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A picture of decline

Posted by Richard Sunday, October 10, 2004

In our Blog yesterday, when we picked up on the declining economic fortunes of the Eurozone, we mentioned the EU commission’s recently published quarterly report on the euro area, noting that the next year’s growth forecast for the area had been revised downwards, from 2.3 to 1.9 percent.

This figure we actually picked up from one of the press reports but it was suggested to us that we should actually read the commission’s report, available from its website.

Having taken that advice, we commend the same action to our readers. Although hardly a gripping read, its 42 pages are packed with facts and figures, illustrated with plenty of graphs, which all to show one thing – the euro, as a single currency, simply has not delivered on any of its economic promises.

What is remarkable – or perhaps not – is that the commission makes no attempt to hide this. It talks of "the lacklustre investment performance of the euro area"; of recent indicators which "do not suggest a strong acceleration of business investment in the months to come"; a "disappointing short-term outlook" for investment; labour markets showing "little signs of recovery"; growth that was "at best, modest"; acceleration of employment growth that "appears unlikely"; and forecasts that "could remain modest…".

Looking at some of the key indicators over time, which the commission helpfully depicts in graph form, we see producer price inflation increasing, wage rates dropping, profitability deteriorating – lagging far behind the USA and the UK – while corporate and domestic debt is increasing. And, in the highly technical area of "discretionary fiscal policy" the report makes it clear that current measures are failing to have a stabilising effect on the economic cycle.

Altogether, from this highly revealing report – written by expert officials rather than politicians – we see a graphic picture of decline, making it impossible to conclude anything other than the euro has been a disaster.