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Why is the European economy not growing?

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posted on Feb, 11 2005 @ 02:24 PM
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Hundreds of millions of inquiring European and general onlookers want to know. As reported:


Washington, DC, Feb. 10 (UPI) -- In a 15-minute speech to foreign ambassadors, financial experts and business men and women, newly elected European Parliament Vice President Alejo Vidal-Quadras Roca tried to answer the question on the minds of 450 million European Union citizens: "Why is the European economy not growing?"

--snip--

....quoting 19 statistical data figures that all said the same thing: Europe lacks growth.

--snip--

In terms of gross domestic product in 2004, the European Union had a 1 percent GDP growth rate, unlike the United States, which had a 3 percent growth rate.

"The United States is performing better than the European Union, that is something that Europeans should reflect upon," he said.

--snip--

It was for that reason that in 2000, members of the European Parliament devised the Lisbon Strategy -- the EU's economic reform agenda -- that aimed to make the European Union "the world's largest knowledge-based economy by 2010."

EU VP says Europe economy is worse

Hmmm, speculation amounts to it being attributed to the over-hyped Euro to socialistic governments to simply not enough Europeans to work or work the hours needed. Outsourcing will become applied in Europe, as it has in the US, real quick, if it has not already begun.

Thoughts and comments?



seekerof




posted on Feb, 11 2005 @ 03:04 PM
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PARIS (AFP) - Economic recovery in the eurozone is taking hold, the chief economist at the European central Bank, Otmar Issing.

The pick-up was likely to be the result of a wider base to growth rather than just an export-led performance, Issing said in remarks to the International Herald Tribune.

"The driving forces of growth should change to the domestic side this year," Issing said.

"For some sceptics, this might come as a surprise."

However, obstacles remained, notably sluggishness in the labour market which was "a major drawback on confidence and real disposable income".

Eurozone companies nonetheless "expect the recovery to continue", the ECB official said.

The bank did not forecast a consumer boom but believed consumption would rise along with increasing disposable income.

Issing defended the ECB for waiting for recovery before raising interest rates, noting that critics had said even recently that current rates could be putting downward pressure on prices.


Tthe euro dollars valuation is much higher than the US dollar which is creating problems for the European export market. China has its dollar the yuan pegged to the US dollar. This fact does not help Europe out either. Unemployment in Germany is rather high creating further drag on the economy.




[edit on 11-2-2005 by cryptorsa1001]



posted on Feb, 11 2005 @ 03:09 PM
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An official of the European Central Bank says a recovery is taking hold:


eubusiness

Economic recovery in the eurozone is taking hold, the chief economist at the European central Bank, Otmar Issing, said on Friday in remarks to the International Herald Tribune.

The pick-up was likely to be the result of a wider base to growth rather than just an export-led performance, Issing said.

"The driving forces of growth should change to the domestic side this year," Issing said.

"For some sceptics, this might come as a surprise."

However, obstacles remained, notably sluggishness in the labour market which was "a major drawback on confidence and real disposable income".

Eurozone companies nonetheless "expect the recovery to continue", the ECB official said.



posted on Feb, 11 2005 @ 03:10 PM
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As for the fact that there isnt any Major countries left to join the union...every country who joins now and has joined recently arent really benefitial to the EU in any sort...the dollar will out-way the Euro soon enough...again...



posted on Feb, 11 2005 @ 03:17 PM
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Originally posted by BasementAddix
As for the fact that there isnt any Major countries left to join the union...every country who joins now and has joined recently arent really benefitial to the EU in any sort...the dollar will out-way the Euro soon enough...again...


That's not quite true.
The countries that joined recently haven't switched their currency over to the Euro. It will still be a few years of transition as they faze out their own currencies in favor of the Euro. Other countries like Russia and China will continue to increase their reserves.
Russia just stopped pegging their currency strictly to the dollar and instead adopted a combination dollar/Euro peg and have said they will eventually give more weight to the Euro side of that peg.



posted on Feb, 11 2005 @ 03:57 PM
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Originally posted by cryptorsa1001
the euro dollars valuation is much higher than the US dollar which is creating problems for the European export market. China has its dollar the yuan pegged to the US dollar. This fact does not help Europe out either. Unemployment in Germany is rather high creating further drag on the economy.

[edit on 11-2-2005 by cryptorsa1001]


Dont forget tho, that most (~80) of EU trade is intra Europe not extra Europe, and none of the intra European trade is affected by the Euro/Dollar exchange rate



posted on Feb, 11 2005 @ 06:09 PM
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It's true that Europe's growth rate is low but then again real growth (ie the growth figure minus the rate of inflation) gives us a bit of a different picture.

Europe's growth is still low but because Europe's inflation is ultra low (if not actually negative at the moment) and the USA's is not quite so low the gap is nothing like the difference the 'bald' figures suggest.



posted on Feb, 11 2005 @ 07:15 PM
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Originally posted by sminkeypinkey
It's true that Europe's growth rate is low but then again real growth (ie the growth figure minus the rate of inflation) gives us a bit of a different picture.

Europe's growth is still low but because Europe's inflation is ultra low (if not actually negative at the moment) and the USA's is not quite so low the gap is nothing like the difference the 'bald' figures suggest.


Yeah that's true, the Australian economy is "growing" too fast (over 3%) which is increasing inflation, so now we have to raise interest rates to combat it and will still probably go into a recession
Also our unemployment is so low we have to pay people outrageous wages for them to work (also adds to inflation) and even then there is trouble finding people to fill many positions. So too much "grow" % can actually be a bad thing too. When the baby boomers get old we are going to feel this lack of people to do jobs because of low emploment even worse.

[edit on 11-2-2005 by Trent]



posted on Feb, 11 2005 @ 07:21 PM
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Here in the States our corporations are making record profits but the hiring of employees is slow. The official unemplyment rate is 5.2% but it is that low because people have quit looking for work so they aren't included in unemployment rate.



posted on Feb, 11 2005 @ 07:38 PM
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There is a variety of reasons IMHO:

1) The financial requirements for membership in the EU seem to be in flux at the whim of its core member states. For example, Germany has exceeded the deficit limit for what like 4 years in a row? So the finiachial/monetary/economic requirements are mere lip service when bigger countries of the EU are involved.



On Wednesday, Chancellor Gerhard Schröder of Germany raised doubts about the deficit limit, which Germany is set to breach in 2005 for a fourth year running.
Financial Flux


I doubt highly that one can create a union like the EU try to interlink the economy, with a vapor like set of basic requirments that seem more like suggestions or "guidelines"

2) The countries of Europe and the EU in particular do protect core internal businesses at the expence of its consumers. Yes Yes, we can have a debate on US policies, but thats off topic. If someone want to start that one up Ill be happy to join the fray. Higer costs for consumer goods decreases consumption, decreases taxes, less money goes into the economy etc etc.

3) As Seekerof put it:



Hmmm, speculation amounts to it being attributed to the over-hyped Euro to socialistic governments to simply not enough Europeans to work or work the hours needed.


This is a key again. The social / welfare system, often touted, nay flaunted, is a huge burden on any economy. How is it payed for? High taxes, gasoline taxes which are as much as 6-7 times the US, all contribute to a decrease in descretionary spending by consumers. Add to that the cost of basic utilities etc, living is expensive.

4) Productivity: Im not knocking the 35 hour work week, but its a economic killer IMHO. As we have seen protest are already beginning in France at the meer hint they may take it away. If people are being payed 5 hours for work they are not doing, that puts a hell of a dent in the bottom line. Again, im not knocking it, and actually I work 12 to 24 hour shifts, so If I do not go out I actually "work" 24-32 hours a week. Add to that the huge amount of vacation time (again not knocking, just pointing out) that adds to the fray as well.



posted on Feb, 11 2005 @ 10:09 PM
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Originally posted by FredT
This is a key again. The social / welfare system, often touted, nay flaunted, is a huge burden on any economy. How is it payed for? High taxes, gasoline taxes which are as much as 6-7 times the US, all contribute to a decrease in descretionary spending by consumers. Add to that the cost of basic utilities etc, living is expensive.


I kind of agree with your other points but i think this one is a bit off. There are two economic practices that are known to fail, state owned economies and economies that run them self to the ground by spending too much on military. The USSR is a good example of a country that made both of these mistakes. With Europe they have free market economies and spending on social programs comes from the governments budget. So I don't see how spending it on social programs to improve the life of the average citizen is any worse than spending it on military or other government programs. I agree that if the taxes were too high and they overspent on their budgets it would be a problem regardless of what they spend it on more or less (paying subsidies might help industries but i see that as being an almost communist ideal of the government interfering with free trade) but is this always the case? It certainly isn't in every European country - Spain, Switzerland, the UK don't have really high tax and have similar social programs in place as countries like Germany and Italy who do have high tax. So i think the issue isn't what they spend the tax on it's if they can afford to spend it without raising their taxes and if they can do this it isn't as bad for the economy as many make it out to be.

[edit on 11-2-2005 by Trent]



posted on Feb, 12 2005 @ 02:21 AM
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Can we use proper terminology, please?

There isnt a single socialistic party in power in EU. Socialistic is a term often connected with former SSSR and tends to lead people to think that EU is some communist haven or something.

What is wrongly refered to as "socialistic" are actually social democratic parties, who have, btw, lost the lead in a lot of EU countries and now either do not rule anymore at all, or rule in coalition with various right wing or centre parties.


Ric

posted on Feb, 12 2005 @ 06:31 AM
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I think it has to do with the current focus on asian trade and production



posted on Feb, 15 2005 @ 08:03 AM
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Most unfortunate news coming out of Germany concerning its economy:


BERLIN (Reuters) - Germany's economy unexpectedly shrank in the final quarter of last year, dealing a blow to euro zone recovery hopes, preliminary German Federal Statistics Office data shows.
The gross domestic product of Europe's biggest economy contracted 0.2 percent from the previous quarter and revised data showed there had been no growth at all in the July through September period.

"This really is a pretty catastrophic figure," said MM Warburg economist Carsten Klude on Tuesday. "It shows the domestic economy is just not getting into gear."

German economy unexpectedly shrinks

I wonder when the Euro finally starts spinning down from its state of over-hyped'ness, will Reuters and the European Press call it "unexpectedly," as well?





seekerof

[edit on 15-2-2005 by Seekerof]



posted on Feb, 15 2005 @ 10:32 AM
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More data on the Euoropean economy:


eubusiness
Eurostat said that for the whole 25-nation European Union, growth in the final quarter was 0.3 percent, unchanged from the previous three months.

In 2004, the EU economy expanded by 2.3 percent from 0.9 percent in 2003.

The "flash estimate" survey was based on figures covering 89 percent of the eurozone's gross domestic product (GDP), and 83 percent of the full EU's including its five biggest economies.

For the whole of 2005, the European Commission is predicting eurozone GDP growth of about 2.0 percent.

Many economists have more gloomy predictions than that with the eurozone struggling afresh.

The euro's record-breaking rally against the dollar in particular, it is feared, will dent growth in European exports by pricing them out of world markets.


As more nations adopt the Euro and peg against the Euro, they won't have to worry as much about currency fluctuations.



posted on Feb, 15 2005 @ 04:06 PM
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Originally posted by AceOfBase
As more nations adopt the Euro and peg against the Euro, they won't have to worry as much about currency fluctuations.


- .....and as well as that particular benefit they will additionally enjoy the boost to growth that the single currency is in itself generating as costs are reduced and trade simplified.



posted on Feb, 16 2005 @ 03:46 PM
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I wonder if eventually this may lead to a world wide currency...like the earth dollar or something...



posted on Feb, 16 2005 @ 04:00 PM
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High taxes, gasoline taxes which are as much as 6-7 times the US, all contribute to a decrease in descretionary spending by consumers.


What do you base that assumption on? From what I have learnt the reason Gas is so high in Europe is because they have no domestic supply.



posted on Feb, 16 2005 @ 06:35 PM
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Originally posted by sardion2000
What do you base that assumption on? From what I have learnt the reason Gas is so high in Europe is because they have no domestic supply.


He's correct about the high taxes, they are way out of control over there.

I don't have an up to date graph but here's one from 2000 that shows the prices and the amount of taxes on that fuel.


www.drivers.com...



posted on Feb, 16 2005 @ 06:58 PM
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Okay first I want to know where this data comes from, as the gas retailers in Canada tried to pull the wool over drivers eyes by saying the reason gas was so high was because of taxes(the actuall Chart they had on the pumps claimed that 60 % of the price was in taxes which was a Mistatment at best and an outright lie at worst), when it was really because they ascribed to the practice of Raising thier prices as soon as the price of Oil goes up, then when Oil goes back down thier prices take months to get back down to normal after an especially high spike. Typical price gouging, they know the end is near for them so they are taking advantage while they can and it really pisses me off sometimes.

www.conferenceboard.ca...

check out this pdf, skip ahead to page 33.

www.energy.ca.gov...

I am finding it very difficult to find information on this.... very frustrating.



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