START A PETITION37,000,000 members: the world's largest community for good
Group Discussions
UK economy in double-dip recession / euro-zone Part 4
6 years ago

UK economy in double-dip recession

GDP chart

The UK economy has returned to recession, after shrinking by 0.2% in the first three months of 2012.

A sharp fall in construction output was behind the surprise contraction, the Office for National Statistics said.


A recession is defined as two consecutive quarters of contraction. The economy shrank by 0.3% in the fourth quarter of 2011.


BBC economics editor Stephanie Flanders says it "adds to the picture that the economy is bumping along the bottom".


She said economic output was slightly smaller now than it was in the autumn of 2010.


Wednesday's figure is an early estimate and is subject to at least two further revisions in the coming months. It is compiled using 40% of the data gathered for later revisions.


The UK economy was last in recession in 2009.


Eurozone impact


"It's a very tough economic situation. It's taking longer than anyone hoped to recover from the biggest debt crisis of our lifetime," said Chancellor George Osborne.


"The one thing that would make the situation even worse would be to abandon our credible plan and deliberately add more borrowing and even more debt," he said.


He blamed the enormous debts that Britain built up in "the good years" and the fact that much of Europe is in recession or heading into recession.


But Labour's shadow chancellow, Ed Balls, said the government's economic credibility was "in tatters".


"David Cameron and George Osborne complacently boasted their austerity plan had taken our economy out of the danger zone, but their failed policies have plunged us back into recession.


"And far from the eurozone being to blame for Britain's woes, it was only growth in the EU and the rest of the world which kept us from going into recession earlier."


Page 1 

6 years ago
Construction questions
The ONS said output of the production industries decreased by 0.4%, construction decreased by 3% and output of the service sector increased by 0.1%.
It added that a fall in public sector investment had contributed to the particularly large fall in the construction sector.
Some have questioned the validity of the ONS's figures, particularly on the construction industry, which has been volatile in recent quarters.
But Joe Grice, chief economic adviser to the ONS, said the construction data was based on a survey of 8,000 companies and had been carefully checked and double checked.
The latest figures supported the view that the economy had been "flattish" in the past few quarters, he added.
Over the last year and a half, the economy has fluctuated between quarters of growth and contraction.
Bank of England governor Mervyn King has previously warned that the economy will continue to "zig zag" this year.
He had forecast growth in the first quarter but then a contraction in the second quarter, when the extra bank holiday for the Queen's Diamond Jubilee is expected to reduce output.
Shortly after the ONS data was released, the pound fell half a cent against the dollar to $1.6093, and half a cent against the euro to 1.2184 euros.
'At odds'
"It is clearly not good news, the missing link in the economy has been confidence," said Graeme Leach, chief economist at the Institute of Directors.
"These are relatively small falls, so we shouldn't be too alarmist.
"[But] regardless of the figures, it is the message that comes out to business - to be cautious - exactly when we want them to be a little more aggressive in terms of recruitment and investment."
However, some pointed to other recent business surveys, which painted a more positive picture of the economy.
"These figures are at odds with the experiences of many UK businesses, which continue to operate with guarded optimism," said David Kern, chief economist at the British Chambers of Commerce.
He added that he expected the preliminary estimate to be revised upwards when more information became available.
The first estimate of GDP for the last three months of 2011 showed a contraction of 0.2%, which was later revised to a contraction of 0.3%.
The estimate for construction output is based on published data for the first two months of the quarter, and an estimation for the third month.
But the ONS pointed out that, while there was "a tendency for upward revisions" to construction, March would need to be "exceptionally strong" in the construction sector to produce growth in the quarter.
How is the recession affecting you? Do you have a business that is struggling? Are you having to make further cuts to your personal budget? Or are you optimistic about the future? Get in touch using the form below:

This post was modified from its original form on 25 Apr, 4:40
EU Commission to propose 6.8% budget increase for 2013
6 years ago

25 April 2012 Last updated at 09:50


EU Commission to propose 6.8% budget increase for 2013

The British government is thought to be among those who would oppose any increase


Officials from the European Commission are due to outline proposals on Wednesday for a 6.8% rise in the EU's budget for 2013.


The proposals will be a starting point for negotiations with the EU's 27 member states.


Some EU members, including the UK, have consistently urged the Commission to scale down its spending plans.


However, Commission officials are expected to argue the budget increase is needed to meet prior EU commitments.


The BBC's Nigel Cassidy says the Commission has to pay for a string of long-term projects, such as infrastructure and research programmes, that it is legally obliged to cover.


The Commission will risk accusations of double standards, as it has been leading calls for budget discipline throughout Europe, our correspondent adds.


In 2012 the EU budget was 129.1bn euros (£105bn; $170bn), a 1.9% increase on 2011.


The largest allocation - 45.9% - was funding to boost growth and jobs in Europe's less developed regions, called "cohesion funds".


Agriculture and fisheries took 40.8% of the budget, while EU administration costs amounted to 5.6%.

Hard bargaining


Richard Corbett, an adviser to European Council President Herman Van Rompuy, said the EU budget commissioner's announcement at 13:00 (1100 GMT) would be just the starting point for negotiations with the governments and European Parliament.


Speaking on BBC Radio 4's Today programme, he said payments for 2013 already agreed by ministers were now becoming due, as the EU works on a seven-year budget cycle.


Negotiations are already under way over the next cycle, for 2014-2020.


The goal is to avoid duplication by pooling Europe's resources, so saving money nationally, Mr Corbett said.


"The usual pattern is that the Commission's initial bid is pared down," he added, and noted that just 2% of public spending is at European level.


The UK government is thought to be among those who would oppose any increase.


"The UK has been consistent that at a time when member states are tightening their belts, the EU must show budgetary restraint," a British government spokesman in Brussels told Reuters news agency.


Poorer member states are meanwhile expected to lobby to keep the regional spending they say is essential for growth and creating jobs.


Eurozone leaders push for growth
6 years ago

25 April 2012 Last updated at 17:59


Eurozone leaders push for growth

Mario Draghi
Mr Draghi showed he understood why austerity is not too popular across Europe

Eurozone leaders have urged governments to focus on growth amid fears about the negative impact of austerity measures.


European Central Bank President Mario Draghi called for a "growth compact", to go with the balanced-budget pact agreed last year.


German Chancellor Angela Merkel and French presidential candidate Francois Hollande echoed that Europe needs more economic growth.


But none said what exactly they are willing to do to boost growth.


Adding to tensions, the Netherlands' government collapsed over last-minute disagreements about finding billions of euros in austerity cuts.


Speaking to the European Parliament, Mr Draghi acknowledged that austerity in Europe - which has brought waves of protest in Greece, Spain and beyond - has curtailed growth without doing much to reduce fears that governments may be unable to repay their debts.


He said austerity - spending cuts and tax rises - "has been undertaken and is starting to reverberate its contraction effects, and we haven't seen the benefits".


"What is most present in my mind is to have a 'growth compact'," the ECB boss said.


Mr Hollande said that, if elected, he will renegotiate the fiscal pact. Signed by 25 of 27 European Union states, it aims to bring about much closer integration of budget policy to try to prevent excessive debts accumulating.


The UK and Czech Republic did not sign up to it.


Mr Hollande wants to incorporate measures such as pooling European debt to finance infrastructure projects and a financial transactions tax.


"Budgetary responsibility? Yes. Austerity for life? No," he said.


These proposals have already been discussed and dismissed many times by Mrs Merkel.


On Tuesday, German Foreign Minister Guido Westerwelle told reporters the pact was agreed and not up for renegotiation. "It will not be made dependent on election results," he said.


Page 1


6 years ago

'Not sufficient'


Mrs Merkel also called for growth, but in different terms from the man who may soon be her French counterpart.


"In Europe, we are called on to overcome the sovereign debt crisis.


"On one hand, that can be done with a sustainable fiscal policy... but that is not a sufficient method of overcoming the crisis, because we also need growth."


"We need growth... in the form of structural reforms, as European Central Bank President Mario Draghi said," she added.


But Mrs Merkel warned that did not mean more stimulus programmes.


Crunch 'easing'


Mr Draghi testified in Brussels that the structural reforms required for governments to make their economies competitive once again would necessarily entail some pain.


But he made clear that it was now up to governments and banks to use the available time to strengthen the banks' finances.


"Now the ball is entirely, squarely in the court of governments and banks," he said,


The ECB has provided more than 1tn euros in three-year loans to eurozone banks since last December, in order to head off a major banking crisis that threatened to erupt last November.


Separately, a survey of eurozone banks allayed fears of a credit crunch.


Only a net 9% of 131 banks tightened their lending conditions in the last three months, according to the European Central Bank's latest quarterly survey.


The data suggests that emergency loans provided by the ECB have helped stave off a sudden curtailment of lending.



Francois Hollande has made it clear that he will not sign the pact until it contains proposals for growth.


The problem is the governments of Finland Greece and Portugal have already ratified this text, the Irish are due to hold a referendum on 31 May.


Mr Hollande says the day after the vote he will send a memo to all European governments. "I hope there will be re-negotiation," he said.


"Could there be an alternative text on growth added to it? That will form part of the discussions," he said.


Yesterday, the German Foreign Minister Guido Westerwelle told reporters the pact was agreed - and holds.


"It will not be made dependent on election results," he said.


Mr Hollande's statement seems to put France and Germany on a collision course - or perhaps it offers both.


Page 2

Hungary concession opens way to EU bailout
6 years ago

25 April 2012 Last updated at 14:08


Hungary concession opens way to EU bailout

Hungarian banknote - 10,000 forintsThe Hungarian forint has rebounded 4% against the euro in anticipation of a breakthrough
Continue reading the main story Related Stories

Hungary has agreed to change a law criticised for undermining the independence of the country's central bank, the European Commission has said.


The concession means negotiations over a 15 to 20bn-euro (£12-16bn; $20-26bn) bailout package can now reopen.


The Hungarian government faces serious problems in its banks, as well as a rising cost of borrowing.


But Prime Minister Viktor Orban has been criticised for undermining democratic protections in his country.


As well as the central bank, Mr Orban has been accused of undermining the independence of the Hungarian judiciary and press, as well as manipulating electoral laws in his favour.


The prime minister's centre-right Fidesz party won a landslide election in 2010 that gave him a two-thirds majority in parliament - enough to make unilateral changes to the republic's constitution.


The Commission, which has expressed concerns about the "quality of democracy" in Hungary, said it was still planning to launch legal challenges in the European Court of Justice against two new laws.


One of the laws lowers the obligatory retirement age for judicial officials from 70 to 62, which the Commission said would enable the government to replace 10% of the country's judges and 25% of its notaries.


But despite these outstanding concerns, the Commission said that Budapest had made enough concessions that Brussels was now willing to discuss a financial aid package.


"These elements will certainly allow more confidence in the legal environment in Hungary," said Commission spokesman Olivier Bailly.


Mr Orban was forced to request aid from the EU and the International Monetary Fund in November.


The country's banks lent heavily to mortgage borrowers in Swiss francs during the last decade, because interest rates in that currency were much lower than in Hungary's own forint.


But since the 2008 financial crisis hit, the Swiss franc has risen 75% in value against the forint, making many of these loans unrepayable.


The confidence of financial markets in the value of the forint and the Hungarian government's finances has also been hurt by Mr Orban's authoritarian style, as well as his move to weaken the central bank's authority and his unwillingness to help the banks out.


Negotiations over the bailout had been deadlocked for five months, with Mr Orban accusing the EU of treating his country like a colony.


As expectations of a breakthrough have risen in the past two days, the forint has strengthened 4% against the euro.


The Hungarian government's cost of borrowing from financial markets for 10 years has also fallen sharply, from a 9% interest rate to 8.1%.

The eurozone crisis as soap opera
6 years ago

The eurozone crisis as soap opera


George Clooney (right) in ER

The plot of the eurozone crisis thickened this week, as markets were rocked by France's presidential election, more bad figures from Spain, and signs that even the Dutch may say No to austerity.


If this was a drama, what kind would it be?


Steve: We're going to be alright aren't we Susie?


Steve: And when this baby comes along, we're going to be a proper family.


Susie: Eh Yeh…A proper family. Look, Steve I think I'm going to have a lie-down, OK?


Steve: Yeah of course. You have to keep your strength up. You know what Susie, for the first time in years I think everything's gonna work out for us.


The camera focuses in on Susie's face. It's clear from her expression that everything is not gonna work out. Whatever happiness Steve's expecting is a sham. The baby is not his. He is headed for bitter disappointment.


The camera lingers for a moment and then the first bars of the signature tune play.


The Steve and Susie storyline is not lifted from any actual soap opera but it will be familiar to a lot of you. The maxim that the darkest hour is just before the dawn doesn't apply in Soapland. Rather it is twisted around to be: "The happier you are now, the worse it will be next week." Followed by "That's not the dawn! I smell smoke. Quick! Don Fisher's house is on fire."


Over the past three years, the eurozone has embodied the very best in soap opera writing. Every time the leaders announce a breakthrough, you just know it's merely a plot device for further chicanery next week.


ECB: We're going to be alright darling ain't we darling?


Spain: What?... Uh yeh.


ECB: And when this one-trillion Long-term Refinancing Operation comes along, we're going to be a proper family.


Members of the cast


European politicians and banker Mario Draghi

Clockwise from top left: German Chancellor Angela Merkel, ECB chief Mario Draghi, Greek ex-finance minister Evangelos Venizelos and Italy's Silvio Berlusconi


The camera lingers on Spain's face and we think: "You're deluding yourself there ECB. Spain has a secret that's going to make next week very interesting."


The audience's interest never wanes because each eurozone country seems to take turns at the centre of the plot.


Ireland had a really enthralling storyline a few years ago. The child of an abusive parent who is adopted, is the perfect son for many years and then in adolescence becomes a Flash Harry, riding so high a fall is all but inevitable. After overdosing on houses, he's found sprawled in the kitchen by concerned neighbours, who forced their way in.


Things have been reasonably quiet since, but the headlines in the plot-spoiling glossy TV magazines are promising a "surprise in store" in May when "Ireland Has A Referendum And Gets A Nasty Shock".


Continue reading the main story

Start Quote


As in all soap operas, one character will play the role of the sometimes curmudgeonly moral centre - they don't do drugs, have affairs or swindle anyone”


Greece is the almost archetypal villain, who returns every six months when audience figures need a boost and the writers can't be bothered to introduce a new, more layered plot. Greece then turns up at a family get-together. "Remember me? Thought you could get rid of me didn't you? Well I'm going nowhere. As you always say, 'We're family.'"


Comic relief was provided for a time by Italy, a lecherous grandfather uttering inappropriate comments from his favourite chair, but the actor playing Italy had to leave and it's just not quite the same.


This week was a bumper week in the soap-europera, with no fewer than three active story lines.


Page 1

6 years ago

You knew Spain was going to feature because of the way they set it up a few months ago, and it was all over TV Now earlier in the week. France was also expected, but Holland? That felt a little out of place. It's like that moment as a viewer when you watch with increasing incredulity and think: "Don't tell me HE's having an affair now as well."


As in all soap operas, one character will play the role of the sometimes curmudgeonly moral centre - the Grace Sullivan, Annie Sugden, Alf Stewart or Miss Ellie. They don't do drugs, have affairs or swindle anyone. They lecture the other characters on their weaknesses or failings, while maintaining a stoical attitude themselves.


Apart from the occasional psychotic episode where they imagine they see their dead spouse they are a steadying influence all through.


The Alf Stewart of Europe is, of course, Germany. The longest-running cast member of Home and Away, he is conservative, permanently exasperated by the failings of others, and beset on all sides by the poor choices of "flaming galahs and mongrels" (as he would put it). But he needs his dysfunctional extended soap family because he is a businessman and a businessman needs customers.


Angela Merkel must feel the same exasperation but she cannot break the ties. The Surf Club of Europe still needs to sell milkshakes.


The main question for Eurozone fans now is how long can it go on. Every week there seems to be a cliffhanger. Surely the cumulative effect of so much drama must be so debilitating for the cast, it cannot continue indefinitely. So the writers may need to cross the soap opera rubicon: The Catastrophe.


Like the train crash on Coronation Street, a helicopter crash on ER or a collapsing roof in Neighbours, a game-changing plot twist is called for and some characters may need to be written out.


They'll need to do something. The ratings are plummeting.


Page 2

Dutch crisis: Parties agree deal on budget cuts
6 years ago

26 April 2012 Last updated at 20:16


Dutch crisis: Parties agree deal on budget cuts

Dutch Finance Minister Jan Kees de Jager (23 April 2012)
Finance Minister Jan Kees de Jager held two days of talks before an agreement was reached

Five Dutch political parties have agreed tough budget cuts days after the government collapsed over the measures.


PM Mark Rutte called elections for 12 September after Geert Wilders' Freedom Party (PVV) refused to back billions of euros in cuts to the 2013 budget.


Prospects of meeting an EU deadline on 30 April for measures to reduce the budget deficit to 3% of GDP seemed slim until Thursday's surprise breakthrough.


A European Commission spokesman said it was a promising development.


After crisis talks on Thursday, three opposition parties backed a budget agreement with the two former coalition partners now running a caretaker administration - the liberal VVD and the Christian Democrats (CDA).


"We have reached an agreement," Stef Blok, leader of the VVD, later told parliament.


Earlier, Finance Minister Jan Kees de Jager said the parties had agreed "a broad package that I hope will win broad support".


"In any case we have a majority in Parliament," he said. "The Cabinet will meet tomorrow and then it (the budget) goes to Brussels."


The Dutch economy is in recession and the government is facing a budget deficit of 4.6% next year if further spending cuts are not made.


Without a deal before the European Commission's 30 April deadline, there are fears that the Netherlands' prized AAA credit rating status could be in jeopardy.


For seven weeks, the two coalition parties had tried unsuccessfully to reach agreement on billions of euros in cuts, together with the far-right PVV on whose support the minority government relied.


The three opposition parties - D66, Green Left and Christian Union - as well as the two former coalition partners put the proposed cuts to their MPs before a parliamentary debate on Thursday evening. All five parties agreed the terms of the deal by late Thursday afternoon, Dutch media said.


"I think what we've agreed is good enough to put to the parliamentary party," Green Left leader Jolande Sap told reporters earlier.


Together, the five parties form a slender majority in the 150-seat Dutch parliament.


Mr Blok told Dutch TV that the cuts would involve "tough and painful measures that are necessary to bring the budget in order before next year". Without going into detail, he said the cuts involved changes to the housing market and the right to dismiss workers.

Greece was not ready for euro admits ex Bundesbank head
6 years ago

Greece was not ready for euro admits ex Bundesbank head

Ernst Welteke
Mr Welteke said growth as well as austerity was needed to solve the eurozone crisis

Greece should not have joined the euro, a former head of the German central bank, who was central to eurozone policymaking at the time, has said.


But Ernst Welteke, who was Bundesbank president from 1999-2004, told the BBC that none of the eurozone's problems would be solved if Greece left.


He added there should be greater transfer of wealth from richer parts of the eurozone to poorer parts.


He said he was confident measures were in place to ensure the euro's survival.


"The euro is not in as big a danger as is often recorded," Mr Welteke told Business Daily on the BBC's World Service.


"The euro has been stable [for] 10 years, inside and outside the European Monetary Union (EMU)."


Strong union

He said that, in hindsight, it was clear that Greece was not ready for the euro.


"We can say that Greece should not have joined the EMU, but that doesn't help."


He said Greece only accounts for 3% of the economic output of the eurozone, so "if Greece leaves the EMU then monetary union will still work."


"But I don't think Greece leaving will solve any problems."


The country's new currency would depreciate, meaning Greece would struggle to repay its euro-denominated debts, he said. This would cause big problems for Europe's banks that lent Greece the money.


Growth needed

Mr Welteke said the current problems facing the eurozone were due to a debt crisis in southern Europe resulting from the financial crisis.


He also highlighted deeper problems, such as trading imbalances, with some countries running current account surpluses and others running deficits.


"Austerity alone is not the solution... without more growth the problems cannot be solved," Mr Welteke said.


"There have to be structural reforms in all countries, not just in the labour market but in tax administration [for example].


"In the end... monetary union is a solidarity union; there is no question [there should be a greater transfer of wealth from Germany to struggling countries].


It was the job of politicians, not the European Central Bank (EC, to resolve these problems, he said.


The ECB should go back to focusing on managing inflation after its recent moves to provide cheap loans to boost liquidity in the banking sector.


Bankers to blame


But Mr Welteke, who resigned from the Bundesbank in 2004 in a row over a luxury hotel bill, said it was important to remember who caused the crisis in the first place.


"The problems occurred after the financial crisis and the financial crisis was not the result of undisciplined politicians," he said.


"It was the result of people living, working and earning a lot of money in the financial centres.


"For 10 years, the financial markets did not differ between lending money to Germany or lending money to Spain, Portugal and Greece.


"If there is a creditor and a debtor, both are responsible for the credit."

S&P reduces Spain's credit rating
6 years ago

S&P reduces Spain's credit rating

Students in Madrid protest against the austerity budget on 25 AprilS&P did welcome Spain's austerity measures, unlike some of the Spanish people

The ratings agency Standard & Poor's has cut Spain's credit rating and warned of risks to come.


S&P cut Spain two notches to BBB+, warning that the country could have to take on more debt to support its banking sector.


It has also placed Spain on negative outlook, meaning there is a risk of further downgrades to come.


S&P predicts the Spanish economy will shrink by 1.5% this year, having previously forecast 0.3% growth.


In 2013 it expects the economy to contract 0.5%, having previously predicted 1% growth.


S&P also gave a damning assessment of the situation in the rest of Europe, saying: "In our view, the strategy to manage the European sovereign debt crisis continues to lack effectiveness."


"We think credit conditions, and hence the economic outlook for Spain, could now deteriorate further than we anticipated earlier this year unless offsetting eurozone policy measures are implemented to support investor confidence and stabilize capital flows with the rest of the world."


The agency suggested such measures could include a pooling of resources and obligations between eurozone countries and policies to harmonise wages across the currency bloc.


'Unemployment to rise'


But there were some positive comments about the measures taken by the government.


"Despite the unfavorable economic conditions, we believe that the new government has been front-loading and implementing a comprehensive set of structural reforms, which should support economic growth over the longer term," S&P said.


"In particular, authorities have implemented a comprehensive reform of the Spanish labour market, which we believe could significantly reduce many of the existing structural rigidities and improve the flexibility in wage setting."


But S&P concludes that the labour market reforms will not create employment in the near term and predicts that "the already high unemployment rate, especially among the young, will likely worsen until a sustainable recovery sets in".


Spain has Europe's highest rate of unemployment at 23%, with more than half of young people out of work.

6 years ago
  • "David Cameron and George Osborne complacently boasted their austerity plan had taken our economy out of the danger zone, but their failed policies have plunged us back into recession."

This should be a wake up call for the US.   The republicans have been firm on NO MORE SPENDING and cutting costs.   Talk about "failed policies" and failed massive's at Obama's feet.   This is why he must be voted out in November.


Osborne: Government on track with deficit reduction
6 years ago

Osborne: Government on track with deficit reduction

Chancellor George Osborne has insisted that the government is on track to hit its deficit reduction targets.


At Treasury questions in the Commons on 24 April 2012, Labour's Chris Leslie told Mr Osborne that recent figures demonstrate that public borrowing is "£150bn higher than you predicted... in your Spending Review predictions".


He blamed unemployment levels and slow growth.


The shadow minister said: "Can I suggest you are not quite so arrogant about your record when it comes to public borrowing?"


But Mr Osborne said the government would have to pay £36bn less in interest bills over this Parliament because of work to cut the deficit.


He added: "As the public finance numbers today show, actually we have hit the deficit reduction target we set out in the Autumn Statement and in the Budget."


Other questioners focused on taxing bankers' bonuses, changes to age-related income tax allowances, and the top rate of income tax.



Spanish unemployment hits record 5.64 million
6 years ago

Spanish unemployment hits record 5.64 million

Unemployed people in Spain describe their hunt for work

Spanish unemployment has hit a new record high, official figures have shown.


The number of unemployed people reached 5,639,500 at the end of March, with the unemployment rate hitting 24.4%, the national statistics agency said.


The figures came hours after rating agency Standard & Poor's downgraded Spanish sovereign debt.


Official figures due out on Monday are expected to confirm that Spain has fallen back into recession.


Earlier this week, the Bank of Spain said the economy contracted by 0.4% in first three months of this year, after shrinking by 0.3% in the final quarter of last year.


Other figures released on Friday showed that Spanish retail sales were down 3.7% in March from the same point a year ago, the 21st month in row sales have fallen.


'Huge crisis'


In the first three months of the year, 365,900 people in Spain lost their jobs.


The country has the highest unemployment rate in the European Union and it is expected to rise further this year.


The rate has risen sharply since April 2007, when it stood at 7.9%.


"The figures are terrible for everyone and terrible for the government... Spain is in a crisis of huge proportions," Foreign Minister Jose Manuel Garcia-Margallo said.


The new government has announced reforms to the labour market, including cutting back on severance pay and restricting inflation-linked salary increases, that it hopes will ease the problem.


These measures have angered unions, which have organised widespread general strikes in protest.


The government has also introduced drastic spending cuts designed to reduce its debt levels and meet deficit targets agreed with the European Union. These cuts are contributing to Spain's economic contraction.


"In Spain today, a cycle similar to Greece is starting to develop," said HSBC chief economist Stephen King.


"The recession is so deep that when you take one step forward on austerity, it takes you two steps back."


The interest rate, or yield, on Spanish government bonds traded in the secondary market rose following the release of the unemployment figures and the S&P downgrade.


The yield on 10-year bonds rose to 5.96%, up from 5.81%, suggesting investors were becoming more wary of Spain's ability to repay its debts.


Also on Friday, the interest rate Italy has to pay to borrow money from international investors rose. In a sale of 10-year bonds, the government offered a rate of 5.84% compared with 5.24% at a similar sale a month earlier.


However, the government raised 5.95bn euros ($7.88bn; £4.85bn), towards the top end of its target range.

'Comprehensive' reforms


Late on Thursday night, the ratings agency Standard & Poor's cut Spain's rating by two notches to BBB+, warning that the country might have to take on more debt to support its banking sector.


S&P predicts the Spanish economy will shrink by 1.5% this year, having previously forecast 0.3% growth.


However, the agency did make a number of positive comments about the government's attempts to bolster Spain's economy.


"We believe that the new government has been front-loading and implementing a comprehensive set of structural reforms, which should support economic growth over the longer term," S&P said.


"In particular, authorities have implemented a comprehensive reform of the Spanish labour market, which we believe could significantly reduce many of the existing structural rigidities and improve the flexibility in wage setting."


6 years ago

Ray, this is serious.   The US needs to be attention because the elephant in the room is "entitlements."   These countries need to get a clue....that keeping citizens on a track of government supporting them crashes and then burns.


I believe once we get rid of Obama in November and Mitt Romney steps forward with real hope and definitive change that it will resonate around the world.    We must have a republican in office in the US who instills personal responsibility as a means of personal pride and a way to financial reform.   Some countries give employees a month's vacation in August for crying out loud.   Entitlements need to be trimmed and fiscal responsibility needs to return...austerity measures across the board will lend a pinch to most citizens but in the end it will be a win win situation.



6 years ago

Well, Diane, I don't think the "elephant in the room" is entitlements, how about the donkey (notice I was polite) in the room is entitlements.  The elephant is smarter.  LOL


But yes, this is serious and does need to be treated as such.  Both the UK and the US need to look at all of this so carefully and realize the threats.  


Right now it is a matter of limping along for the US and doing all that Congress can to stop any more damage.  Notice that Obama faced a challenge on the bill regarding student loans.  He will come back in another manner and use it on the campaign trail to say that Congress doesn't care about students, however, it was the Democrats this time that didn't support him as I understand.

6 years ago

Well, you got me there, Linda.   Yes, of course, Obama will turn this around as a republican issue and use it to mask his own horrendous term as POTUS.   Honestly, the liberals are doing everything to avoid discussing Obama's failed presidency.

David Cameron: Recession figures disappointing
6 years ago

David Cameron: Recession figures disappointing


Prime Minister David Cameron says he is disappointed by figures released this week showing that the UK has gone back into recession.


But speaking on the Andrew Marr Show, he added: "There is a rebalancing taking place."



Eurozone chairman backs Hollande investment idea
6 years ago

30 April 2012 Last updated at 18:46


Eurozone chairman backs Hollande investment idea

Jean-Claude Juncker
Mr Juncker poured cold water on Mr Hollande's demand to renegotiate Europe's new fiscal rules

Eurozone finance chairman Jean-Claude Juncker has backed the idea of boosting the European Investment Bank (EI.


It is one of several measures demanded by the leading French presidential candidate Francois Hollande to boost growth in the eurozone.


Mr Hollande has said he wants the measures added to newly agreed limits on European governments' borrowing.


However, Mr Juncker poured cold water on the idea that the "fiscal compact" could be amended.


Despite his opposition to renegotiating the fiscal rules, Mr Juncker appeared to offer an olive branch in a speech in Hamburg on Monday, by backing Mr Hollande's idea that the EIB could play a bigger role.


Mr Juncker said that the bank's capital - its buffer against loan losses - could be increased by 10bn euros ($13bn; £8.1bn), which would increase its lending capacity by several times that figure.


The EIB is jointly-owned by the 27 EU nations - including the UK - and finances infrastructure, small and medium businesses, and green projects among other things.


'Pipe dream'


Mr Hollande is ahead of the incumbent President Nicolas Sarkozy in opinion polls, having already narrowly beaten him in the first round of voting a week ago.


The other pro-growth measures called for by Mr Hollande include:

  • the introduction of Europe-wide government bonds to finance infrastructure investment
  • a financial transactions tax
  • a reallocation of unused structural funds in the European Commission budget

If elected, Mr Hollande has said he would veto ratification of the fiscal compact - which was agreed by EU governments, except the UK and Czech Republic in March - unless some of his demands were met.


He has also expressed scepticism over the speed of spending cuts and tax rises advocated by Germany, earning support in other parts of Europe.


Mr Hollande has garnered support from other European leaders for the idea that the harsh austerity signed up to by European governments must be balanced by measures to boost growth.


Mr Juncker appears to have joined German Chancellor Angela Merkel in opposing the reopening negotiations on the fiscal pact - which has already been ratified in its current form by some countries.


Mr Juncker, who chairs the eurogroup of finance ministers, told the German Sunday newspaper Welt am Sonntag that he would "speak to Hollande" if the Socialist won the second round of presidential elections due this Sunday.


"The notion that you can renegotiate the pact from top to bottom and take substantial elements out of the text is a pipe dream," he said.


6 years ago

2 May 2012 Last updated at 10:55


Eurozone jobless rate hits record high

Students and the unemployed take part in a protest against austerity cuts and lack of jobs in Naples
Austerity and a lack of jobs have led to protests on the streets of Italy

Unemployment in the eurozone reached a record high again in March as spending cuts continued to hit the working population.


For all 17 nations in the eurozone, the jobless rate rose again to 10.9%, the highest since the euro was formed in 1999, Eurostat said.


For the eurozone, 17.4 million are now looking for work and more than 3 million of those are under 25.


Italy's unemployment rate reached a 12-year high, up to 9.8%.


And in a surprise move, the jobless rate in Germany rose to 6.8% in March, official figures showed, having been expected to stay at the previous month's 6.7% after six months of declines.


The number of Germans out of work is now at 2.87 million.


For the whole of the European Union, including countries such as the UK and Denmark, the jobless rate is 10.2%.

Austerity or growth

Last week, Spain said that the number of jobseekers rose for the eighth month in a row in March to hit 5.6 million, a record rate of 24.4%.


Spain has the highest unemployment rate in the European Union and it is expected to rise further this year.


Spain and Italy are both in recession and have seen borrowing costs rise, raising the prospect that they may need help or even bailouts.


A debate is raging in Europe about whether politicians have prioritised austerity at the expense of economic growth, making recovery even harder for themselves.


Eurostat said that the EU member countries that had the biggest falls in unemployment in the past year were on Europe's eastern fringe - Lithuania, Latvia and Estonia.


Those with the biggest increases were Spain, Greece and Cyprus.


Separately, a survey of eurozone manufacturing indicated that the sector slipped further into decline last month as new orders fell for the 11th straight month.


Markit's manufacturing purchasing managers' index (PMI) dropped to 45.9 in April, from 47.7 in March, its lowest reading since June 2009. A reading below 50 indicates contraction in the sector.

Business Bites: Record eurozone unemployment rates
6 years ago

Business Bites: Record eurozone unemployment rates


Official figures show that the eurozone unemployment rate hit a record high level in March, jumping to 10.9% for the first time for 15 years.


There were nearly 17.4 million people looking for work in the single currency area in March, 170,000 more than in February.


Spain had the highest jobless rate at 24.1% and Austria the lowest at 4%.

The rising jobless rate could fuel arguments for governments to switch from austerity-only policies to growth measures in order to revive their economies.


Meanwhile, European Union finance ministers are meeting in Brussels to try to agree how much capital the continent's banks should hold.


The BBC's Aaron Heslehurst discusses the key financial stories of the day.




Sir Mervyn King: Eurozone biggest threat to banks
6 years ago

Sir Mervyn King: Eurozone biggest threat to banks


The governor of the Bank of England, Sir Mervyn King, has renewed calls for reform of the banking industry.


Sir Mervyn said that more money from banks' shareholders should be "on the line", to make them more careful in choosing to whom they lend.


He also suggested that the biggest threat to the stability of banks at present "stems from the trouble in the euro area".


Sir Mervyn's comments came as he gave the Radio 4 Today Programme's annual lecture in London.



Mood box: Do Tories want to be in or out of Europe?
6 years ago

Mood box: Do Tories want to be in or out of Europe?

David Cameron has promised that no more powers will be transferred from London to Brussels - but some in the Tory party are concerned about the coalition' s attitude to the EU.


Adam Fleming got out the blue balls to ask the delegates in Birmingham to whether they want to be in or out of Europe.


The Daily Politics is testing the mood of the delegates at the Liberal Democrat, Labour and Conservative parties where people are asked to vote with coloured balls on an issue of the day.





Please note, this was mood box was done in 2010, however, the MP's are still of the same opinion in relation to the EU, and I would add this is only one part of the report, there is a number of other mood boxes that BBC's The Daily Politics Programme carried out 


High unemployment to do 'permanent damage' to UK
6 years ago

High unemployment to do 'permanent damage' to UK

Job centre plusNiesr said high unemployment would do permanent damage to the supply side of the economy

The UK unemployment rate will rise from its current 8.3% to almost 9% by the end of this year, doing "permanent damage to the UK's productive capacity", a think tank has said.


The National Institute of Economic and Social Research (NIESR) said that the persistent weakness in the economy was "unprecedented".


It says growth in 2012 will be close to zero. It forecasts 2% growth in 2013.


On Thursday, the CBI forecast growth of 0.6% this year and 2% next year.


Official figures from the Office for National Statistics (ON last week showed that the economy shrank by 0.2% in the first quarter, returning the UK to recession.


Moot point

NIESR acknowledged that later revisions may change this, but said "small quarter-to-quarter movements of this sort are largely irrelevant to the broader picture of an economy that remains very weak".


"Our monthly estimate of GDP suggests the level of economic activity in the economy in March 2012 was the same as in September 2010," it said in its latest forecast for the UK economy.


"This clearly does not constitute a sustained recovery, so the question of whether or not the economy is technically in a double-dip recession is moot."


It said that four years after the start of the recession, the economy was still well over 4% below its pre-crisis peak, showing unprecedented weakness over the period.


It said it expected unemployment to remain elevated until 2013, which was likely to do "permanent damage to the supply side of the economy, with large long-run economic costs".


However, NIESR said its growth estimates were essentially unchanged from its January forecast and it expected inflation to fall below the Bank of England's 2% target by the end of the year.




Political Derby Related threads 
6 years ago

Eurozone private sector 'contracts sharply'

Woman walking past a fashion store in Madrid

The eurozone service sector figures were described as "truly dire" by one analyst

Political Derby Related threads 


The eurozone's private sector contracted sharply in April and by more than initially thought, a survey says.


The Markit eurozone composite purchasing managers' index (PMI) fell to 46.7 in April from March's 49.2. Any figure below 50 suggests contraction.


This is the sharpest fall since October last year, and one of the steepest contractions in almost three years.


"Marked declines in new business" and weak manufacturing exports were largely to blame for the falls, Markit said.


Markit said the figures suggested the eurozone economy as a whole contracted at a quarterly rate of 0.5% in April.


'Truly dire'

Italy saw output from its manufacturing and services sectors hit a three-year low, while Germany, Europe's economic powerhouse, slipped "towards stagnation".


New business contracted for the ninth straight month, while employment fell for fourth month in a row.


The eurozone's services sector PMI dropped to 46.9, down from 49.2 in March, a figure described by Howard Archer from IHS Global Insight as "truly dire".


Markit's chief economist Chris Williamson said business and consumer confidence "appears to have deteriorated markedly across the region since the upturn at the start of the year".


"The final PMI came in well below the [initial] estimate. The survey suggests that the economy was contracting at a quarterly rate of around 0.5% in April, extending the downturn into a third successive quarter," he said.


"Growth has practically ground to a halt in Germany and France has joined Italy and Spain in seeing a strong rate of economic decline."

Euro Disney reports higher losses
6 years ago

Euro Disney reports higher losses

Twentieth anniversary launch
The company is hoping its 20th anniversary events will boost revenue

Losses have grown 22% at Euro Disney due to higher wages and the cost of refurbishments made ahead of its 20th anniversary this year.


It lost 120.9m euros (£97.4m; $157.4m) in the first half of its financial year compared with a net loss of 99.5m euros in the same period a year earlier.


Visitors to Disneyland Paris also fell, but those who went spent more on average, helping revenues rise 1%.


There were fewer visitors from the UK and Italy in particular, it said.


Euro Disney said the "challenging economic environment" had affected attendance, but it pointed out that its 20th year celebrations, which began on 1 April, presented an important growth opportunity.


The second half of the year is also usually more important for revenue as it includes the high season.

EU sanctions cheaper mobile-phone calls within Europe
6 years ago

EU sanctions cheaper mobile-phone calls within Europe

A woman uses a smartphone
Regulations to make using a mobile phone abroad significantly cheaper have been passed by the European Parliament.

The plans, which were voted in by a huge majority, include imposing a price cap on operators.


From July, using mobile data in Europe will not cost more than 70 cents (56p) per megabyte - far less than current rates.


Consumers will also be able to choose a different operator abroad from the one they use at home.


It is hoped this split-network approach - which comes into force in 2014 - will encourage greater competition.


The first changes will come into effect from 1 July. Calls will be capped at 29c (23p) per minute, plus VAT.


'Borderless Europe'


The EU said the regulations were designed to prevent "bill shock" - the moment when travellers discover they have have totted up huge bills after making calls and using data applications, such as maps, while away.


"In a borderless Europe, there is no place for charges that diverge so much at home and abroad," said MEP Ivo Belet.


The EU said the changes could mean savings for a "typical" businessman of more than 1,000 euros (£800) in a year.


The EU said that from 2014 customers would be able to choose their mobile networks upon arrival in a country, or signing up to a contract before leaving.


Currently, mobile users are forced to use their standard domestic operator when travelling abroad - or to use alternative arrangements, such as a cheap pre-paid SIM card.


Under the new regulations, customers can choose a different operator with a more attractive travel tariff before leaving - without changing their number.


6 years ago

In my opinion the EU is a rip off in itself, 23p per minute plus 20% VAT, calls to the EU States,


I can phone my girl friends in America for nothing on my landline at the weekends and week days evenings. 

6 years ago

LOL, Ray!   Yes, you can call your girlfriends in the US anytime for free!   That vat tax is a doozie.   While in Florence, Italy, we bought a watch and the vat tax was enormous.   There's always rumblings of a vat tax in the US but it never gets off the ground.   Now we can see that the vat tax hasn't helped other countries and has probably hurt tourist sales.  Now, of course, you are experiencing a double dip recession.   High taxes are never the answer.

Spain to announce bank reform plans
6 years ago

Spain to announce bank reform plans

Bankia headquartersThe government took a 45% stake in Bankia earlier in the week
Continue reading the main story Related Stories

The Spanish government is expected to announce plans to clean up its banking system on Friday.


It is likely to force the banks to set aside extra money, in the region of 30bn euros ($39bn; £24bn), to cover the cost of loans going bad.


The weekly cabinet meeting is also expected to approve a plan to force banks to put bad property loans into separate companies.


Earlier in the week, the Spanish government took a 45% stake in Bankia.

It had already forced banks to make provisions of 54bn euros to cover bad loans.


"The big question is whether the Spanish state can afford on its own to put into these banks the sort of capital that is necessary or whether they will have to go for emergency help from the eurozone bailout fund or the IMF," said BBC business editor Robert Peston.

Eurozone economy to shrink by 0.3%, EU Commission says
6 years ago

Eurozone economy to shrink by 0.3%, EU Commission says

Olli Rehn: "The European economy is estimated to be currently in a mild but short-lived recession"

The eurozone economy is forecast to shrink this year as its debt crisis continues to bite.


The European Commission's spring forecast confirmed its prediction of a 0.3% contraction in 2012 in the economies of the 17 countries that use the euro.


It predicted growth of 1.0% for the eurozone in 2013.


European Commissioner for Economic and Monetary Affairs Olli Rehn said "a recovery is in sight" for the eurozone.


But he added: "The economic situation remains fragile, with still large disparities across member states."


For all 27 countries in the EU, the Commission is predicting zero growth for 2012, with 1.3% growth next year.


Growth figures for the first quarter of 2012 will be released by the European statistics agency Eurostat on Tuesday 15 May.


"Economic activity in the EU contracted in the last quarter of 2011 and is estimated to have also done so in the first quarter of 2012," the Commission said in its statement.


Two consecutive quarters of economic contraction are generally taken to indicate a recession is underway.


But the Commission believes that a gradual recovery will start in the second half of the year.


'Longing for the turnaround'

Among the individual member states, the only one predicted to see an economic contraction in 2013 is Spain, which is forecast to decline by 0.3%.


The Commission predicts Spanish unemployment will continue to be the highest in the EU, with the jobless rate hitting 24.4% this year and 25.1% in 2013.


The unemployment rate in the eurozone is forecast to be 11% this year and in 2013, and 10.3% in the EU for both years.


The Commission describes Greece as "an economy longing for the turnaround".


It predicts a contraction in the Greek economy of 4.7% this year and zero growth for 2013, with unemployment at 19.7% in 2012 and 19.6% the following year.


"The recovery, which was previously expected for this year, will be further delayed with, at best, an insignificant improvement in activity in 2013," the Commission said.


Credit ratings agency Fitch warned that if Greece left the eurozone it was "likely" to put the sovereign credit ratings of all euro member states on negative ratings watch.


Cyprus, France, the Republic of Ireland, Italy, Portugal, Spain, Slovenia and Belgium are already on negative ratings watch and are most at risk of a Fitch credit downgrade if Greece exited the euro.

This thread is archived. To reply to it you must re-activate it.

New to Care2? Start Here.