outlook. Companies may not be able to count on stronger domestic demand to bolster earnings with the government planning to raise value-added tax from 2007.

``The global slowdown should gradually show an impact on German exports,'' said Andreas Scheuerle, an economist at DekaBank in Frankfurt, who expects economic growth to slow to 0.6 percent in the third quarter from 0.9 percent in the second. Germany will experience ``an unfortunate combination of weak domestic and foreign demand after the VAT increase early next year.''

Exports, the mainstay of German growth in 2005, rose 9.6 percent from a year earlier to 69.4 billion euros ($87.5 billion), today's report showed. Imports fell 0.3 percent in the month and gained 12.5 percent in the year. The trade surplus narrowed to 11.2 billion euros from 13.2 billion euros in July. Adjusted for seasonal swings and work days, the surplus widened to 12.1 billion euros from 12 billion euros.

`Difficult Environment'

Growth in the U.S., the world's largest economy and destination for one-fifth of European exports, will slow to 2.9 percent next year from 3.4 percent this year, according to a Sept. 14 forecast by the International Monetary Fund. In comparison, the global economy may expand 5.1 percent and 4.9 percent this year and next, the Washington-based fund said.

Volkswagen AG, Europe's largest carmaker based in Wolfsburg, Germany, said Oct. 3 that U.S. sales fell 7.2 percent in September from a year earlier. In the same month, U.S. sales of Munich-based Bayerische Motoren Werke AG's BMW luxury cars dropped 7 percent.

The euro's 7 percent gain against the dollar this year is adding to pressure on European exporters by making their goods more expensive abroad. The euro was at $1.2596 today.

DaimlerChrysler AG, the world's fifth-largest carmaker, unexpectedly cut its 2006 profit goal on Sept. 15 because of a projected $1.5 billion loss at Chrysler in the U.S. in the third quarter. The Stuttgart, Germany-based company said it's facing a ``difficult environment.''

Oil Prices Retreat

German executives grew more pessimistic about the outlook for the next six months in September, the Ifo economic research institute said on Sept. 26. The government's plan to raise value- added tax by 3 percentage points to 19 percent from January is threatening to undermine domestic demand just recovering from record unemployment last year. The jobless rate was at 10.6 percent in September for a third month, down from a post World War Two high of 12 percent in March last year.

A 23 percent retreat in oil prices from a record of $78.40 a barrel on July 14 may help counter the increase in VAT by boosting households' purchasing power. Bundesbank President Axel Weber told reporters in Berlin on Sept. 29 that the economy may expand at a faster-than-expected pace if the decline in oil prices persists.

A rebound in construction spending helped counter slowing export growth and shrinking consumption in the second quarter, fueling the fastest growth since the first three months of 2001.

In August, German industrial production probably increased 0.3 percent from July, a Bloomberg survey shows. The Economy and Technology Ministry will release the report at noon in Berlin today. Factory orders unexpectedly jumped 3.7 percent in August, the government said Oct. 6.

The Bundesbank currently expects German growth of about 2.25 percent this year and 1.5 percent in 2007.

[Fabb]

German Industrial Production Increases the Most in Three Years

By Matthew Brockett

Oct. 9 (Bloomberg) -- Industrial production in Germany rose the most in almost three years in August as Europe's largest economy heads for its fastest expansion since 2000.

Production jumped 1.9 percent from July, when it rose a revised 0.8 percent, the Economy and Technology Ministry said today in Berlin. August's gain was the biggest since October 2003. Economists expected a 0.3 percent increase, according to the median of 40 estimates in a Bloomberg News survey. From a year earlier, production rose 7.2 percent.

Germany's IW economic institute today raised its forecast for economic growth this year to 2.4 percent from 2 percent, as exports fuel domestic investment and spending. Growth may moderate next year after the European Central Bank raised interest rates five times in 10 months to quell inflation in the 12 nations that share the euro.

``There's a momentum in Germany and the euro zone at the moment that's almost unstoppable,'' said Stephen Webster, chief European economist at 4Cast Ltd. in London. Growth is ``surprising on the upside. The ECB is definitely going to raise rates again.''

Economists and investors predict the ECB will raise its benchmark rate to 3.5 percent in December after an increase to 3.25 percent last week.

German construction output rose 1.2 percent in August from July while production of goods such as refrigerators and washing machines climbed 1.8 percent, the ministry said today. Production of semi-finished goods jumped 4.6 percent, and plant and machinery production advanced 0.4 percent.

Orders Surge

German factory orders unexpectedly surged 3.7 percent in August after a 2.1 percent gain in July, driven by both foreign and domestic demand, a report last week showed,

That prompted economists including 4Cast's Webster, Nick Matthews at Barclays Capital and Sandra Petcov at Lehman Brothers to revise up their forecasts for industrial production.

``Conditions in the German industrial sector still look very favorable,'' said Matthews. ``German GDP is looking quite strong in the third quarter. It reinforces our confidence for euro-region growth this year of 2.7 percent.''

The 12-nation euro-region economy is also expanding at the fastest pace in six years, with the European Commission currently forecasting 2.5 percent growth this year. It's due to update its forecasts on Oct. 11.

Latest data ``suggest the global economy is doing better than people thought, and that benefits countries like Germany, the world's biggest exporter'' of goods, said Dario Perkins, European economist at ABN Amro Holding NV in London.

Global Economy

Porsche AG, the German luxury carmaker, expects ``excellent'' results this fiscal year as sales in Russia and China increase, Chief Executive Officer Wendelin Wiedeking said last week.

Salzgitter AG, the German steelmaker, had a record profit in the third quarter and will generate sales of 8 billion euros ($10.1 billion) in 2006, Chief Executive Officer Wolfgang Leese told the Financial Times Deutschland newspaper last week.

Still, economic growth may slow next year as higher interest rates, slower global expansion and a sales-tax increase reduce demand for goods such as cars and mobile phones, the European Commission said Oct. 2.

European economic growth will slow to 2 percent next year, according to the International Monetary Fund. The U.S. will expand 2.9 percent after 3.4 percent this year, the Washington-based fund said Sept. 14. It forecasts the global economy will expand 5.1 percent this year and 4.9 percent in 2007.

Economists are divided on whether European economic growth will prove strong enough to allow the ECB to continue raising interest rates next year. Eleven of 20 economists surveyed by Bloomberg News say the Frankfurt-based central bank will lift its benchmark rate to 3.75 percent in March after a quarter-point increase in December.

[The Dear Leader]

Originally Posted by pricemazda

From today's Times Newspaper

The US will still have considerably higher growth than Eurozone countries like Germany, Italy or even France.

[flash110]

It´s good to be optimistic but let´s face it, the global economy was booming for several years now, Eurozone seems to be "slowly" following that trend. The Eurozone will hardly meet the sustained growth rates other free market economy countries like USA or UK, simply because countries like Germany already have big demographic problems (its population even shrinks) and specially because their rigid economy system (inflexible labour market with overexcessive trade unions influence, laws that limit free capital flow, excessive state social spendings) crushes the economy growh potential and the investments every year , until these economies are liberalized the Eurozone will be lucky to have some average growth years from time to time...

[AJW]

From the BBC:

Eurozone economy gathering pace

The eurozone economy is now expanding at its fastest rate since the turn of the century, according to the latest figures from the European Commission.
Raising its forecast, the Commission now expects that economic growth across the 12 nations that share the euro will grow by an average 2.6% in 2006.

Revised up from its previous estimate of 2.5%, it is a marked improvement on the 1.4% growth seen in 2005.

The economic expansion is helping states reduce their public deficits.

'Growth continuing'

Brussels said it was increasing its eurozone growth predictions after a surprisingly strong economic performance in the first half of the year.

After growing 2.6% this year, it expects eurozone economic growth to continue next year, only at the slower pace of 2.1%.

For the 25-nation European Union region as a whole, it expects growth to be 2.8% this year and 2.4% in 2007.

European Union Economic and Monetary Affairs Commissioner Joaquin Almunia said the good figures brought to an end "years of disappointing results".

Brussels' latest half-yearly economic forecast predicts that Germany and France will see their budget deficits shrink to below the eurozone ceiling of 3% of GDP in 2006.

This repeats comments made by Mr Almunia last month.

The Commission's latest report says that the German deficit will fall to 2.3% this year, 1.6% in 2007 and 1.2% in 2008; while France will drop to 2.7% this year, 2.6% in 2007 and 1.2% the year after.

Falling inflation

The 3% rule was designed to ensure the euro is not undermined by overspending states.

Yet as eurozone economic growth has struggled in recent years, a number of member state governments have found it difficult to control the gap between their revenues and expenditure.

It is only this year, with economies again growing strongly, that nations have been able to get their deficits in order.

The Commission added that while Italy should manage to reduce its deficit from 4.7% this year to 2.9% in 2007, it could rise again in 2008 unless the Italian government takes extra measures.

Yet the report added that Portugal was expected to be the most persistent budget offender, with its deficit rising to 4.6% this year, 4% next year and 3.9% in 2008.

As for eurozone inflation, the Commission sees it standing at 2.2% this year, before easing to 2.1% in 2007 - both just above Brussels' 2% target.

[Fabb]

Associated Press
All Associated Press News

PARIS (AP) - President Jacques Chirac said in an interview published Monday that France's unemployment rate dropped to 8.8 percent in September, from 9 percent in August.

Chirac, who rarely announces economic figures himself, was quoted as telling Le Figaro newspaper that France was headed in "the right direction" toward his goal of bringing joblessness below 8 percent by the end of 2007.

"The fight against unemployment is the absolute priority," Chirac said in an interview posted on the daily's Web site. "I won't hide that for me, this fight against unemployment is head and shoulders above any political considerations."

Chirac, whom many political analysts expect will not run for a third term in next spring's presidential elections, was asked almost exclusively about domestic affairs in the interview.

Chirac said he would not announce whether he will run again until "the first trimester of 2007," to avoid distracting attention away from his government's agenda.

© 2006 The Associated Press.