ECB holds interest rates at 1 per cent
Is it time for the Eurozone pizza plan?
The European Central Bank has annouced that it is to keep interest rates at their record low of 1 per cent.
The decision was expected, but highlights the divergence throughout the Eurozone between the troubled European periphery and the robust German economy. The latter has record low unemployment and is now instead having very real fears of high inflation. Earlier this month, the president of the Bundesbank, the German central bank, told a press conference in Frankfurt that the state of emergency may be over, saying:
That does not mean all crisis measures must be immediately withdrawn, but that we as central bankers have an idea how we will organise and implement an 'exit strategy'.
While Germany may be feeling the squeeze from low interest rates and thus be chomping at the bit to get back to business as normal, the Eurozone as a whole is still very much in trouble. The Markit composite PMI, a measure of the combined activity in the service, manufacturing and constructing sectors, dropped 0.2 to 49.1 in March; a figure of less than 50 indicates contraction.
If Germany is feeling healthiest in the Eurozone, it is surely Greece which is feeling the worst. Even children are picking on it now.
10 year-old Jurre Hermans submitted an entry to the Wolfson Economics Prize, which called for a safe way to break up the EU, hoping to win the €250,000 pot. Jurre, who is now 11, suggested that:
All Greek people should bring their Euro to the bank. They put it in an exchange machine [as demonstrated on the left of his picture]. You see, the Greek guy does not look happy!! The Greek man gets back Greek Drachme from the bank, their old currency.
The Bank gives all these euro's to the Greek Government [see top-left on his picture]. All these euros together form a pancake or a pizza [see on top in the picture]. Now the Greek government can start to pay back all their debts, everyone who has a debt gets a slice of the pizza. You see that all these euro's in the pizza's go the companies and banks who have given loans in greece [see right in the picture].
And it is accompanied by a, frankly, adorable illustration:
Now, yes, this won't actually work (Matt Yglesias sucks the fun out of the whole thing). But if one is forced to seriously look at a plan to "turn an omlette back into its constituent parts", it may as well involve pizza and pancakes too.