Last week, in what appears to have become a six-monthly ritual, Jose Manuel Barrosso, the President of the European Commission, came out with yet another one of his periodic reassurances that the worst of the Euro crisis was behind us. Yet no sooner did he provide that reassurance than EUROSTAT released data suggesting that, if anything, the European economic recession deepened in the fourth quarter of last year.
According to EUROSTAT, overall European unemployment has now risen to an all-time high of 11.8 percent while youth unemployment now exceeds 24 percent. At the same time, in November European industrial output declined yet again, with the year-on-year decline now having increased to 3.7 percent. As illustrated in the chart above, European industrial production is now more than 12 percent below its 2008 pre-Lehman crisis peak.
European policy-makers’ reassurances that the worst of the European economic crisis is over would have more credibility if they were matched by changes in policy direction. Sadly, there is little indication of such change. Rather, Europe remains embarked on the same economic policy mix as it was in 2012 of severe budget austerity and structural reform within a Euro straitjacket and at a time of a meaningful domestic credit crunch. And it is doing so in the context of a weaker global economic environment. European policymakers offer no explanation as to why the same policy mix that was applied in 2012 and that produced a European recession that year will not produce a deepening in the economic recession in 2013.
One has to hope that, when cheerleading markets, European policymakers do not believe their own rhetoric. For this will only blind them to the sort of policy changes that are now urgently needed to pull Europe out of its ever deepening economic recession.