After the European Council dinner, the leaders of the single currency are going to a lecture by Mario Draghi
Recovery is slowing; the economy remains “fragile” perhaps a fine tuning of strategies is necessary
Next Thursday state and government leaders of the Euro will hold and extraordinary Euro Summit with Mario Draghi. The situation seems to be worse than predicted; the European economy seems to be getting out of control from those who should be managing it. Yesterday two heavy blows were delivered. The first one from Mario Draghi himself – that for the first time, only a few weeks from after he had made the last forecast, he explained that the recovery will no longer be this year but next. Even so, until a few days ago, he had repeated for months that it would have started in 2013. It is not the first delay; a year ago a positive GNP was foreseen already for the beginning of 2013. Then in the afternoon Herman van Rompuy, President of the European Council and one of the supporters of the austerity policy arrived. In the convening letter for the next Council on March 14 and 15 he explained to the European Prime Minister that things are not taking off yet; the single market is not regenerating as it should and they don’t understand why yet.
Following counsel of the European Central Bank, Draghi explained to journalists that the data “indicates that the weak economy of the Euro zone continued in the beginning months of 2013 and confirms also there are some signs of stabilization, even if at a low level.” The forecast therefore is for “a gradual upswing in the second half of 2013 sustained by a strengthening of global demand and an accommodating monetary policy managed by the ECB.” Hitherto it seems fine; but then the President of the ECB explained that the prospects of growth remain “predominantly risky” due to above all (and here starts the confusion) “an internal need or a weaker than forecasted export or even of a slow or inadequate implementation of the structural reforms in the Euro zone.” This demonstrates the “fragility” Draghi often discussed. The road to recovery, he highlighted “remains constant.” This is still the vector but the speed is uncertain. The level is one step lower because the document distributed after the management council explains that the ECB considered lowering the forecast also as a proclivity to remain positive. The economic growth forecast for the European area now predicts 2013 with a GNP between .9 & .1% and the transition into positive will be in 2014 but with much caution between 0 & 2%. The ECB management council “continues to see risk of lowering, tied an implementation of reforms being too slow stemming from the recovering the confidence and therefore slowing down recovery.” Because of politicking, that answers explaining that “a huge endeavor was made for economic stability but the forecasts indicate nonetheless that recovery will be slow and fragile,” writes van Rompuy in his letter to the Prime Minister. The reply therefore is “focus on the structural reforms that will push competitiveness and recovery.” The Flemish politician is confident that the road taken is the right one and admonishes the government which did not develop policies to innovate the single market (Single Market Act I). “There is a delay – he affirms – which is difficult to justify.” Van Rompuy then asks to intensify efforts in the “industry, transport, energy and telecommunication” sectors which could restart the rest of the economy as well. Very original ideas.
Further proof that there are problems – perhaps unforeseeable -in the politics of recovery based on austerity is the Eurosummit decided but for now not announced publicly,with Mario Draghi on the evening on March 14th, later that evening after the European Council dinner. The ECB President, explains a source from Brussels, “will explain the economic situation in the Euro zone and will update regarding the progress and actual problems.” An accelerated course in real economy.
Lorenzo Robustelli
