Malta on track for euro – Credit Suisse
by David Lindsay

Out of the 11 EU member states lined up to join the euro, only Malta and Cyprus will reach the fiscal criteria to join by 2008 while Slovakia appears on track to sign on to the single currency the following year, a report drawn up by Credit Suisse found out.

The study, European Monetary Union – The Euro’s First Steps into the East, however, found that the other eight euro adoption hopefuls – Poland, Hungary, the Czech Republic, Latvia, Lithuania, Estonia, Romania and Bulgaria – “will probably be waiting for the euro until the next decade”.



The Credit Suisse Economic Research Group describes Malta as a “struggling economy pinning hope on the euro” and stipulates that certain hurdles will need to be overcome along Malta’s road to adopting the single currency. Cyprus, meanwhile, was deemed the most ready to adopt the euro.

The report noted that Malta at present meets only one convergence criterion, that of long-term interest rates, but added that by mid-2007 the correct legislative framework and exchange rate stability should be in place, while the Maltese lira will have completed its two-year stretch in the ERM II in May.

The report also noted how underlying inflationary pressures are subdued and “in the absence of a renewed rise in energy prices the headline inflation should continue to recede”.

Following this week’s meeting of the EU’s Economic and Financial Affairs Council, Prime Minister Lawrence Gonzi expressed confidence that Malta will be adopting Europe’s single currency on 1 January 2008 as planned. He added that all that is left is for Malta is to review its inflation figures for December and January before filing its application to enter the eurozone.

The Credit Suisse report also noted that the budget deficit, which had hit an “exceptional” 10 per cent of GDP in 2003, had dropped below the three per cent threshold last year and that it is projected to decline further this year. It also noted that public debt is “now receding rapidly” from its peak of 75 per cent of GDP in 2004.

On the general economy, the report pointed out how, after growing by a “lively” 4.25 per cent annual rate over the second half of the 1990s, with a comprehensive programme of liberal reforms providing a stimulus, “the economy has languished in the current decade” and that “the ground won before has been lost again”.

Early in the current decade, the report observed, the two main export-oriented sectors, semi-conductors and tourism, were badly hit by the bursting of the technology bubble and the geopolitical tensions in the Middle East.

“The openness and small size of the Maltese economy meant that these blows were particularly disruptive and the budget and current account deficits ballooned,” the report notes.

Since then “intense competition from low-wage emerging countries has made for a difficult recovery” and has left the clothing and tourism industries suffering.

The report on Malta concludes: “Hope is now pinned on the stability provided by eurozone membership and a further round of reforms. The European Commission expressed reasonable optimism that Malta would pass the convergence requirements when the application is made towards mid-2007, even indicating readiness to delay the assessment to allow more time for inflation to decelerate. It also commended Malta’s currency changeover plan.”

German Q4 preliminary GDP growth 0.9 pct vs Q3; above consensus
02.13.07, 2:15 AM ET


WIESBADEN, Germany (AFX) - German GDP grew 0.9 pct seasonally, price and calendar-adjusted in the fourth quarter of last year compared with the third quarter, according to preliminary figures from the Federal Statistics Office.

Unadjusted year-on year GDP growth in the fourth quarter was 3.5 pct, the office said.

Economists polled by AFX News had forecast a quarter-on-quarter increase of 0.6 pct and year-on-year growth of 3.1 pct.

The office also revised upward its figure for GDP growth in the first three quarters of 2006 to 0.8 pct from 0.4 pct, 1.2 pct from 0.9 pct and 0.8 pct from 0.6 pct quarter-on-quarter.

It also said that full year GDP was revised upward to 2.7 pct from 2.5 pct.

In January, the office said that it expects fourth quarter GDP to grow around 0.5 pct quarter-on-quarter and 3.0 pct year-on-year.

judith.csaba@thomson.com

Upward revision ? Who didn't see that coming ?

More figures for the Eurozone :

Spain : +1,1 (Q4) +4,0 (2006)
France : +0,6 to 0,7 (Q4) +2,0 (2006)

http://www.finfacts.com/irelandbusin...pfeb132007.jpg

http://www.spiegel.de/international/...471269,00.html

Even Stronger Growth Forecast for 2007

"The Institut für Weltwirtschaft (IfW) announced Monday that Germany's economy should grow by 2.8 percent in 2007 on the back of strong domestic demand and fuller than expected company order books. There had been concerns that a sales tax hike from 16 to 19 percent that was implemented at the beginning of 2007 would have a dampening effect on consumer demand, but these fears have proved largely unfounded.

"Germany's upswing is continuing unabated," the IfW's chief economist Joachim Scheide told Bloomberg. The Kiel-based institute expects the gross domestic product (GDP) to grow to 2.8 percent this year, revised upwards from the 2.1 percent predicted in December. Germany's economy grew by 2.7 percent in 2006, the strongest performance since 2000, largely due to booming exports.

The good news is that the growth in 2007 is expected to be driven by strong domestic demand and the IfW predicts that this will "remain in full swing and be the main pillar of the upswing."

GDP growth : Euro Area has surpassed Britain and the US
 

Q4, % change on year ago :

Euro Zone : +3,3%
US : +3,1%
UK : +3,0%

Source :
http://www.economist.com/images/20070324/TAB1.gif

Most places at least have significant population that believes that (they are correct) except the US states of Ohio and Michigan, if they controlled the US, America would have 18th century merchantilist policies and be in a constant economy of stagflation or prolonged recession.

Yeah but the annual growth for 2006 shows that the Eurozone grew at 2.6% which is only the same as the UK and lower than the US's 3.4%. The Eurozone's 2006 growth was lower than almost all of the of the other developed world countries that are themselves growing far more slowly than the rest of the planet. That means that the Eurozone was one of the slowest growing places on earth last year.

Whatever...

Meanwhile :

Sharp fall in German jobless

By Bertrand Benoit in Berlin and Reuters

Published: March 29 2007 10:43 | Last updated: March 29 2007 12:22

Unemployment in Germany registered another sharp fall this month, according to data released on Thursday, bringing the number of jobseekers who have found work in the past year close to 1m.

Underscoring the strength of the country’s recovery, the Federal Labour Agency said unemployment had fallen by a seasonally adjusted 65,000, bringing the jobless rate to 9.2 per cent. Internationally comparable figures released by the Federal Statistical Office put the rate at 7.5 per cent in February.

The healthy state of Europe’s largest economy was also evident in figures, published separately, that showed orders of machines and plant had jumped by 27 per cent in February from their level a year ago.

In another boost to European economy, French unemployment fell to a 24-year low of 8.4 per cent in February, more than a percentage point lower than a year earlier, a government source said on Thursday.

With a presidential election less than four weeks away, the government has sought to trumpet falling joblessness as one of its biggest achievements, and Labour Minister Jean-Louis Borloo said he expected unemployment to continue its decline this year.

”I am convinced we will be at 7.9 percent at the end of the year,” he told reporters.

The investment boom now underway in Germany, illustrated by a 22 per cent year-on-year rise in domestic orders, confirmed the fact that the country’s recovery was no longer being driven primarily by exports, even though foreign orders grew equally robustly.

Economists have been raising their estimates for German growth this year, with forecasts ranging between 2 and 3 per cent. The robustness of the rebound allowed the economy to absorb a three-point value-added tax rise in January, the biggest tax increase in German post-war history, with an adverse effect on growth economists said was so far consistent with a 1-point increase.

On a non-adjusted basis, the Federal Labour Agency said unemployment had dropped by 114,000 this month, twice as much as the average of the past three years. The brought the number of jobseekers to 4.1m, or 869,000 below its level a year ago.

Seasonally-adjusted employment figures, whose publication lags a month behind that of the jobless data, showed 30,000 positions were created in February. Adjusted vacancies figures, however, showed a 22,000 drop, although they remained well over last year’s level.

Copyright The Financial Times Limited 2007

Who's laughing now ?

Like I predicted :

France: Final 4Q, 3Q GDP Growth Figures Revised Higher

Fri, Mar 30 2007, 07:16 GMT
http://www.djnewswires.com/eu


PARIS (Dow Jones)--French gross domestic product was revised up in both the third and fourth quarters of 2006, according to data from Insee, the French statistics office, Friday.

GDP growth in the fourth quarter was revised up to 0.7% from a previous estimate of 0.6%, while growth in the third quarter was revised up to 0.1% from 0.0%, Insee said.

GDP growth in 2006 as a whole was 2.1% compared with 1.2% in 2005, Insee said.

-By Gabriele Parussini, Dow Jones Newswires; 33-1-4017 1740; gabriele.parussini@dowjones.com

(END) Dow Jones Newswires

March 30, 2007 03:16 ET (07:16 GMT)


Copyright 2007 Dow Jones & Company, Inc.

Euro zone Q1 GDP growth slips but outstrips U.S.


By Brian Love, European Economics Correspondent
REUTERS

4:01 a.m. May 15, 2007

PARIS – Euro zone economic growth lost some of its pace in the first quarter of 2007, but maintained an edge over the United States despite a tax rise in Germany which was the biggest since World War Two.

Economists responded positively to official estimates on Tuesday that growth slowed to 0.6 percent in the 13-nation euro currency area from 0.9 percent the previous quarter, and predicted at least one more interest rate rise from the European Central Bank.

“The euro zone seems well set to achieve growth of around 2.6 percent this year despite the strength of the euro and higher interest rates,” said Howard Archer of Global Insight, an economics consultancy.

Growth in the bloc has now outperformed the U.S. rate for several consecutive quarters. According to an early estimate, the U.S. economy grew 0.3-0.4 percent in the first three months of this year and economists believe this figure is likely to be scaled back heavily in subsequent revisions.

Tuesday's data merely confirmed expectations that the ECB will make its eighth quarter percentage point rate increase since late 2005 when it meets next month. “On the back of these solid numbers, the ECB can raise rates to 4.0 percent in June with conviction,” said Bear Stearns economist David Brown.

Among the euro zone's biggest national economies, German first quarter growth slipped to 0.5 percent from 1.0 percent while France produced growth of 0.5 percent for a second straight quarter.

Spain's rate slid to 1 percent from an above-par 1.2 percent in the prior quarter and Italy limped in with GDP growth of 0.2 percent after a spurt in the previous three months.

German growth was higher than expected despite the drop. “The German phoenix is surging higher and higher,” said Holger Schmieding, chief Europe economist at Bank of America.

Despite a value-added tax rise in January worth about one percent of German gross domestic product, GDP grew well above economists' average forecast of 0.3 percent, with an investment surge helping to make up for the tax hit to consumer spending.

Economists had expected the bigger drop due to January's increase in the standard VAT rate to 19 from 16 percent.

France – the second biggest euro zone economy after Germany – did no better and no worse than the last quarter of 2006. But its first-quarter showing was nonetheless well short of the 0.7 percent forecast by economists in a Reuters poll.

Official forecasters such as the International Monetary Fund believe Europe and Japan could outpace the slowing U.S. economy in 2007 as a whole, contributing more significantly to another year of bumper global growth alongside the likes of China.

Tuesday's readouts from Europe also included unchanged growth rates in the Netherlands and Austria.

Germany's statistics office said investment drove first quarter growth while consumer spending, still the missing piece in country's recovery story, was hit by the VAT rise.

“The VAT disaster has been avoided,” said Bernd Weidensteiner, an economist at DZ bank. “The numbers show there's rising confidence among companies about Germany's growth prospects. And private consumption should pick up this year thanks to higher wage deals and the stronger labor market.”

Belgium also reported a dip recently in growth for the first three months but upward revisions to estimates for the last six months of 2006 kept economists in upbeat mood.

Europe got rid of a hangover from the collapse of the dot-com boom when GDP growth nearly doubled in 2006 to a six-year high. It is forecast to do well again this year and next despite the German VAT rise and the U.S. slowdown.

The European Commission, a major official forecaster in the region, expects near repeat performances of 2.6 and 2.5 percent growth respectively in 2007 and 2008, after 2.7 percent in the euro currency area last year.

The figures are equally flattering for the broader 27-nation European Union, which also includes the fast-growing “catch-up” countries of formerly communist eastern Europe.

IMF forecasts for the euro area are somewhat lower at 2.3 percent for this year. But this, along with a similar forecast from the IMF for Japan, is slightly higher than the agency's forecast of 2.2 percent growth in the U.S. economy.

Among long-industrialised nations, Britain remains in front with the IMF forecasting 2.9 percent growth this year, although that pales beside rates which are two to three times as high in Russia, India and above all China.

The quarterly GDP reports from Europe on Tuesday gave only headline figures. Details in coming weeks should show the relative impact of exports, investment and consumer spending. Comparable figures on Japan are due on Wednesday.

^Good to see strong growth in the €-zone (good for the economy and more likely that Sweden joins within the next 10 years).

In ralted news:
__________________________________
Malta and Cyprus on countdown for euro
http://ec.europa.eu/news/economy/070516_1_en.htm
Malta and Cyprus are on target to join the eurozone after the commission today proposed that both countries should be allowed to adopt euro in 2008.
Following a thorough analysis, the European commission's verdict today is clear: both countries meet the necessary legal and economic conditions to join the euro (the "convergence criteria"). Provided they continue pursuing sound economic policies, they should be allowed to adopt the single currency on 1 January 2008. This proposal is key for Cyprus and Malta's bid to be a part of the eurozone. The next step will be the discussion of today’s recommendations by EU leaders at their summit on 21-22 June, with the final decision being made by EU finance ministers on 10 July. If ministers agree, there will be 15 countries using the single currency next year.

Cyprus clears final hurdle
Cyprus was judged to have met three of the requirements for joining as early as December 2006 and continues to do so. Its key challenge in the run-up to today's report was to address its outstanding areas of incompatibility with EU law. Full compliance was achieved in March this year, when the Cypriot parliament passed a law changing the rules governing Cyprus' central bank.

Malta "excessive deficit procedure" to be lifted
Apart from controlling inflation, a key challenge for Malta was to get its financial house in order, in line with the convergence criteria. This involved sustainably reducing both its annual budget deficits (excess government spending over and above its tax take) and inflation. Following successful consolidation of public finances by the Maltese authorities, the commission has given Malta the green light and is recommending EU finance ministers lift the excessive deficit procedure.

Dutch economy growing stronger every day. It's interesting to see how the fact that gas is paid upfront affects overall cosumer spending when the winter is mild. :) Q2 and Q3 should probably see a spike in consumer spending.

PS. It's funny and somewhat sad at the same time to see that the Chinese newssites usually have better articles in English about the Netherlands than newssites from English speaking countries.

That's because much of the Anglo press is controlled by this man:

http://www.nndb.com/people/420/00002...g211954581.jpg

This is good news! How is the employment situation among Europe's new arrivals. I always felt if the EU could give many Muslims and Africans good lives at home, that would give the west added credablity to help the Islamic world turn away from terror.

BTW, what is Sarozky's plans for reforming the French economy?

Sarkozy has to win first the congress elections in june I guess, IMO Sarkozy will lead France, and the rest of continental europe, to a radical economic liberalization process which will eventually thrive the eurozone to a new higher ground regading economic growth

From what I have understood Sorkozy seems to be rather a man of the political center. In some areas he seeks liberalization in others he is protectionist.

Credibility in what regard? That the western system is able to offer full employment wheras an islamic state does not? As far as I know the terrorists have targeted exactly those western countries which already have almost full employment like the US and the UK, therefore unemployment doesn't really seem to be a problem their are fighting against.

Credability in being for the best inerest of their peoples. I think the US and EU should try to bring more jobs to the muslim world.

Well, you can´t expect from a french to trust the market more than their own country and their interests, but as far as economic growth goes, he will seek for liberal reforms, specially regarding the labor market, I read somewhere that conflict between the new goberment and the local trade unions is already pgrogrammed

It rather looks like he will make sure that France continues to trail and not lead:

http://washingtontimes.com/op-ed/200...3346-1205r.htm

"The first of them is a commitment to economical and political protectionism, using the European Union as a shield against globalization. "France is back in Europe" stated Mr. Sarkozy, encouraging the other EU states "to hear the voices of the people who want to be protected." Mr. Sarkozy intends to take the European leadership and to fuel the engine with protectionism since Europe must not be the "Trojan horse of globalization" -- i.e. must not yield to a capitalist system embedded in the United States. "

http://www.bbj.hu/main/news_26874_sa...ade+talks.html

"Sarkozy, on his first presidential visit to Brussels, called on Europe to “protect” its citizens, buying them time to adapt to the pressures of globalization. His comments suggest he will pursue an assertive French agenda in Europe that could put him in conflict with free traders including Angela Merkel, German chancellor, and Gordon Brown, incoming UK prime minister. Sarkozy’s passionate defense of French farmers will concern Europe’s trade partners who hoped he might be more flexible in his approach to cutting EU farm tariffs than Jacques Chirac, his predecessor."