MT hates to be a doom-monger, but the latest Eurozone economic data is not happy. Inflation in the Euro Area has continued its downward march, falling 0.2% to 0.5% in May – the last time it was at the target rate of 2% was January 2013.
Economists had expected a fall to 0.6%, but German inflation of 0.6%, the lowest since 2009, continued to hold back the Eurozone. That Europe looks to creeping closer to Japanese-style deflation (and definitely looks like it is stagflating already), raises the probability that the European Central Bank will cut interest rates from the already rock-bottom 0.25% to something like 0.1% on Thursday.
Meanwhile, unemployment has finally resumed its snail-paced downward trajectory, falling to 11.7% in April after four months at 11.8%.
A reason to be cheerful, one might think, but a look at the cavernous differences between countries is none too joyful. Unemployment may be just 4.9% in Austria and 5.2% in Germany, but the percentage of Greeks out of work was 26.5% in February, while 25.1% of Spaniards are unemployed (that makes the UK rate of 6.8% look positively rosy).
Youth unemployment is also horrifically high almost everywhere, with an average of 23.5% across the whole Eurozone.
However, it was only 7.9% in Germany in April, but was a heart-rending 53.5% in Spain and 56.9% in Greece in February.
Unless the debt-laden, austerity-stricken southern European countries and their more frugal northern neighbours start converging soon, the continent is going nowhere fast. The gaping differences between them will also continue to fuel Euroscepticism (as evidenced in the wave of populist parties that won seats in the recent European Parliament elections) among both unemployed southerners and the northerners who are still footing the bill for bailing their countries out.