But surprise, surprise, here’s what he DIDN’T say
HE MAY have blown the EU’s trumpet until he was blue in the face, but what about the things JeanClaude Juncker didn’t say in his grandstanding speech? ALEX BRUMMER offers a reminder of the economic and social crises that threaten to tear the eurozone apart.
Heavy unemployment
Yesterday the UK reported unemployment has fallen to 4.3 per cent of the workforce – with just 1.46 million on the dole, a 42-year low. The eurozone equivalent is 9.1 per cent of the workforce. In France, the jobless rate in July stood at 9.8 per cent of the workforce, in Italy 11.3 per cent and in Greece 21.7 per cent.
What is unconscionable are the horrendous levels of youth unemployment, condemning generations of young Europeans to lives without hope. In Greece, some 44.4 per cent of young people are without work, in Italy 35.5 per cent, in Spain 38.6 per cent and in France 23.4 per cent. It may take decades of economic expansion to eliminate the unacceptable levels of joblessness across the region.
Broken banks
A decade after the financial crisis, the European banking system is still struggling to recover. Deutsche Bank, Germany’s largest, has become the most fined bank in Europe, paying the Americans £6 billion last year for malpractice, and handing the Russians penalties for money laundering.
The Italian system is in crisis, its banks weighed down with £307bn of bad debts. US investment bank Morgan Stanley estimates it could take ten years simply to reduce the levels of bad loans in Italy to the average across the EU. Efforts by the Italian government to repair its own banking system have been thwarted by EU regulators because of ridiculous rules restricting state aid. The deep-seated problems of the European banking system are a severe block on a sustained economic success story.
Printing money
The current recovery in European output is being supported by the ‘crack cocaine’ of the financial system – the printing of billions of euros known as quantitative easing. European Central Bank president Mario Draghi is printing 600 billion euros a month in an effort to get the eurozone economies moving by oiling the wheels with credit, but this can drive up inflation and encourage debt. Despite German pressure to pull back or stop, he is refusing to turn off the tap for fear the eurozone economies will tank.
Migration backlash
The virtually unprecedented surge of immigration from the Middle East and Africa has not only sparked huge social pressures, but seen the rise of hard Right-wing parties including the Five Star movement in Italy, and the violent and destructive Golden Dawn in Greece. Worse, mass migration has opened schisms between several old Eastern bloc countries and the bureaucrats of Brussels, who brought legal proceedings against Hungary, Poland and Czech Republic after they refused to be part of an EU-wide settlement plan for 160,000 immigrants.
Club Med stragglers
Germany remains deeply frustrated with the profligacy of the eurozone’s weaker members such as Italy and Greece in the so-called Club Med region. Greece’s inability to meet its debt payments sparked the 2010 crisis in the single currency, which almost swept the whole EU edifice into the Mediterranean – and the situation hasn’t improved much since then.
German car industry
The traditional driver of Germany’s industrial might – and thus its economic stability – has been undermined by a series of scandals. Volkswagen’s in disgrace for its cheating on emissions tests, and has so far paid £17bn in fines. VW, BMW and others have also been engaged in a cartel which kept the price of car parts too high. And now the German motor industry is falling behind that of the US, China and UK-based manufacturers in the embrace of electric and hybrid vehicles.
French union strife
To his credit, France’s callow president Emanuel Macron is seeking to liberalise France’s restrictive labour markets. But optimism is turning to chaos this week as union protesters, farmers and others take to the streets. There seems little danger of reforming the sclerotic French state any time soon.
Financial services
Europe has virtually no capacity to raise new equity because of the feeble state of the financial system. Efforts by Frankfurt and Paris to lure bankers from London to set up alternative financial centres are also foundering. London remains the world’s top financial centre, and only ten of the top 40 global banks in London have bothered to seek banking licences on the Continent.
This means that commerce in a post-Brexit Europe will be highly dependent on British offices if businesses and economies are to raise the cash they need to recover and expand.