South Europe recession threatens to spread north; French jobless number at new high; 'Don't pray for a strong recovery'; Disposable people

1 South Europe recession threatens to spread north (Jack Ewing in The New York Times) Daimler’s glum forecast for 2013 is the latest evidence that Germany, and other relatively healthy countries like Austria and Finland, risk falling into the recession that has long afflicted their southern neighbors. The slowdown in Germany was foreshadowed by months of declining industrial output, said Carl B. Weinberg, chief economist of High Frequency Economics in Valhalla, NY “The EU has made Europe a much more cohesive economy, which is good when things are going up,” he said. “But when things are going down the multiplier is very strong. An outgoing tide lowers all ships.”

The region’s overall economic weakness as well as slowing demand in China and other big markets for German exports of consumer products, cars and sophisticated machine tools, industrial robots and construction equipment are finally taking their toll.  Just one more consecutive quarter of shrinking economic output and Germany would officially enter a recession. The same is true of Belgium, France, Luxembourg, Austria, even Sweden and Finland. The Netherlands has already suffered two quarters of declining gross domestic product. 

Further evidence of the spreading European recession came Thursday, first from Madrid, where the Spanish government reported that unemployment had reached a record level: 27.2%. Then new economic data from London indicated that Britain had barely avoided slipping back into recession for the third time since 2008. 

If Germany slips into recession, much would slide down with it. Germany and the other 26 countries of the European Union together represent the world’s second-largest economy and as a bloc it is the single largest US trading partner. The further delay in Europe’s recovery that a German recession would cause would seriously hamper growth in the United States, Asia and Latin America.

2 French jobless number at new high (BBC) The number of unemployed people in France rose to a fresh high last month, official data shows. There are now some 3.2 million people seeking work in France, 11.5% more than a year ago and 1.2% more than in February, the labour ministry said. The number of jobseekers is the highest since records began in January 1996.

The ministry does not express the jobseeker figure as a percentage of the work force, as done by the International Labour Organization. But it did say the unemployment rate was 10.2% at the end of 2012, and current unemployment had not breached the 10.7% high seen in 1997.

3 ‘Don’t pray for a strong recovery’ (Stephen King in The Guardian) The justification for giveaways isn't just political. It reflects a genuine fear that, following the dotcom crash in 2000 and 9/11 a year later, the west might succumb to a Japanese-style lost decade. It made sense to offer stimulus because the alternative was just too scary. In hindsight, it is now abundantly clear that, despite all the monetary and fiscal heavy lifting (or even because of it) the underlying pace of economic growth was deteriorating.

In the US, there was too much investment in housing and too little elsewhere. In the UK, employment growth became increasingly dependent on the direct and indirect effects of financial leverage. The only sectors to see gains were financial services, property and construction and the public sector. Policymakers also forgot that some of the big postwar drivers of economic growth were reaching maturity. The opening up of trade, the increased employment of women, the huge increase in educational attainment and the growth of consumer credit all contributed to a "step-change" in living standards that, while welcome, hardly suggested a permanent increase in growth rates.

The new reality is, I'm afraid, a world of significantly lower growth, where the gap between our expectations and actual income is getting bigger day by day. Neither Keynesians nor austerians have an answer to this sober outlook because both sides claim their own policies will ultimately take us back to a world of rapidly advancing living standards.

Praying for a strong recovery is not, however, the answer to our problems. By doing so, we'll only end up imposing a bigger and bigger cost on our children. Living within our means is hardly easy but the alternative is worse: false hope leads ultimately to financial crisis, political upheaval and social turmoil.

4 Disposable people (Khaleej Times) Unsafe working conditions in factories are a pressing problem in South Asia. Every now and then, an accident at an industrial site has the most tragic consequences. And now the collapse of a building housing a garments factory at the outskirts of Dhaka, Bangladesh, which has killed over 200 people, has set a new benchmark for tragedy. Eyewitnesses have described that the entire building was razed to the ground in just a few moments.

This incident again highlights the extremely poor safety standards for Bangladesh workers, who ironically partake in a multi-million dollar garments export industry.  The police have confirmed that cases have been filed against the building owner and the owners of the factories for causing unlawful deaths. But it would be overly optimistic to assume that such an accident will not take place again. Not just in Bangladesh, but even in India and Pakistan, unfortunately there is little regard for the lives for labourers. 

It’s high time that the governments of South Asian countries start enforcing strict safety standards at industrial sites. In fact, Western companies involved in importing goods from South Asia, should bear the responsibility of pressurising business owners to ensure the safest working conditions for their labourers.