THE EUROPEANS

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thelivyjr
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THE EUROPEANS

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MARKETWATCH

"Opinion: The ECB’s bond-buying program was a flop, and that’s perilous for the eurozone"


By Ashoka Mody

Published: Sept 21, 2018 12:18 a.m. ET

European Central Bank President Mario Draghi has declared that eurozone economic growth is on a steady course and that the risk of deflation is fading, allowing the central bank to phase out its bond-purchase program by the end of December.

Such “mission accomplished” rhetoric is entirely contrary to reality.

In truth, the ECB’s bond-buying program has largely failed: economic growth is slowing, and inflation remains worryingly low.


With the ECB reaching the political limits of its actions, perils lie ahead for the eurozone economy.

At his Sept. 13 press conference, Draghi insisted that the euro-area economy is set to experience “broad-based expansion” and the inflation rate is on course to rise “gradually rise” from its worryingly low underlying (core) rate of 1% over the past three years.

While he acknowledged that eurozone economic growth had “moderated” since early 2018 after “strong growth performance” in 2017, he brushed aside the “moderation” as temporary.

This optimistic assessment has it backwards.

In 2017, Chinese authorities made available easy credit to pump up their economy.

That domestic growth acceleration, through China’s huge influence on global trade, caused growth in world trade to surge to nearly 5.5%.

European economies rely heavily on international trade, and eurozone economic growth recorded a temporary above-normal performance.

However, starting in early 2018, Chinese authorities began withdrawing the domestic stimulus for fear that the already dangerous financial risks could become unmanageable.

World trade quickly slowed down to a pace of around 3.5%.

The eurozone economy slowed in tandem with world trade.

As the Chinese deceleration continues, eurozone GDP will continue to slow down from its unusual clip in 2017.

The ECB is underestimating the pace of slowdown.

In December 2017, it projected that euro-area GDP would increase in 2018 by 2.3%; it has now scaled down that forecast to 2.0%.

However, parts of the eurozone—Italy and even France—could face recessionary conditions in the coming months.

The ECB responds late and then only with half measures.

On inflation, Draghi’s optimism is even more mystifying.

Bond purchases did little to move the inflation rate.


The core inflation rate—the rate stripped of volatile movements in energy and food prices—has remained stubbornly grounded at an annual 1%.

Yet the ECB has remained faithful to its prediction that the inflation will rise soon.

Consistently low inflation is a problem because it creates the expectation that inflation will remain low, causing consumers to postpone purchases.

GDP growth is held back; government and private debt burdens remain elevated.

Put simply, while the ECB’s bond purchases brought down interest rates, which helped reduce debt-service obligations, the program proved largely ineffective in generating growth momentum or raising the inflation rate.

The problem with the ECB since its start in 1999 is that it always responds late to economic weakness, and then only with half measures.

The contrast between the ECB and the Federal Reserve

This tendency proved especially costly after the onset of the global financial crisis in 2007, when the ECB remained ideologically committed to high interest rates to prevent a phantom inflation.

Even after deflationary tendencies set in by mid-2013, the ECB inexcusably delayed the introduction of bond purchases to January 2015 while members of the ECB’s Governing Council acrimoniously debated their competing national preferences in public.

The ECB’s actions stand in stark contrast to those of the U.S. Federal Reserve, which, after rapidly reducing its policy interest rate to nearly zero, began its bond-purchase program in December 2008 — three months after the collapse of Lehman Brothers.

The Fed continued the bond purchases for nearly six years through October 2014, at which point it could taper the purchases with some confidence that, temporary setbacks notwithstanding, the U.S. economy was on a sustainable recovery path.

The ECB bond purchases, after their late start, were much larger than the Fed’s purchases, both in relation to GDP and net new government bond issuance.

However, the ECB’s commitment was unclear.

Already by October 2017, Draghi began to speculate about exiting from the program.

The ECB has now delivered on that exit promise before completing its task.

The consequences are stark.

Over the past three years, despite tightening monetary policy in the United States, the S&P 500 index has climbed nearly 50%; over the same period, despite ECB easing, the Euro Stoxx 50 is up less than 7%.

The ECB is stuck with the consequences of its delays, much like the Bank of Japan is.

The Japanese economy fell into a low inflation trap in the 1990s because the BOJ repeatedly pulled back its monetary stimulus too early.

Even after stepped-up bond purchases since January 2013, it has been unable to raise inflation.

The economist Paul Krugman has written that the BOJ’s past “timidity” has strengthened public expectations that inflation rates will remain low.

So on average, Japanese businesses don’t raise their prices, which reinforces deflationary conditions.

The BOJ, therefore, helplessly and ritualistically repeats that inflation will rise in the “medium term.”

The lesson of recent history is clear.

The U.S. Federal Reserve began early and aggressively fought the risk of excessively low inflation.

U.S. core inflation never fell too low, and the core inflation rate in the U.S. is now close to the target 2% rate.

The BOJ’s ongoing effort, plagued by the history of past half-measures, has achieved little by way of higher inflation.

Compared with the ECB, the BOJ has done modestly better.

BOJ bond purchases have succeeded in somewhat lowering value of the yen against the dollar, as well as against a basket of currencies, providing some support for Japanese economic growth.

The ECB has been unable even to push down the euro’s value against the dollar.

It remains around $1.17, almost exactly where it was at the start of bond purchases in January 2015; in fact, against a basket of currencies, the euro has appreciated.

Fresh tensions for Italy, Spain and Portugal

Despite little to show for its effort, the ECB has declared victory because its governing mechanism, stymied by national conflicts, has reached its political limits.

Continuing to accumulate bonds of member country governments runs the risk that when the purchases stop, interest rates will rise and, hence, the value of the purchased bonds will decline, possibly sharply.

The rise in interest rates (and loses on past bonds purchased) will likely be especially large for Italy, Spain, and Portugal, which could face something of an investor drought after the stoppage of bond purchases.

Investors who have sold these countries’ government bonds to the ECB (and to the country’s national central banks) have used the sales proceeds to buy assets outside the countries.

German interest rates, in contrast, will rise very little.

The uneven distribution of financial and economic stresses will inevitably elevate political tensions.

The eurozone is entering a perilous phase with no easy fix.

Rising interest rates will further dampen growth and inflation.

The eurozone’s debt and banking fault lines will reemerge.


While Draghi has promised that the ECB will gear up its bond purchases again, divergent national interests will ensure delays and half measures.

Divergence of national interests remain the eurozone’s tragic central flaw, its Achilles Heel.

Ashoka Mody is the Charles and Marie Robertson Visiting Professor in International Economic Policy at Princeton University and previously was a deputy director of the International Monetary Fund’s European Department. He is the author of “EuroTragedy: A Drama in Nine Acts.”

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Re: THE EUROPEANS

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ASSOCIATED PRESS

"Worst riot in a decade engulfs Paris; Macron vows action"


2 DECEMBER 2018

PARIS — France's most violent urban riot in more than a decade engulfed some of central Paris on Saturday as "yellow jacket" activists torched cars, smashed windows, looted stores and tagged the Arc de Triomphe with multi-colored graffiti.

Protesters angry about rising taxes and the high cost of living clashed with French riot police, who closed off some of the city's most popular tourist areas and fired tear gas and water cannon as they tried to quell the mayhem in the streets.


At least 110 people were injured.

French President Emmanuel Macron denounced the violence from the G-20 summit in Argentina, saying those who attacked police and vandalized the Arc de Triomphe will be "held responsible for their acts."

He said he will hold an emergency government meeting Sunday on the protests.

"(Violence) has nothing to do with the peaceful expression of a legitimate anger" and "no cause justifies" attacks on police or pillaging stores and burning buildings," Macron said in Buenos Aires.

He refused to answer any questions from journalists about the situation in Paris.

It was the third straight weekend of clashes in Paris involving activists dressed in the fluorescent yellow vests of a new protest movement and the worst urban violence since at least 2005.

The scene contrasted sharply with other protests in France, where demonstrations and road blockades elsewhere were largely peaceful Saturday.

The violence is Macron's biggest challenge so far as president, and even colored his international image as he had to defend his plans for fuel tax rises — the initial impetus for the protest movement — to other leaders at the G-20 summit.

France's failure to quell the anger has led to copycat yellow jacket movements in Belgium, Germany and the Netherlands.

Thousands of French police were deployed to try to contain the violence, which began Saturday morning near the Arc de Triomphe and continued well after dark.

Paris police said at least 110 people, including 20 police officers, were injured in the violent protests and 224 others were arrested.

Interior Minister Christophe Castaner, speaking on French television channel TF1, said one protester was in a life-threatening condition after being part of a group pulling down a metal fence at the Tuileries gardens.

A video on social media shows the heavy fence falling on some protesters.

By the afternoon, clashed continued down several streets popular with tourists.

Pockets of demonstrators built makeshift barricades in the middle of Paris streets, lit fires, torched cars and trash cans, threw rocks at police and smashed and looted stores.

Some demonstrators removed the barriers protecting the Tomb of the Unknown Soldier from World War I under the Arc de Triomphe monument to pose near its eternal flame and sing the national anthem.

An Associated Press reporter at the scene saw other protesters and a soldier intervene to disperse the troublemakers and protect the flame.

Police later fired tear gas in the area.

Graffiti sprayed onto the Arc de Triomphe read: "yellow jackets will triumph."

By Saturday afternoon, a large part of central Paris was locked down by police, with all roads leading away from the Arc closed off as more police moved in.

Over 20 downtown Paris metro stations were closed for security reasons and police ordered stores in nearby neighborhoods to close early Saturday evening.

Hours later, some cars still smoldered and law enforcement and protesters were still facing off elsewhere in the capital.

French television showed police leading a shaken woman away from the protesters, and loud bangs rang out near the famed Champs Elysees Avenue where the violence was centered.

Paris Mayor Anne Hidalgo tweeted her "indignation" and "deep sadness" at the destruction and clashes with police, saying that violence is "not acceptable."

In addition to rising taxes, the demonstrators are furious about Macron's leadership, saying that his government does not care about the problems of ordinary people.

The grassroots protests began with motorists upset over a fuel tax hike, but now involve a broad range of demands related to France's high cost of living.

The violence in Paris, however, suggests that some protests appear to have been taken over by more radical far-right or far-left groups.


French far-right leader Marine Le Pen urged the protesters to go home in a tweet.

French authorities said they counted 75,000 protesters Saturday across the country, including 5,500 in Paris, numbers that were less than last week's protest but produced much more destruction.

Earlier Saturday, several hundred peaceful protesters in Paris passed through police checkpoints to reach the Champs-Elysees.

They marched on the famed avenue behind a big banner that read "Macron, stop taking us for stupid people."


Access to the Champs-Elysees was closed to cars and strictly monitored by police with identity checks and bag inspections.

"It's difficult to reach the end of the month."

"People work and pay a lot of taxes and we are fed up," said Rabah Mendez, a protester who came from a southern suburb to march peacefully in Paris.

"Our purchasing power is severely diminishing every day."

"And then: taxes, taxes and taxes," said Paris resident Hedwige Lebrun.

"The state is asking us to tighten our belts, but they, on the contrary, live totally above all standards with our money."

Since the yellow jacket movement kicked off on Nov. 17, two people have been killed and hundreds injured in clashes or accidents stemming from the protests.
___

Associated Press writers Lori Hinnant in Paris and Angela Charlton in Buenos Aires, Argentina, contributed to this report.

http://www.msn.com/en-us/news/world/wor ... id=HPDHP17
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Re: THE EUROPEANS

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THE WALL STREET JOURNAL

"ECB appoints administrators for troubled Italian lender Banca Carige"


By Pietro Lombardi

Published: Jan 2, 2019 12:09 p.m. ET

The European Central Bank has appointed temporary administrators at troubled Italian lender Banca Carige SpA after a majority of its board members resigned on Wednesday.

The three temporary administrators are Fabio Innocenzi, Pietro Modiano and Raffaele Lener, the ECB said.

Along with a surveillance committee of three members, also appointed by the central bank, the administrators will “take charge of Banca Carige and replace its board of directors,” it said.

“Temporary administrators are tasked with safeguarding the stability of a bank by closely monitoring its situation, continuously informing the ECB and, if necessary, taking action to ensure the bank restores compliance with capital requirements in a sustainable manner,” the ECB said.

The Italian bank’s management and control bodies have been removed as part of the temporary administration.

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Re: THE EUROPEANS

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MARKETWATCH

"Opinion: Germany is a diminished giant, and that spells trouble for Europe"


By Ashoka Mody

Published: Jan 28, 2019 5:21 p.m. ET

Germany’s near-recession in the second half of 2018 was a surprise to many.

It should not have been.


World trade growth slowed starting early 2018 just when the German auto industry was dealing with a wrenching drop in domestic sales.

This concurrent hit to two of Germany’s vulnerabilities — overwhelming dependence on buoyant world trade and accelerating obsolescence of its industrial structure — is pushing the economy into recession.

Absent a heroic policy effort, a protracted German slowdown will curb European growth.

It could fuel a further rise in nationalism, which would deliver another blow to the vision of a unified Europe.

Since the start of the millennium, the German economy’s reliance on external trade has implied an eerie dependence on the strength of the Chinese economy.

As China experienced explosive growth in the early 2000s, German exporters, acclaimed for their high-quality engineering products, found a bonanza: a Chinese government investing on a historically unprecedented scale in leading-edge infrastructure, consumers with an insatiable appetite for Mercedes and BMWs, and factories ramping up with high-end machine tools.


Between 2004 and 2006, heady years of world trade growth, virtually all of Germany’s increase in exports went to China.

In late 2009, Chinese authorities rescued German manufacturers teetering from the blow delivered by the global financial crisis.

China’s fiscal and credit stimulus on steroids, designed to energize the domestic economy, created voracious demand for German products.

Thus Germany — and Europe, carried along in its wake — powered ahead again in 2017 when Chinese policy makers, frustrated by their inability to hit absurdly high GDP growth targets, injected a new round of stimulus.

However, fearful of further inflating their property and credit bubbles, Chinese authorities pulled back on the stimulus in late 2017.

World trade decelerated.

German industrial output swooned.

GDP contracted in the third quarter of 2018 and barely grew in the fourth quarter.

Germany’s blue-chip stock-market index, the DAX fell sharply.

Although the benchmark has steadied in January, a respected German economic indicator fell to a four-year low.

The direct blow of slower world trade growth combined with a weaker Germany have rapidly decelerated European growth.

Alongside slower world trade, longer-term pressures on the auto industry have intensified.

Car producers and their multilayered network of suppliers sustain about 14% of the German economy.

Of particular importance are diesel-fuel based car engines, a German invention on which the industry is heavily reliant.

In Germany and elsewhere in Europe, sales of diesel cares have fallen sharply following snowballing revelations that car producers and their suppliers wantonly cheated on emission standards.

In February 2018, a German court ruled that municipal and city authorities could restrict diesel car usage without federal legislation.

In May, Hamburg banned diesel cars on certain city roads.

Perhaps most importantly, electric cars will gradually replace today’s internal-combustion-engine-based car.

And in electric car technology, German producers lag behind world leaders.

Relegation to the world’s second-tier economic league?

Germany’s fabled manufacturers have reinvented themselves in past decades, but always within the same framework of engineering excellence, supported by an enviable apprenticeship system that produced generations of highly industrially literate factory workers.

However, today, the global technological race is in science-and-mathematics-based electronic and computing technologies, where Germany is proving an also-ran.

Among the world’s top 15 science and mathematics university programs, East Asian economies — China, Korea, Japan, and Taiwan — take prized spots along with the United States.

No German—or European—university makes that prestigious list.

Germany could easily fall into the world’s second-tier economic league unless the country’s leaders act with new urgency

Germany is another example of a great economic power fearful of giving up a celebrated past and hence is trapped in the present.

The politically powerful car industry is lobbying to hold back change.

Helpfully, Chancellor Angela Merkel has argued against higher emission limits.

For her, too rapid a shift could hugely disrupt the networks of production that generate wealth.

Merkel feels the ire of aging Germans hurt most severely by the continuing industrial attrition.

Such older Germans are at the leading edge of the country’s increasing social and political tensions.

As Alexander Roth and Guntram Wolff of the Brussels-based think tank Bruegel have noted, voters for the right wing, anti-Europe Alternative für Deutschland party are predominantly older, relatively poorly educated men in non-urban areas whose well-paid manufacturing jobs are moving to either lower-wage Eastern European nations or are being eliminated by automation.

New jobs are increasingly in the service sector on anxiety-ridden temporary contracts with reduced wages and benefits.

The social trauma of this economic transition is eroding public support for Germany’s mainstream political parties.

As new contenders vie for influence, the political system is fragmenting, threatening Germany’s vaunted political stability.

Some have dismissed the current economic downturn as temporary, caused by the struggle to meet new emission standards and by the decline in river water levels, which slowed inland water traffic.

However, an inevitably slower Chinese economy and gradual obsolescence of Germany’s old industrial structure will weigh heavily on German growth, which will depress Europe’s already low long-term growth potential.

The continuing rise in German political entropy will further erode the country’s grudging financial support of Europe.

Ashoka Mody is the Charles and Marie Robertson Visiting Professor in International Economic Policy at Princeton University and previously was a deputy director of the International Monetary Fund’s European Department. He is the author of “EuroTragedy: A Drama in Nine Acts.”

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THE WALL STREET JOURNAL

"Defying U.S., European powers set up company to trade with Iran"


By Laurence Norman and Benoit Faucon

Published: Jan 29, 2019 5:07 p.m. ET

France, Britain and Germany, defying threats from Washington, are this week executing their plans to set up a special-payments company to secure some trade with Iran and blunt the impact of U.S. sanctions.

In the short term, the new company is expected to struggle to achieve even its initial goal of enabling Tehran to import vital food and drugs at affordable prices.

After months of delays, people familiar with the plan said Tuesday the three European governments had started the process of registering the company to run a payments channel that would allow goods to be bartered between European and Iranian companies without the need for direct financial transactions.

The company should be established by Thursday or Friday, the people said.

The company is being registered in France and will be headed by a German official with the French, British and German governments as shareholders — an arrangement intended to ward off U.S. Treasury Secretary Steven Mnuchin’s threat of sanctioning the entity by putting it under the aegis of Washington’s traditional European allies.

The European Union promised to create what is known as the special-purpose vehicle as part of efforts to persuade Iran to remain in the 2015 nuclear deal following President Donald Trump’s decision in May to pull the U.S. out of the accord and reimpose sanctions.

When many smaller member countries expressed reluctance to host the company or participate directly as shareholders because of U.S. sanctions threats, the bloc’s three biggest powers proceeded with the project.

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Re: THE EUROPEANS

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MARKETWATCH

"German industrial output down a 4th straight month"


By Nina Adam

Published: Feb 7, 2019 7:29 a.m. ET

FRANKFURT--German industrial production unexpectedly dropped in December, adding to evidence that the nine-year recovery in Europe's largest economy is foundering.

The Federal Statistical Office said Thursday that total industrial output--comprised of output in manufacturing, energy and construction--fell 0.4% from the month before.

That marked the fourth consecutive decline, and missed economists' forecasts of a 0.8% gain.

Compared with December 2017, production was down 3.9%, taking into account of calendar effects.

Commenting on the data, Germany's economics ministry said the outlook remains muted in view of declining manufacturing orders and weaker business sentiment.

The decline occured despite a surge in production of vehicles and parts, which rose 7.2% in December from the month before.

The adoption of new emissions-testing standards had caused severe bottlenecks in the approval of passenger cars earlier in 2018.

Write to Nina Adam at nina.adam@wsj.com

https://www.marketwatch.com/story/germa ... 2019-02-07
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MARKETWATCH

"In Finland, tax-free income for the unemployed isn’t creating more jobs, but it is making people happier"


By Associated Press

Published: Feb 8, 2019 2:47 p.m. ET

COPENHAGEN, Denmark (AP) — A nationwide experiment with basic income in Finland has not increased employment among those participating in the two-year trial, but their general well-being seems to have increased, a report said Friday.

The Social Insurance Institution of Finland, or Kela, said “it was not yet possible to draw any firm conclusions” from the first half of the experiment, where about 2,000 randomly selected, unemployed people aged 25 to 58 got tax-free income of 560 euros ($636) a month with no questions asked.

Finland is looking into ways to reshape its social security system and became in January 2017 the first European country to launch the trial, which will end in 2020.

Critics say universal basic income reduces incentives for people to look for work.

Proponents say it can empower people to start new businesses, knowing that they would continue to receive monthly income no matter how well their new venture does.

It can also encourage people to try a new job without the fear of losing their unemployment checks or having to go through the paperwork of reapplying for benefits.

“Earlier, I didn’t accept all small jobs out of fear of losing my benefits and having to reapply for them,” said writer Tuomas Muraja as he was on his way to a sauna before heading out for an evening at the opera.

“I feel much more secure now that short-term jobs no longer reduce my benefits or delay their payment.”

In the Finnish experiment, the basic income is below what unemployment benefits pay, which is €32.40 a day, or almost €1,000 ($1,135) a month — subject to income tax of about 30 percent.

The basic income is tax free, but barely enough to live on for someone paying rent, so it keeps pressure on the recipients to join the work force.

Minna Ylikanno, a researcher with Kela, said the basic income recipients appeared less stressed, healthier and more confident in the future than a 5,000-member control group of unemployment benefits recipients.

The report found that those on basic income and the unemployed people in the control group ended up working roughly the same number of days.

“The basic income may have a positive effect on the wellbeing of the recipient even though it does not in the short term improve the person’s employment prospects,” Ylikanno added.

The participants in both the trial and the control group were selected randomly among those who received unemployment benefits from Kela in November 2016 , Ylikanno told The Associated Press.

The Nordic country’s official unemployment rate was 5.4% in 2018.

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MARKETWATCH

"Germany narrowly avoids recession in late 2018"


By Nina Adam

Published: Feb 14, 2019 2:50 a.m. ET

FRANKFURT--The German economy came close to entering its first recession in six years in the final quarter of last year, and seems set for another year of weak growth amid uncertainty about the future of global trade rules.

The abrupt slowdown in the eurozone's industrial powerhouse in the second half of last year partly reflected short-term problems in its key automobile and chemical industries.

But weakening demand for its exports from China and elsewhere also played a part, and will likely continue to hold back growth this year.

Germany also faces the threat of a rise in U.S. tariffs on automobile imports from Europe, and a U.K. departure from the European Union without a trade deal.

"The headwinds to German exporters should pick up further," Andreas Rees, an economist at UniCredit, said.

Germany's gross domestic product--the broadest measure of goods and services produced in an economy--stagnated in the fourth quarter, which translates into an annualized growth rate of 0.1%, according to the Federal Statistical Office.

In the three months through September, the economy contracted by 0.8% in annualized terms.

Germany's slowdown is part of a wider European trend that has cast a cloud over the global economy's prospects this year.

Italy entered a technical recession at the end of last year--defined as two straight quarters of falling output--with France's economy impaired by the rolling mass protests against President Emmanuel Macron's reform agenda.

The German statistics body said the economy was mostly driven by domestic demand, as investments in construction but also in machinery and equipment "increased markedly" from the third quarter.

"Foreign trade did not make a positive contribution to growth in the fourth quarter," it said, as exports and imports of goods and services increased "nearly at the same rate."

As a leading exporter, Germany's fortunes often reflect swings in the global economy, and the signs aren't encouraging.

German goods exports to China dropped 7.6% year-to-year in December, while shipments to the U.S. and the U.K. fell by 6.4% and 8.8%, respectively, from December 2017, according to the statistics body.


Germany's influential VDMA mechanical engineering association, which still in December projected a 5% rise plant and machinery output in 2018, was caught off guard by the slide.

"We unexpectedly suffered setbacks in November and December, which means that we clearly missed our forecast," Olaf Wortmann, an economist at VDMA, said.

Output in the sector likely increased by only 2% last year, he said.

For this year, the VDMA remains cautiously optimistic despite concerns about some European markets.

"If it comes to a hard Brexit, we can reckon with a drop in U.K. exports," he said.

German industrial activity in the second half of the year was depressed by temporary factors, notably car makers' struggle to switch to a new emissions-testing protocol as well as exceptionally low water levels at the Rhine River, a major transportation route for oil and other goods.

While a tepid rebound can be expected in the first quarter, the German economy should remain stuck in low gear as the majority of economists project a growth rate of just above 1% this year.

Write to Nina Adam at nina.adam@wsj.com

https://www.marketwatch.com/story/germa ... 2019-02-14
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MARKETWATCH

"German manufacturing orders plunge in January"


By Nina Adam

Published: Mar 8, 2019 3:25 a.m. ET

FRANKFURT--German manufacturing orders plunged at the start of the year, but orders in December were revised sharply higher due to the late reporting of large tickets, the Federal Statistical Office said Friday.

Total orders for the key sector declined 2.6% month-to-month in January, missing economists' forecasts of a 0.5% increase.

But December data now show a 0.6% monthly rise in orders thanks to the late reporting of two large tickets in the aircraft industry, said a statistician at the German statistics body, which had previously reported a 1.6% drop in orders.

The German economics ministry said that the latest orders drop shows that the slowdown in the industrial sector continued at the start of the year.

Write to Nina Adam at nina.adam@wsj.com

https://www.marketwatch.com/story/germa ... 2019-03-08
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MARKETWATCH

"European Central Bank offers fresh help to faltering economy"


By William Watts

Published: Mar 7, 2019 8:24 a.m. ET

The European Central Bank on Thursday responded to a flagging economy by announcing the launch of a new round of long-term loans to eurozone banks and extending a pledge to hold off on any rate increases until at least the end of the year.

In a statement following a policy meeting, the ECB, which had previously said it expected to leave rates on hold at least through the summer, said it expected to keep rates at present levels at least through the end of 2019 and until policy makers are confident that inflation in the eurozone will converge to the bank’s target of near but just below 2%.

Many analysts had expected the ECB to wait until June before making any decision on whether to extend its so-called forward guidance on rate moves.

Meanwhile, the ECB also announced the launch of a new program of cheap loans — known as targeted long-term refinancing operations, or TLTROs — to eurozone banks in return for pledges to maintain lending.

The quarterly program will launch in September 2019 and is scheduled to end in March 2021, with each round providing two-year loans.

The rate on the loan is indexed to the interest rate on the ECB’s main refinancing operations over the life of each operation.

The two previous iterations of the program saw the ECB provide over 700 billion euros in loans to eurozone banks.

The euro weakened in the wake of the additional measures, slipping around 0.3% versus the U.S. dollar to $1.1271, and adding to a decline that’s seen the shared currency lose around 0.9% versus the greenback so far this week.

“This is as much as could have been expected from the ECB at this stage…"

"We doubt, however, that the new measures will be enough to reverse the economic slowdown,” said Andrew Kenningham, chief Europe economist at Capital Economics, in a note.

The moves come amid a eurozone economic slowdown that took hold in 2018, pushing Italy into recession, and continuing into early 2019.

ECB President Mario Draghi will hold a news conference at 8:30 a.m. Eastern U.S. time at the bank’s Frankfurt headquarters.

https://www.marketwatch.com/story/europ ... 2019-03-07
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