1 Eurozone faces New Year recession (Phillip Inman in The Guardian) The eurozone economy stumbled in November, according to a closely watched survey which has raised fears that falling demand from Russia and China will plunge the currency area into renewed recession in the new year.
The euro tumbled to a 27-month low against the dollar after Markit’s composite purchasing managers’ index (PMI) for November sank to 51.1 from October’s 52.1 – its lowest reading for 16 months. The new business sub-index fell below the 50 mark that separates growth from contraction for the first time since the middle of last year, dropping to 49.7 from 50.8 and suggesting a further downturn in December.
Chris Williamson, chief economist at financial data provider Markit, said: “The region is on course to see a mere 0.1% GDP growth in the final quarter of the year, with a strong likelihood of the near-stagnation turning to renewed contraction in the new year unless demand shows signs of reviving.”
The European central bank (ECB) is increasingly concerned about the persistent price cutting. Annual inflation dipped to 0.3% in November, far below the central bank’s 2% target and deep into what the ECB’s president, Mario Draghi, has termed the “danger zone” for price moves. The central bank is not however expected to alter its already loose policy when it meets on Thursday.
2 Falling oil prices a free fiscal stimulus (Linda Yueh on BBC) Budgets are in focus in the UK, France and other European countries this week. One unexpected factor that could help is oil. The drop in oil prices could be a free boost to their economies. It’s not entirely costless as there are also taxes on energy to consider. But, for consumers, it should eventually translate into more money in their pockets.
The OECD estimates that a $20 drop in the price of oil adds a chunky 0.4% of GDP growth to developed economies after two years. And oil prices have more than halved since they peaked at nearly $150 per barrel in 2008. Now both Brent and West Texas Intermediate have fallen to just above $60. So, that should be a hefty total boost to economies whose growth rates aren’t exactly bounding ahead, particularly in continental Europe.
As oil prices come down, there should eventually be a pass-through to the prices that households pay for gas, as well as at the pump. And that’s where the boost to the economy would come from. Extra money available to households, but not being provided by governments through tax credits or additional spending that would have to be paid for through more public borrowing. It’s a free fiscal stimulus in that sense.
Of course, it depends on prices remaining low, which is what current forecasts are. For governments seeking to balance their books while trying to raise the rate of growth, a free fiscal boost wouldn’t hurt.
3 India’s Bhopal victims let down even after three decades (San Francisco Chronicle) Three decades after lethal gas swept through Bhopal, the central Indian city remains haunted by memories of the world’s worst industrial disaster.
Hundreds of survivors of the gas leak that claimed thousands of lives took to the streets Wednesday to mark the 30th anniversary of the disaster, chanting slogans and carrying placards demanding harsher punishments for those responsible and more compensation for the victims.
On the morning of Dec. 3, 1984, a pesticide plant run by Union Carbide leaked about 40 tons of deadly methyl isocyanate gas into the air in Bhopal, quickly killing about 4,000 people. Lingering effects of the poison pushed the death toll to about 15,000 over the next few years, according to Indian government estimates.
Thirty years later, activists say thousands of children are still being born with brain damage, missing palates and twisted limbs because of their parents’ exposure to the gas or water contaminated by it. American chemical company Union Carbide Corp. has said that the accident was an act of sabotage by a disgruntled employee, never identified, and not lax safety standards or faulty plant design, as claimed by some activists.
Union Carbide was bought by Dow Chemical Co. in 2001. Dow says the legal case was resolved in 1989, when Union Carbide settled with the Indian government for $470 million, and that all responsibility for the factory now rests with the government of the state of Madhya Pradesh, of which Bhopal is the capital. In Bhopal, which remains anguished by the disaster, most consider Union Carbide’s settlement with the government an insult.
Warren Anderson, who headed Union Carbide Corp. at the time of the leak, died in September in a nursing home in Florida. Just after the disaster, Anderson traveled to India, where he was arrested. He left the country while free on bail and never returned. Dow Chemical says it has no liability because it bought Union Carbide more than a decade after the cases had been settled.