euro-area

JUST a few weeks ago the main question about the euro-area economy was whether it would avoid recession.

The logic was that if you were preparing for financial apocalypse, you had better not rely on the euro area surviving intact.

Third, the rules of the euro area turned out to be about as solid as a slice of brie left out in the midday sun.

The trouble is, the euro area has no mechanism to help a member that cannot fund itself in capital markets.

Over longer time horizons, inflation expectations in the euro area seem to be well anchored at levels below but close to 2%.

A YEAR ago, when the financial crisis was in its infancy, the euro area enjoyed a brief moment in the sun.

The optimistic outlook is that this correction would take the form of a catching up by the euro area in productivity growth.

'We are prepared to work with our counterparts in the euro area to see in what way we can . . . normalize market conditions, ' he said.

The euro area, he said, was currently its epicentre, and the consequences could be much worse than anything seen so far.

Just as in 2001, however, the outlook for the euro area seems to be deteriorating a lot faster than the optimists had expected.

A year ago they tore up the rule book to bail out Greece and to ward off market attacks on other fiscal reprobates in the euro area.

Yet business and consumer confidence seem to be picking up across most of the euro area.

The crisis is taken as evidence that the euro area is so far from being an optimal currency area that it is doomed.

The German figures, the best since reunification almost two decades ago, meant that the euro-area economy had a good quarter, too.

The euro area, for instance, would be far better off with a clear set of rules governing sovereign crises within its borders.

As a result, the euro area is likely to make a bigger contribution to global growth over the next few years than it has of late.

The summit's closing statement referred to "a new quality of economic-policy coordination in the euro area. "

How would less productive economies cope with competition in the euro area when devaluation was no longer an option?

Second, it would be an instrument to rebuild trust among the members of the euro area.

Interbank loans and unsecured term funding are seizing up in the euro area, with short-term ECB loans and secured debt taking its place.

German Chancellor Angela Merkel said the same day, the stability of the euro area more important than the fate of Greece.

The economies of America, Britain and the euro area now seem to be growing again.

Protecting central-bank capital is especially important in the euro area, which has no central fiscal authority.

No such luck: this is an equal- opportunities economic crisis, and the euro area is in it just as deep as America, Britain and the rest.

And it's reported that the draft says the new system will only be used if it's indispensable for the stability of the euro area as a whole.

THE euro area is falling into such a deep hole that the recovery, when it eventually comes, will be a long, hard journey.

THE 13 members of the euro area may share the same money. But payments in this common currency cannot circulate fluently between them.

This year the euro area's economic strength has been a source of surprise. Its longer-term prospects may be brightening too.

But first, he said, euro-area countries must establish trust by enacting big financial reforms.

European leaders have "put in place a number of strong measures" to aid Greece and other euro-area countries, he said.

In a few years' time, the relative economic fortunes of America and the euro area could be reversed.

Their cost of borrowing has shot up, stirring fears of default. Some now talk of a possible break-up of the euro area.

Within the euro area a debate is in progress over whether the single currency itself encourages or discourages reforms.

In the euro area, by contrast, there are more signs that wages are picking up in response to recent inflation.

On that count alone, borrowing costs would be far higher than they were within the safer confines of the euro area.

Mr. Tilford says whether Britain will be weaker for staying out of the deal depends on what happens to the euro area.

Other euro-area countries, notably France, have long been unhappy about this tax competition.

A study by the French Banking Federation concluded that the long-term level of GDP would be 6% lower in the euro area.

By dodging some of its duties as a regional currency, the euro area constrains the euro's wider adoption globally.

Worse, the financial consequences of a shift to a world where a euro-area country can go bust are only just becoming clear.

Defensive Eurocrats point out that the public finances of the euro area as a whole are no worse than America's.

Such measures should be enough to avert a drying-up of bank credit, the main source of finance for euro-area borrowers.

The euro area's weaker sovereigns currently have none of these defences.

The clear and present danger comes instead from a sort of bank run on Italy, the euro area's third-largest economy.

And it's reported that the draft says the new system will only be used if it is indispensable for stability of the euro area as a whole.

If America were like the euro area, Virginia would have to bear the burden itself.

WHEN Greece had to seek a rescue from the rest of the euro area and the IMF it was a shock.

First, the bulk of the money promised by the euro-area countries is not there yet.

Third-quarter GDP figures are likely to show the euro-area economies outpacing America's for a second consecutive quarter.

Raising potential growth needed "sound fiscal policies and an appropriate improvement in the competitive edge within the euro area" .

This reflects the clear dividing line in the euro area between the responsibilities of the central bank and those of the fiscal sphere.

However, even a messy default by Greece alone would not necessarily mean the end of the euro area.

The worst offenders on this count are the euro area's peripheral economies, as well as Britain and America.

This was an organisation, he insisted, that looked after over 300m citizens in the 17 countries of the euro area.

Investors also took some comfort earlier from the French and German leaders insisting that Greece is an integral part of the euro area.

Most of Poland's trade is with the euro area and much of that is intra-firm trade: between, say, a German firm and its Polish subsidiary.

The truth about weaker euro-area economies, notably France and Italy, stares Mr Sarkozy in the face: their ills are home-grown.

In the euro area it has proved to be a watershed for collective reflection.

In this context of a favourable external environment, euro area exports are expected to grow significantly this year and next.

On the basis of the latest Commission forecasts, the average euro area budgetary position is not expected to improve much this year or next.

Germany would no longer be able to influence the euro area's monetary policy.

For so long a laggard in the euro area, its economy is now growing faster than the regional average.

And they point out that Italy is not the only country in the euro-area to have a growing problem with competitiveness.

Germany's response to the troubles of Greece, Spain and other euro-area countries has followed just such a line.

A working group has been set up to examine ways of co-ordinating economic policies more closely among the 16 euro-area countries.

The commission will trim its forecasts later this month, but euro-area growth is likely to stay close to 2% this year.

Shortly after the announcement of a European emergency fund to stabilize the euro-area economy, gains were seen in the financial markets.

The credit crunch has had a less dramatic impact across the euro area than in either Britain or America.

We will also have to deal with tighter monetary policy if the rest of the euro area picks up, creating more pressure.

No easy task, to be sure, judging by how euro-area countries flouted the fiscal targets in their Stability and Growth Pact.

Indeed, the scale and timing of fiscal support explains much of the recent divergence within the euro area.

So far, the collapse in euro-area output has had an uneven effect on employment.

The healthy second-quarter growth rate recorded in the euro area failed to affect the number of jobless.

Ireland is having a deeper recession than any other euro area country.

This is an equal- opportunities crisis; the euro area 's three biggest economies are in it just as deep.

A disorderly default by a member of euro area could cause a shock that would reverberate through the global economy.

Federal Reserve officials are preparing to conduct a new round of stress tests on American banks with a euro-area collapse in mind.

Despite all this, euro-area optimists may face a testing few months.

The Spanish public deficit was one of the highest in the euro area at 11. 4 percent of gross domestic product (GDP) in 2009.

Only the central bank can prop up growth by loosening monetary conditions across the euro area.

The pressure to tighten fiscal policy in some parts of the euro area will make it hard for the ECB even to consider raising interest rates.

In his view, the euro area is characterised by a succession of booms and busts , each in a single country.

In Portugal and Spain inflation was a little lower but still well above the euro-area norm.

European politicians need to create a new one, either with a more integrated fiscal union or a break-up of the current euro area.

For now, the idea of Greece having to seek a bail-out from its euro-area partners or appealing to the IMF for help is just talk.

In particular, the euro area, which purchases half of Britain's exports, is at last showing some vigour.

European countries later had to agree to a nearly one trillion dollar rescue for the euro area.

Most are small and very open economies whose exports account for a large share of GDP and whose trade ties to the euro area are strong.

The low interest rates across the entire maturity spectrum also support the economic recovery in the euro area.

That the euro area is struggling too may be little solace to Mr Darling, since more than half of Britain's exports go there.

It estimates that in 2004 the average property in the euro area was overvalued by at least 15%, and homes in Spain and France by almost 30%.

We firmly believe that the ability to restore the credibility of the euro area, which includes every member.

In contrast, figures in the euro area and Britain have been revised up by an average of 0. 5 percentage points.

There's widespread public hostility to the bailout in other parts of the euro area.

Life within the euro area is no longer quite so cosy.

Risk signals for financial stability in the euro area are flashing "red" as the debt crisis threatens to infect banks, ECB's Trichet said.

The downgrade caused stock markets to fall amid fears of a potential wider fiscal crisis in the euro area.

"In the euro area. . . default does not exist, " he declared (perhaps rashly) on Bloomberg television.

The euro area must not be treated as an "opt out" from the European Union.

Over time, the emergency fund could evolve into an institution that improves the euro area's fiscal co-ordination.

The restraint imposed on the euro area by the stability and growth pact was supposed to limit euro-denominated sovereign borrowings.

Last week, the Paris-based Organization for Economic Cooperation and Development lowered its growth estimates for the euro area.

France repeatedly pushed for governments in the euro area to have more say over things like exchange rates.

The manufacturing bent of the big euro-area economies has also left them looking cumbersome rather than strong.

Banks, especially in the euro area, also face a "wall of maturities in the next few years. "

Detailed figures for euro-area GDP, published on November 30th, confirmed a slowing from a stunning second quarter to a much duller third.

A third reason for delaying and seeking any alternative to restructuring is the potential reputational damage for the entire euro area.

Both the European Commission and the European Central Bank realised that problems beyond the euro area could create headaches inside it.

The malign effects of the credit crunch are now clearly visible in the euro area's biggest foreign markets, Britain and America.

The new bank, in the euro area's top five, will have scope to cut costs at home and be well placed to do deals abroad.

The new bank, in the euro area's top five, will have scope to cut costs at home and be well placed to do deals abroad.

If the answer is still, "not very much" , the euro-area might begin to shed some of its weaker members.

"Today's data suggest that the recovery in the euro area is starting to broaden out, " said Colin Ellis, an economist at Daiwa Securities.

That makes it harder for firms in these countries to compete with rivals in the rest of the euro area.

And pain is being felt all around the periphery of the euro area.

FOR months now European leaders have been striving to get on top of the euro-area debt crisis.

That's the message from the heavy-hitting political and financial figures in the euro area, so it must be true.

VIENNA'S glories are largely faded but its name is being mentioned with increasing frequency by the euro area's policymakers.

Starting with the economic analysis, real GDP in the euro area was virtually stagnant in the first half of this year.

Once safely tucked inside the euro area and benefiting from low interest rates, all three mismanaged their economies and public finances.

Over the same period, the euro-area economies saw no fiscal stimulus and household saving barely budged.

GDP in the euro area is expected to rise slightly, though the fund's forecasters think Britain will grow at a faster rate.

The high level of saving by German firms contributes to this handsome surplus and masks a worrying fault line running through the euro area.

'It is clear that we are no longer managing a crisis just in the euro-area periphery, ' said the letter, which was made public on Thursday.

Economic growth in the Euro-area has stagnated: further indication that no region or country can remain insulated from a global slowdown.

The country would thus effectively cease to be part of the euro area.

The first reviews the main developments in the debt financing of the euro area private sector over recent years.

Weaker euro area activity data over the past month puts the ECB in a precarious position at this juncture, analysts said.

Going further than his previous comments, Mr Trichet went on: "First signs are already emerging in some regions of the euro area. "

The second-greatest beneficiary of euro depreciation would be Germany, as 40 per cent of its exports are to countries outside the euro area.

Rising relative costs and prices have damaged peripheral economies, deepening the euro area's dangerous imbalances.

Overall, the outlook for the global economy and euro area foreign demand remains relatively favourable.

That did little to cool the economy. Greece's inflation rate stayed above the euro-area average, hurting its competitiveness.

The overall outlook for the global economy and euro area foreign demand remains relatively favourable.

In the euro area, economies deprived of the safety valve of devaluation must make structural reforms to adjust.

Or, more powerfully, the wider euro area could adopt more expansionary monetary policies for several years.

That may please Switzerland's consumers, but it makes life tough for its clockmakers, who sell to customers in the euro area.

Yes, there have been structural improvements in the core euro area, especially Germany.

In many ways France, Europe's second-biggest economy, will be decisive for the future of reform across the entire euro area.

raising more questions about the ability of those countries to back any further potential euro-area bail-outs.

Nevertheless, there are downside risks to the economic outlook for the euro area that need to be monitored closely.

The idea that the euro area is an updated version of the gold standard has been much discussed.

Furthermore, the euro area should over time reap the full benefit from the effects of policy measures announced over recent weeks .

At least house prices are still falling in the euro area's overvalued markets, such as France, Spain and Ireland.

The immediate source of trouble is the euro area, which is struggling to stop the spread of its sovereign-debt crisis.

A euro area breakup, even a partial one involving the exit of one or more fiscally and competitively weak countries, would be chaotic.

In Europe, the 15 countries in the euro area agreed on a broad menu of measures to cope with the growing financial crisis.

Its job is to set rates for the whole of the euro area.

European stocks rose as euro-area finance ministers pledged to strengthen the safety net for debt- strapped countries.

Spain accounts for one-eighth of euro-area GDP but until recently was generating a much larger share of consumer spending and new jobs.

The euro area has three big problems, not just one: its fiscal deficits, bank liabilities and structural barriers to growth.

IMF calls on developed economies, especially in the euro area to take prompt action to repair and reform the financial system.

Most of the euro area's current growth comes from domestic demand, as spending by firms and households has perked up.

One reason why bond yields are low across the euro area is that inflation is under control and expected to stay that way.

One goal would be to control budget deficits for euro area countries.

They discussed economic governance for the euro area and cooperation on budget and tax policies.

Overall, the substantial excess liquidity available in the euro area remains a matter of concern.

The euro area's consumers have high savings and low debt by rich-world standards but are nervous all the same.

Panic about the Greek government's ability to repay its creditors is infecting other euro-area countries' sovereign debt. Where will it end?

Growth is expected to be slower this year and next because of the crisis in the euro area, Germany's main export market.

All in all, they suggest that the recovery of real economic activity in the euro area has continued into 2004, albeit at a modest pace.

And the European Central Bank's interventions in the banking system in December and February have pulled the euro area back from the brink.

On the one hand, these risks relate to developments and imbalances in the global economy and their possible spillovers to the euro area.

Portugal, Spain and Italy are scheduled to sell debt this week following a slump in euro-area government bonds last week.

The euro area is another obvious source of stress, this time financial as well as macroeconomic.

As a result manufacturing production is closer to its pre-recession peak in Britain than in Germany or the euro area (see chart).

That is tough in a downturn: most countries inside the euro area are already in breach of these rules.

Yet no euro-area country wants to give its more profligate fellows the impression that their debts will be covered.

Thankfully, the euro area's original deficiencies can be fixed.

Eastern Europe and other parts within the euro area are benefiting very directly from German exports.

In the euro area, inflation is running at 3. 1%, the fastest pace since the euro notes and coins began circulating.

The euro area registered solid economic growth resulting from strong domestic demand.

Trichet told Der Spiegel that Europe needs "a quantum leap in the governance of the euro area. "

But European leaders have yet to agree on enlarging the rescue fund meant for debt-troubled euro-area economies.

The euro area's economy has looked remarkably healthy this year, and keeps surprising forecasters.

The second gives an overview of the ongoing process towards the integration of financial markets in the euro area.

Devaluation, the usual route to rebalancing, is not open to countries in the euro area.

Now, with Britain hit harder than either America or the euro area, the nation's self-confidence is as shaky as its credit rating.

In the euro area as a whole, a quarter of a point is on offer.

Concerning the second pillar, the latest data and survey results confirm that economic activity in the euro area remains subdued.

The euro area may shrug off these ills, particularly if Germany powers ahead and consumer spending picks up.

The worst of the credit crunch may be in the past, but there are tougher times ahead for the euro-area economy.

Granted, the troubles of the euro area's peripheral economies have proved all too real.

The euro area must eventually develop into a fiscal union in order to survive and flourish.

The summit was supposed to rubberstamp a package of measures to settle the tension affecting the euro area.

Even now inflation in these countries remains above the average for the euro area.

The crisis has also revealed the weaknesses of public finance, both in the euro area and in other industrialised countries.

"the euro area has taken a major step towards pooling risks arising from unsound public finances" .

The most concerned onlooker is Germany, which sees its credit lying behind the entire euro area.

Preparing for this eventuality would make the existing euro area more resilient.

Or it could mean restructuring the euro area through common Eurobonds and fiscal transfers.

The truly troubled economies of Europe were always the core euro-area ones: Germany, France and Italy.

However, this also reflects the market for large-scale relief operations in the euro area will be concerned about the burden of Germany.

In particular, both the employment rate and labour productivity growth in the euro area need to increase significantly.

The euro area would clearly benefit from stronger discipline on borrowers and lenders.

It helps the euro area as a whole. They would really rather have a fair valued currency than an expensive currency.

Even the economy is doing well: growth is higher than the euro-area average and the deficit is narrowing faster than forecast.

In the event, a special summit of euro-area leaders hammered the essentials out two weeks ahead of schedule.

It is unquestioningly accepted at home and widely used beyond the euro area's borders.

In contrast, GDP figures in the euro area were revised up by an average of 0. 3 points.

Until the crisis struck, the euro area's current account was roughly in balance.

Sebastien Galy says growth expectations for the euro area have dropped.

A third even of euro-area trade is still dollar-based.

People forget Germany is nearly one-third of the euro area and Germany is booming.

"The euro area has entered a deep recessionary spiral" , said Aurelio Maccario, an economist at UniCredit, an Italian bank.

Today seventeen of the twenty-seven members of the European Union are in the euro area.

And debt problems extended beyond Greece. Ireland asked euro-area members and the IMF for help last month.

It is a delusion to suppose that euro- area exports can continue to barrel on regardless of their cost .

Slovenia and Slovakia were shielded from currency speculators by being in the euro area.

But Greece makes up only 3% of euro-area GDP, and rapid fiscal consolidation is much less likely in the big economies.

Since it entered the euro area in 2001, Greece has sacrificed competitiveness and amassed enormous trade deficits.

Yet this could be a high-water mark for the euro-area economy.

In the euro area, especially, austerity plans will further sap domestic demand.

The third cause for concern is what the euro area's governments will do with the time the rescue package buys them.

Exit from the euro area would deplete its customers in the rest of the zone of the cash and credit needed to buy German goods.

By contrast, the core of the euro area is basking in sunny economic revival.

The first reviews recent findings on the monetary policy transmission process in the euro area.

Many economists reckon that both Japan and the euro area could see a second quarter of decline in the three months to September.

The latest surge in joblessness follows mounting evidence that the euro area is on the brink of recession.

The European Central Bank's provision of liquidity to foreign banks encouraged them to keep financing subsidiaries outside the euro area.

Worse still, Britain's banks have lent heavily to the euro area's biggest trouble spots.

If Portugal did ask for help, it could prove another nasty moment for the euro area.

It is a Spanish mantra, requiring a mere change of name of euro-area countries, to insist that Spain is different.

A few years ago, Japan and the euro-area economies were flat on their backs.

Goldman Sachs expects the euro area's current account to show a surplus this year, which will only grow next year.

Even in countries outside the Euro area, like Hungary and Poland, businesses and individuals often borrowed in Euros .

"Debt restructuring in euro-area member states is not an option, " European Union spokesman Amadeu Altafaj said this week.

Euro-area nations have set up a bailout fund of about one trillion dollars.

The idea may yet be revived as policymakers in the euro area rewrite the rules governing the currency.

That is despite an unemployment rate that has shot up to 19%, double the average in the euro area.

Business cycles favour it: the euro-area economy is picking up speed again, but America's recovery is more advanced.

In the euro area, the development of the private bond market implies that there has been an increase in the options available to borrowers.

In the euro area, inflation is 2. 4%; the ECB aims for a rate close to but below 2%.

Euro area leaders, meeting in Brussels on Friday, will announce a wave of reforms.

That markets now discriminate among euro-area credits is a good thing.

Since the end of 2006 euro-area GDP has outpaced America's: in 2007, it should grow by 2. 7%, ahead of both America and Japan.

Also, several countries in the euro area are still struggling with debt crises.

Any help will require the unanimous approval of the 16 euro-area members, giving Germany a veto.

Yet in the euro area productivity in these sectors fell by 9% over the same period.

Over the past four years, Spain has created two-thirds of all new jobs in the euro area's biggest four countries.

Differences in debt and competitiveness will make it harder to manage the euro area.

Consumer prices in the euro area rose by 3. 2% in the year to January, well above the 2% limit of the central bank's target range.

Business confidence has turned down sharply in all of the three biggest economies in the euro area: Germany, France and Italy.

Various surveys showed a much sharper slide than had been expected in consumer confidence in America, Britain and the euro area.

In our view, this would probably not be sufficient to abort the economic recovery in the euro area.

Many signs now point to the euro area slipping back into recession, not least because of the rush to intensify fiscal austerity.

In the euro area's crisis, there is plenty for them to guard against: the European Union accounts for a fifth of China's exports.

By then, the euro-area economy may already be in recession.

In the euro area and Britain, broad money growth is running well ahead of nominal GDP.

The euro area threw everything it could at the crisis this weekend.