The Euro - the currency for Europe- is in trouble. Please try not to laugh.
16/04/2008

The Eurozone is hit by a ‘double-whammy’. Berlusconi for Italy threatens to join France in calling for slashed ECB rates while today’s ghastly inflation figures will ensure that no such cuts take place. The north-south strains on the Euro get worse by the day TELEGRAPH Business News 16.4.08 Berlusconi plans Paris-Rome axis to humble European Central Bank By Ambrose Evans-Pritchard Silvio Berlusconi's return to power in Italy is a nightmare come true for the European Central Bank, opening the way for a Rome-Paris axis with the political muscle to force a change in monetary policy. The billionaire politician has pledged an alliance with France's Nicolas Sarkozy aimed at humbling the bank and asserting the primacy of elected leaders over interest rates and the currency. "A very strong euro is hurting Italy's economy. I will discuss intervening with the ECB with Sarkozy," he said. The threat brought a sharp retort yesterday from the ECB's German governor and chief economist Jurgen Stark. "I would recommend to political leaders in Europe, newly elected and re-elected, to read the European law on the ECB," he said. Mr Berlusconi - who is setting up a temporary office in Naples to tackle the city's long-running rubbish crisis - inherits an economy trapped in near slump conditions. The country has lost 40pc in unit labour cost competitiveness against Germany since 1995, largely due to anaemic productivity gains and an inflationary wage-bargaining culture. Yet it cannot use the old method of devaluation to claw back parity. The International Monetary Fund forecasts growth of just 0.3pc in both 2008 and 2009, levels that are certain to cause a renewed rise in the country's national debt. Italian car sales plunged 18.8pc in March, and the Alpine lender Credito Valtellinese has just become the first European bank in living memory to miss a redemption on a callable bond - raising concerns of deeper troubles brewing in Italy's financial system. Mr Sarkozy has repeatedly attacked the ECB's tight money policies, blaming it for causing the euro to surge 27pc in two years to a record $1.59 against the dollar. He says the ECB risks bankrupting Airbus and driving much of Europe's industry off-shore. Until now he has lacked the allies needed to impose his will. "Politics is everything in EMU, and the re-election of Berlusconi represents a big shift in the political balance of power," said Bernard Connolly, global strategist at Banque AIG. "Spain will probably join France and Italy before too long, so you will have three of the big four eurozone countries in the same camp. They can set 'broad guidelines' for the ECB. It is a total misperception that the ECB should not be subject to political influence." Article 111 of the Nice Treaty gives politicians power to set a fixed exchange rate for the euro (by unanimous vote), or to shape the exchange rate (by qualified majority vote). This power gives EU ministers an indirect means to force the ECB to cut interest rates. The treaty article has never been invoked but it hovers in EU affairs like Banquo's Ghost. Mr Berlusconi does not share the EU-loyalities of the outgoing government. Ex-premier Romano Prodi was once the president of the European Commission, the public face of the euro. His finance minster Tommaso Padoa-Schioppa was a founder of Europe's monetary union. The last time Mr Berlusconi was in power, two ministers from his coalition partner 'La Lega Nord' called for a return to the lira to escape the constraints of the euro system. While he did not endorse the comments, he appeared to relish their effect on his enemies in Brussels and Frankfurt. =================== BBC ONLINE 16.4.08 Fresh jump in eurozone inflation Surging food and fuel prices pushed up annual inflation in the eurozone to a record 3.6% last month, official figures have shown. March's figure was sharply ahead of February's 3.3% number and was also higher than the initial 3.5% estimate. Inflation varies significantly in the 15 states that use the euro, from 6.6% in Slovenia to 1.9% in the Netherlands. The latest figures pushed the euro to yet another high against the US dollar, making it worth $1.5947. The euro has been boosted by the European Central Bank's (ECB) concerns about inflation and its unwillingness to cut interest rates from their current 4% mark. IMF worries At 3.6%, inflation is way above the central bank's 2% target. It is under growing pressure to cut the cost of borrowing to give the slowing eurozone economy a boost, but it has, so far, refused to be diverted from its anti-inflationary path. The International Monetary Fund recently downgraded its growth forecasts for the eurozone to 1.4% in 2008 and 1.2% in 2009. At the same time, it argued that the ECB had scope to relax its monetary policy, which has remained unchanged for nearly a year. But one economist said the latest inflation numbers meant that rate cuts would be off the ECB's agenda for most of 2008. "Consumer price inflation will go down like a lead balloon at the ECB and undermines already limited hopes of an interest rate cut in the near term," said Howard Archer, chief european economist at Global Insight. Policymakers were worried about the prospect of inflation-busting pay settlements in France and Germany and the rising cost of manufactured goods across Europe, he added. Consumer price rises are now at a 12-year high in France, its statistics agency revealed on Tuesday, rising 3.5% last month.

 
 
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A woman must quietly receive instruction with entire submissiveness. But I do not allow a woman to teach or exercise authority over a man, but to remain quiet. For it was Adam who was first created, and then Eve. And it was not Adam who was deceived, but the woman being deceived, fell into transgression.
1 Timothy 2:11-14

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