The role of the European Central Bank (ECB) is: “To manage the euro, keep prices stable and conduct EU economic & monetary policy”. Self-evidently, its role is limited to the affairs of the 19 nations which currently use the Euro, but decisions taken within the Eurozone clearly have consequences in the wider 28 member European Union.
The ECB believes that price stability will support economic growth within the Eurozone and bolster job creation. It follows the central bank orthodoxy that a little inflation is good for an economy and has a target value of 2% for average inflation across the Eurozone.
According to Eurostat, inflation increased from -0.1% to 0% between September and October. Whilst this is a move in the right direction, it is still a long way from the target figure. Unemployment across the Eurozone edged down from 10.9% in August to 10.8% in September. At the beginning of the millennium, Eurozone unemployment stood at 9.2% and dipped to 6.8% just prior to the economic onslaught associated with the Global Financial Crisis. By any measure, unemployment within the bloc remains high. In the wider EU, the rate fell from 9.4% to 9.3%, but the economies worst hit by the economic crisis and the subsequent sovereign debt crisis were all Eurozone nations (Greece, Spain, Portugal, Ireland and Italy) which distorts the picture.
Unemployment in the EU remains patchy with 21.6% of Greeks out of work compared to just 4.5% of German workers. Measures which get people back into productive work will reduce social security cost and improve tax revenues, of course.
Given this background, recent employment and inflation data for the Eurozone is bolstering speculation that the ECB will make further moves to loosen monetary policy in the hope of generating a little inflationary pressure and stimulating economic activity with the intention of easing unemployment.