Nov. 30 (Bloomberg) -- European inflation remained at a three-year high and unemployment increased to the highest in more than 13 years, undermining an economy already hit by a worsening fiscal crisis.
The inflation rate in the 17-nation euro area held at 3 percent in November, the European Union’s statistics office in Luxembourg said in an initial estimate today. The region’s unemployment rate rose to 10.3 percent in October from 10.2 percent in the previous month, according to a separate report. That’s the highest since June 1998, before the euro was introduced, according to Eurostat.
The European Central Bank earlier this month unexpectedly cut interest rates as the region’s worsening fiscal crisis pushed the economy toward its second recession in as many years. While the euro area is showing signs of a deepening slump and companies including Deutsche Bank AG are cutting jobs, policy makers have rejected calls to counter the turmoil by printing money.
“The very serious possibility of euro zone gross domestic product contraction in the fourth quarter, coupled with recent overall signs that underlying inflationary pressures are easing, provides a compelling case for the ECB to cut interest rates again” next week, said Howard Archer, chief European economist at IHS Global Insight in London. “It’s evident that both businesses and consumers are very worried.”
IMF Role
The euro was little changed after the data were released, trading at $1.3276 at 11:07 a.m. in Brussels.
Economists had forecast euro-region unemployment to hold at 10.2 percent in October, according to the median of 29 estimates in a Bloomberg News survey. In the 27-member European Union, the jobless rate was 9.8 percent last month.
Euro-region finance ministers said at a meeting in Brussels late yesterday that they would seek a greater role for the International Monetary Fund in fighting the worsening debt crisis. European heads of governments meet on Dec. 9.
The European Commission said on Nov. 10 that euro-region inflation may average 2.6 percent this year and 1.7 percent in 2012. It also cut its growth forecasts for this year and next, citing the turmoil among the biggest risks. The ECB, which aims to keep annual gains in consumer prices just below 2 percent, will release its latest estimates on Dec. 8.
Financial Job Losses
With tougher budget cuts eroding consumer spending and global export demand cooling, the economy is showing increasing signs of slowdown. European economic confidence dropped more than economists forecast in November to the lowest in two years, while services and manufacturing output contracted.
About 16.29 million people were unemployed in October in the euro region, up 126,000 from the previous month, today’s report showed. At 22.8 percent, Spain had the highest jobless rate. Austria and Luxembourg had the lowest rates of 4.1 percent and 4.7 percent, respectively.
Job losses in the global financial services industry this year are close to surpassing 200,000 as Citigroup Inc., France’s BNP Paribas SA and Bank of America Corp. eliminate jobs to lower costs. BNP Paribas, France’s largest bank, said on Nov. 16 it will trim about 1,400 positions. Deutsche Bank last month announced 500 job cuts and further writedowns of Greek bond holdings in the wake of the crisis.
Rate Cut
The ECB stepped up bond purchases last week as yields rose across the area. While officials were forced to resume purchases of covered bonds and extend cash provisions to banks, they have pushed back against investors and governments calling them to backstop the currency bloc by boosting bond-market interventions.
ECB Executive Board member Juergen Stark from Germany resigned in September to protest the central bank’s purchases of government bonds and new President Mario Draghi has called on governments to step up efforts to contain the turmoil.
“The ECB will continue to cut interest rates next week,” said Andreas Scheuerle, an economist at Dekabank in Frankfurt. “It finds it easier to lower borrowing costs than pledge large packages on government bonds and may cut the benchmark below 1 percent if the situation continues to worsen.”
The statistics office will release a breakdown of November consumer prices next month. Euro-area core inflation, which excludes volatile costs such as energy, held at 1.6 percent in October from the previous month.
Bloomberg
Europe is turning on the pressure on Iran , as the Islamic Republic strikes back: Iranian parliament's Foreign Affairs and Defense Committee Chairman Aladdin Burucerdi warned Wednesday that the UK will suffer "the consequences" of its decision to expel Iranian diplomats stationed in London following the storming of its embassy in Tehran on Tuesday.
Following the announcement by UK's Foreign Secretary William Hague on Wednesday, Burucerdi called other European countries to avoid taking similar measures, after Germany, the Netherlands, France and Italy had already taken diplomatic steps against Iran.
"We recommend that other European countries avoid following in Britain's and the Unites States' footsteps," Burucerdi said. "The parliament approved downgrading the diplomatic relationswith Britain but Iran's public is pleased that the British diplomats are no longer in Tehran."
YNET
SINGAPORE (AP) — Oil prices edged higher to near $101 a barrel Thursday in Asia amid a surge in global stock markets after major central banks pledged to lower borrowing costs.
Benchmark crude for January delivery was up 32 cents to $100.68 a barrel at late afternoon Singapore time in electronic trading on the New York Mercantile Exchange. The contract rose 57 cents to settle to $100.36 on Wednesday.
In London, Brent crude was up 40 cents at $110.92 on the ICE futures exchange.
On Wednesday, the central banks of Europe, the U.S., Britain, Canada, Japan and Switzerland reduced the rates that banks must pay to borrow dollars. Separately, China's central bank also acted to release money for lending and help shore up slowing growth by lowering bank reserve levels for the first time in three years.
The moves sparked a jump in global equities, which oil traders closely watch as a barometer of overall investor sentiment. The Dow Jones industrial average soared 4.2 percent on Wednesday and most Asian stock markets rose sharply Thursday.
Signs of weak U.S. crude demand kept prices from rising further. The Energy Department's Energy Information Administration said Wednesday that oil and gasoline supplies grew last week, as imports rose and refineries slowed down because of weak demand.
"The bearish shocker was the whopping 5 million barrel build in distillate stocks that was much above our expected unchanged level," energy consultant Ritterbusch and Associates said in a report.
Yahoo News
Fast forward to 2:08: "It is puzzling to some that Major General Zhang Zhaozhong, a professor from the Chinese National Defense University, said China will not hesitate to protect Iran even with a third World War... Professor Xia Ming: "Zhang Zhaozhong said that not hesitating to fight a third world war would be entirely for domestic political needs...." And don't forget Russia, which recently said it is preparing to retaliate against NATO and has put radar stations on combat alert: "Russia is another ally of Iran, with similar policy to that of China. Toward Iran." Watch, and please forward the entire video, for an explanation of how China is approaching the situation not only in Iran, but a perspective of how they view the western "threat", as well as what tensions they face domestically.
Zero Hedge
"The Iranian charge (d'affaires) in London is being informed now that we require the immediate closure of the Iranian embassy in London and that all Iranian diplomatic staff must leave the United Kingdom within the next 48 hours," British Foreign Secretary William Hague told parliament.
"We have now closed the British embassy in Tehran. We have decided to evacuate all our staff and as of the last few minutes, the last of our UK-based staff have now left Iran," he said.
Hague also announced that Iranian ambassadors had been summoned in countries across Europe to receive strong protests over the storming of the British embassy.
Britain, locked in a confrontation with Iran over its nuclear activities, has voiced outrage over the ransacking of its diplomatic premises in Tehran on Tuesday by hardline students and Basij militia in revenge for new British and Western sanctions.
"If any country makes it impossible for us to operate on their soil they cannot expect to have a functioning embassy here," Hague said.
This does not amount to the severing of diplomatic relations in their entirety. It is action that reduces our relations with Iran to the lowest level consistent with the maintenance of diplomatic relations," he added.
Hague said it was "fanciful" to think the Iranian authorities could not have protected the British embassy, or that the assault could have taken place without "some degree of regime consent".
He said European Union foreign ministers would discuss the embassy attack at a meeting in Brussels later on Wednesday and on Thursday. The EU ministers would discuss "further action which needs to be taken in the light of Iran's continued pursuit of a nuclear weapons programme," he said.
Britain and other Western nations accuse Iran of seeking to develop nuclear weapons but Tehran insists its programme is purely for peaceful purposes.
The Telegraph
