Archive for May, 2013

Record unemployment, low inflation underline Europe’s pain

Joblessness in the 17-nation currency area rose to 12.2 percent in April, EU statistics office Eurostat said on Friday, marking a new record since the data series began in 1995.

With the euro zone in its longest recession since its creation in 1999, consumer price inflation was far below the ECB’s target of just below 2 percent, coming in at 1.4 percent in May, slightly above April’s 1.2 percent rate.

That rise may quieten concerns about deflation, but the deepening unemployment crisis is a threat to the social fabric of the euro zone. Almost two-thirds of young Greeks are unable to find work, exemplifying southern Europe’s ‘lost generation’.

Economists and policymakers including Germany’s finance minister, Wolfgang Schaeuble, have said the greatest menace to the unity of the euro zone is now social breakdown from the crisis, rather than market-driven factors.

In France, Europe’s second largest economy, the number of jobless rose to a record in April, while in Italy, the unemployment rate hit its highest level in at least 36 years, with 40 percent of young people out of work.

“I’ve sent CVs everywhere, I come to the unemployment agency every day, for 3 or 4 hours to look for work as a truck driver and there’s never anything,” said 42-year old Djamel Sami, who has been unemployed for a year, leaving a job agency in Paris.

Thousands of demonstrators from the anti-capitalist Blockupy movement cut off access to the ECB in Frankfurt on Friday to protest against policymakers’ handling of Europe’s debt crisis.

Some economists believe the ECB, which meets on June 6, will have to go beyond another interest rate cut and consider a U.S.-style money printing program to breathe life into the economy.

“We do not expect a strong recovery in the euro zone,” said Nick Matthews, a senior economist at Nomura International in London. “It puts pressure on the ECB to deliver even more conventional and non conventional measures.”

In the past, the euro zone has needed economic growth of around 1.5 percent to create new jobs, according to Carsten Brzeski, an economist at ING. With the Organisation for Economic Cooperation and Development forecasting this week that the euro zone economy would contract by 0.6 percent this year, unemployment is set to worsen long before it turns around.

“We do not see a stabilization in unemployment before the middle of next year,” said Frederik Ducrozet, an economist at Economist at Credit Agricole in Paris. “The picture in France is still deteriorating.”


ECB President Mario Draghi, whose pledge to buy the bonds of governments in trouble helped protect the euro zone from break-up last year, has so far left the onus on governments to reform.

A majority of economists polled by Reuters do not expect the ECB to cut its deposit or main refinancing rates soon, although the OECD this week called for the bank to consider printing money for asset purchases to revive growth.

ECB policymaker Ignazio Visco said on Friday it stood ready to take further action but that monetary policy alone could not solve the euro zone’s economic problems.

The Commission, the EU’s executive, told governments this week they must focus on reforms to outdated labor and pension systems to regain Europe’s lost business dynamism, shifting the policy focus away from debilitating budget cuts towards growth.

EU leaders are expected to put the problem of joblessness at the forefront of a summit in Brussels at the end of June.

European Council President Herman Van Rompuy, who chairs the meetings, said last week youth unemployment was one of the most pressing issues for the 27-nation European Union as a whole.

Ministers from France, Italy and Germany called this week for urgent action to tackle youth unemployment, with Schaeuble describing it as a “battle for Europe’s unity” and warning of revolution if Europe’s welfare model is abandoned.

In April, 5.6 million people under 25 were unemployed in the European Union, with 3.6 million of those in the euro zone.

Even if governments take on unions and vested interests to enact reforms, they will take time to produce benefits.
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U.S. ITC won’t ban Microsoft’s Xbox as Google requests

IDG News Service – The U.S. International Trade Commission has turned down a request for a ban on Microsoft’s Xbox after finding that the gaming device did not infringe a patent owned by Google’s Motorola Mobility unit.

The ITC’s ruling Thursday has essentially confirmed an initial ruling by administrative law judge David P. Shaw in March that the Xbox did not infringe a Motorola patent relating to wireless peer-to-peer communications.

“We’re disappointed with this decision and are evaluating our options,” Motorola’s spokesman William Moss said in an email on Thursday.

The patent in question was the last in the dispute which was filed in the ITC in November 2010 by Motorola which accused Microsoft of infringing five of its patents.

Google acquired Motorola last year for US$12.5 billion, in part for its patent portfolio.

Motorola dropped two patents relating to the H.264 video encoding standard from the investigation in January this year after Microsoft filed that it expected Motorola to withdraw claims relating to the patents in view of a settlement earlier in the month between Google and the U.S. Federal Trade Commission over standard-essential patents and other issues. Two other patents, relating to the 802.11 standard, were withdrawn by Motorola from the investigation in October last year.

Judge Shaw had in April last year recommended a ban on Xbox consoles in the U.S., and found that Microsoft failed to establish that Motorola’s alleged obligation to provide a license on FRAND (fair, reasonable and non-discriminatory) terms precluded a finding of violation of section 337 of the Tariff Act of 1930. Section 337 investigations conducted by the ITC most often involve claims regarding intellectual property rights, including allegations of patent infringement and trademark infringement by imported goods, and can lead to the ban on their imports into the U.S.
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Greek 2015-16 Fiscal Gap Will Be Focus of Troika Talks, EU Says

Greece’s fiscal outlook after 2014 remains “inherently uncertain” and will be the focus of negotiations between Greece and its euro-area and International Monetary Fund creditors later this year, the European Commission said.

While Greece continues to make progress in its economic reform program under its bailouts from the euro area and the IMF, “major efforts” are needed in the fight against tax evasion, the European Union’s Brussels-based executive arm said in a report today. A fiscal gap of 1.7 percent of gross domestic product in 2015 and 2.1 percent in 2016 needs closing, according to the report.

“The fiscal outlook depends to a large extent on the strength of the recovery and improvement in taxpayer capability to service their tax obligations, as well as gains made from strengthening tax and social security administration,” the commission said. “The task of filling the gap in 2015-16 will be taken up in the context of the 2014 budget negotiations in the autumn.”

Since a budget deficit more than five times the euro area’s permitted limit forced Greece into its bailout in May 2010, the troika of officials from the commission, the IMF and the European Central Bank have held quarterly reviews and negotiations with Greek authorities on its compliance with the terms of the 240 billion euros ($309 billion) of loans.

Budget Deficit
The commission’s report today forecasts the budget deficit will narrow to 3.3 percent of GDP next year from 4.1 percent this year, while public debt will peak at 175.2 percent of GDP this year before gradually declining. Economic output will contract 4.2 percent this year, its sixth year of recession, before GDP increases 0.6 percent next year “led by investment and exports.”

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