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Global Marketplace
www.read-tpt.com80
November 2013
Economic outlook
A Canadian observer expects
Europe to emerge stronger than
ever from its most critical period
since World War II
“One wouldn’t wish on Europeans the economic hardship
they have endured and continue to suffer. That said, the
potential silver linings from the crisis are a kilometre wide,
for a newly efficient European super-economy in which no
member country is left behind.”
David Olive, a business and current affairs columnist at the
Toronto
Star
, sees persuasive signs of sustained recovery
in the European Union – good news for a North American
comeback that has been muted due to diminished exports
to Europe, and for North American investors. These include
Canada’s major retiree pension funds, for which European
investments are once again attractively priced.
Among the turnaround signs cited by Mr Olive in “Europe
Rising” (2 Aug):
›
The anticipated result of relaxed austerity measures
across the continent will be a resumption by next year
of vigorous economic growth. Germany’s GDP is expected
to clock in at 1.8 per cent in 2014, well ahead of this year’s
0.4 per cent. Even the much harder-hit Ireland and Spain are
forecast to post healthy GDP gains of 2.2 per cent and 0.9 per
cent, respectively, in 2014.
›
That growth will also be spurred by a return of global
investor confidence in Europe. Ireland, Spain and Italy –
which not long ago were paying rates of 7 per cent to 8 per
cent on newly issued bonds – are able to sell new debt at
yields of just 4 per cent to 4.5 per cent.
›
A European Central Bank (ECB) now headed by Mario
Draghi, the former Italian finance minister, realises (as
Ben Bernanke, head of the US Federal Reserve Board, earlier
did) that central banks must not permit the control of inflation
to crowd out the other half of their dual mandate, which is to
promote economic growth. And so, as the Fed has done, Mr
Olive wrote, “The ECB has been stepping into the market
to buy government and corporate debt at reasonable rates.
[Newly available] cheaper money is kick-starting business
expansion while relieving some of the debt-obligation pressure
for EU governments.”
The
Star
columnist readily acknowledges the worries, centred
mainly on unemployment, that still abound. But in his view
it is becoming steadily more difficult to describe Europe as
“struggling.” Recommending that the prefix be dropped after
half a decade, he noted that the European common currency
zone has welcomed Latvia as a new member; and Lithuania
is not far behind, for an expansion of the eurozone to 19
member nations.
Moreover, the EU has begun negotiating a free trade deal
of unprecedented ambition with the US. Mr Olive posed the
question: Why would America take on that arduous task if the
27-member-nation EU, which welcomed Croatia as a new
member last year, “were heading for the dustbin of history, as
we were hearing as recently as 2011?”
In his view, America is determined to get in on the ground floor
of a New Europe before a fully recovered EU can demand
tougher terms, the goal behind Canada’s own four-year-long
negotiations to secure a Canada-EU trade pact. Meanwhile, a
euro that was once dismissed as Monopoly money has been
steadily strengthening, gaining 10 per cent against the US
greenback since the spring.
›
That is no less a headache for European exporters than
for their Canadian counterparts, coping with a “loonie” at
or near par. Yet, Mr Olive pointed out, while the strong euro
can be a short-term inhibitor for exporters, longer term it has
the salutary effect of forcing providers of goods and services
across Europe to shed obsolete practices and otherwise raise
their game.
Adding to signs of a
strengthening recovery in Britain,
the nation’s industrial production
rebounded at midyear
After a second-quarter expansion of 0.6 per cent, the British
economy gained from a surge in manufacturing in June.
On 6 August, in London, the Office for National Statistics
(ONS) said that industrial output had increased 1.1 per cent
from May, exceeding economists’ forecast of a 0.7 per cent
increase.
All 13 categories within manufacturing recorded an increase
in June, for the first time since June 1992. The increase
was led by transport equipment, up 5.3 per cent; other
manufacturing and repair; and computer and electronic
products. Also surpassing expectations was the 1.9 per cent
jump in factory output indicated by the median of 33 estimates
in a Bloomberg News survey.
In the three months through June, total British production
increased 0.6 per cent from the previous quarter, matching
the estimate in the gross domestic product report of 25 July.
The ONS said the data released 6 August will have no impact
on the GDP estimate. Manufacturing rose 0.7 per cent in the
period, the most since December 2010.
Steel
›
As reported from Kolkata by Jayanta Mallick of
The Hindu
(20 August), a Tata Steel joint venture has secured a key
land-use license for its iron ore project in the vast Millennium
Iron Range area of northeastern Canada. According to New
Millennium Iron Corp, the Indian company’s 20 per cent
partner, Tata Steel Minerals Canada Ltd (TSMC) signed an
agreement with the appropriate aboriginal council in south
Labrador, paving the way for mining and building infrastructure
related to the direct shipping ore (DSO) project.