After the Financial crisis of 2008 rolled on , it was clear that conventional policies would not be capable to work the crisis out. Conventional monetary policy was somehow displaced ,by the fact of financial markets under stress, and the real economy with its fundamentals in a weak position (government debt, Fiscal policy restraint, low expectations for investment projects unemployment and consumption decreases).-
Given that financial crisis, means weak Banks (Some analysts characterized them as “Zombies Banks”), and disconnected from real side economy requirement ,it take longer than usual for the period of recovery to take place. Besides , this time coupled with institutional flaws concerning the ability of Governments to address more efficiently its countercyclical role , made expectations more important than policies.-
Therefore, Central Banks best policy instrument, is not the interest rate (actually almost at zero nominal level, and negative real level ), but how to shape these expectations concerning its next step ,and then the expected response on the real side(Employment, consumption ,and investment).-
Thus, Central Banks are in an unknown territory, where learning is by doing, the chances of mistakes are high, the quality information is key, and the path of corrective decisions implementation, has not previously being proved .
What signal on the real side is the more reliable : Unemployment rate?. Consumer confidence?, Real assets prices?.Actually, the policy of quantitative easing, has boosted the financial side of the economy. Does this mean that the real side indicators, are also biased because of these approach?.-
In these circumstances, one thing is also for sure more decisive : the communicational skills and policy. It might be look strange, but Central Banks are currently evaluated for the effectiveness of this policy .-
Recent reports on unemployment, economic sentiment, and progress in the Spain economy, helped to improve the mood of investors. The world economic projections show that the EU is moving out of the recessionary territory, although still far away from normality.
Unemployment dropped in Germany to 6,5% in October, although a more detailed analysis, reflect the impact of migration from other weaker economies. Adjusted by seasonal effect, unemployed in Germany increased to 2.97 million people. On the other side, the economic sentiment according to IFO(Institute for economic research) fell slightly from 107,7 in September , to 107.3 in October which shows some doubts concerning the pace of economic growth for the near future. However, for the European Union as a whole, the economic sentiment of investors and consumers improved by 1,1point to 101,8 points; with stronger performance in industry than services sectors. Industry has still idle capacity to recover, which support the expectations of higher production levels in months to come. In fact for the Euro Zone, it is expected to have 0,5% of economic growth new year.
Germany has the growth engine for their partner in the EU zone, and consumer moods to spend more ,seem to suggest better results for those which export to that country.
Spain has the first indicators of Improving its economic situation .It has been declared technically out of the economic recession, which started three years ago. Unemployment and economic growth slight advances are signals for moderate optimism looking into 2014 to get out of the recession definitively. Tradable goods (exporters) are on the lead to sustain the recovery. Layoffs rates has slowed by 25- 30000 a month, indicating that unemployment might have been reached its bottom (www.roubini.monitor).
Italy has made the fiscal adjustment in terms of structural budget, and it is on track for reducing the debt to GDP ratio required under the Euro+/ Six pack accord ,(3% each year from 2015).
No matter the gains made so far , these seems to be more related with the relaxing of some austerity criteria, and the seasonal effect of summer ,than to structural changes to sustain steady economic growth. Theses structural changes will take some years to come into effect, and so it will to recover the path of meaningful growth.