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Looking back at July 2014 IMF Article 4 paper on Euro area (most of which I covered back when it was published), here is an interesting chart mapping changes in the euro area countries' unit labour costs. The chart is complex, so let me point out few things in it: Firstly: improvements in the unit labour costs (ULCs) is reflected in the vertical distance between the black dot (accumulated change in ULCs over 2000-2007 period: higher level of the dot reflects lower competitiveness or higher ULCs compared to EA17 levels) and the black bar (accumulated change in ULCs over 2008-Q3 2013 period). This shows that Ireland has delivered (a) the highest ULCs deterioration of the sample of countries reported over 2000-2007 period, and (b) since 2008, Ireland has delivered the largest improvement in competitiveness (ULCs drop) of the sample.  Second largest improvement in ULCs was recorded in Greece and it is comparable to, but modestly shallower than in Ireland; third and virtually indistingu...

BlackRock Investment Institute released the latest Economic Cycle Survey results for North America and Western Europe. Here are the main points (emphasis mine): "This month’s North America and Western Europe Economic Cycle Survey presented a positive outlook on global growth , with a net of 59% of 74 economists expecting the world economy will get stronger over the next year, compared to net 81% figure in last month’s report." Global outlook: "The consensus of economists project mid-cycle expansion over the next 6 months for the global economy. At the 12 month horizon, the positive theme continued with the consensus expecting all economies spanned by the survey to strengthen or stay the same." Regional outlook for Euro area: "Eurozone is described to be in an expansionary phase of the cycle and expected to remain so over the next 2 quarters . Within the bloc, most respondents described Greece, Italy and France to be in a recessionary state, with the even split...

Few charts to summarise the continued problems with growth in euro area and the 'peripheral' states: First, consider changes in real GDP on pre-crisis peak: Next, the weakest link in the euro area: Italy. This is really woeful - since hitting absolute lows, Italian economy continued to decline, steadily and with little sign of improvement. The above also shows the miserable state of the euro area as a whole. Another chart, to show changes on crisis-period absolute lows: Note: the first 2 charts reference index to 2005=100, the last one references index to Q4 2006=100.

With stagnant GDP and falling inflation, Euro area is set back into the rot of economic crisis, not that you'd notice as much from the Eurostat headline lauding 'stable' GDP print. Here is the chart showing the miserable performance of the euro area's industrial production from end-June 2011 through 2014: A message to Brussels: keep digging, folks... And here's the same story in terms of average year-on-year growth rates for the last 3 years: And the last 12 months:

Another paper relating to debt corrections/deflations, this time covering the euro area case. " A Surplus of Ambition: Can Europe Rely on Large Primary Surpluses to Solve its Debt Problem? " (NBER Working Paper No. w20316) by Barry Eichengreen and Ugo Panizza tackle the hope that current account (external balances) surpluses can rescue Europe from debt overhangs. Note: I covered a recent study published by NBER on the effectiveness of inflation in deflating public debts here: http://trueeconomics.blogspot.it/2014/08/1082014-inflating-away-public-debt-not.html . Eichengreen and Panizza set out their case by pointing to the expectations and forecasts underpinning the thesis that current account surpluses can be persistent and large enough to deflate Europe's debts. "IMF forecasts and the EU’s Fiscal Compact foresee Europe’s heavily indebted countries running primary budget surpluses of as much as 5 percent of GDP for as long as 10 years in order to maintain debt sustai...