Over the past 30 years the American and British economies have traded their manufacturing jobs for work in all types of services. The banks, investment houses and hedge funds of
The economic model practiced in the
Germany France and
The worldwide recession struck employment first and hardest in the financial sector. But this crisis is no respecter of economic model or good intentions. It has hit the euro area’s three largest economic forcefully, despite their more extensive manufacturing base.
Industrial output in the EMU was negative in eight of the ten months to November last year. In
Consumption is falling worldwide.
In the Eurozone the recession is also being felt in restrained consumption. The saving rate in the EMU is higher than in the Anglo-Saxon economies but rising unemployment and the air of pervasive gloom is keeping consumer out of the stores. European consumer confidence is at record lows. And the negative outlook is affecting services as well; the December Services Purchasing Managers Index registered a record low. Services are not going to rescue the Eurozone economy.
The slowdown is driving government deficits higher around the globe and
The European manufacturing sector, larger and to some degree more protected than the
The ECB has been guilty of similar miscalculation. Until President Trichet’s admission last July that economic growth was far slower than expected the bank had maintained a standoffish attitude to the credit crisis. It had preferred to believe that the crisis was the product of lax
Once again events have overtaken EMU and ECB official expectations. The protected EMU industrial model has not saved European jobs. It has not sustained consumption or consumer spending. Trichet has all but promised a rate cut in March. This time the markets will take him at his word.