The European Central Bank (ECB) only started its Quantitative Easing (or QE) program in March 2015 in order to fight ultralow inflation in the Eurozone (also called the Euro Area). It somewhat worked by weakening the Euro (€), increasing exports, giving the stock market a boost and drastically lowering financing costs for European governments and corporations. This caused the ECB balance sheet to soar over €4.5 trillion or 45% of Eurozone GDP.
In January to September 2018, Euro area or Eurozone exports of goods to the rest of the world rose to €1,686.0 bn (an increase of 3.6% compared with January to September 2017), while imports rose to €1,542.9 bn (an increase of 5.8% compared with January to September 2017). As a result, the euro area recorded a surplus of €143.1 bn, compared with +€169.2 bn in January-September 2017. Intra-euro area trade rose to €1,449.8 bn in January-September 2018, up by 5.7% compared with January-September 2017.
The Federal Statistical Office (Destatis) reported that the German GDP shrank by 0.2% in the third quarter (vs the second quarter) of 2018. Growth was +1.1% on the same quarter a year earlier following increases of 2.3% in the second quarter (calendar adjusted: +2.0%) and 1.4% in the first quarter of 2018 (calendar adjusted: +2.1%).
Both the European Commission and the IMF recently published their forecasts on growth in Europe. Both have lowered forecasts for growth between 2018 and 2020 in Europe.
Seasonally adjusted GDP rose by 0.2% in the Eurozone or Euro Area and by 0.3% in the European Union (EU) during the third quarter of 2018, compared with the previous quarter, according to a preliminary flash estimate published by Eurostat, the statistical office of the European Union. In the second quarter of 2018, GDP had grown by 0.4% in the euro area and by 0.5% the European Union.
At the end of the second quarter of 2018, the government debt to GDP ratio in the Euro area (EA19) or Eurozone stood at 86.3% and in the European Union (EU28) the ratio stood at 81%.
“Geography has made us neighbors. History has made us friends. Economics has made us partners, and necessity has made us allies.” – John F. Kennedy
Sixteen members of the European Union recorded current account surpluses, eleven current account deficits and one was in current account balance in the second quarter of 2018 for the total (intra-EU plus extra-EU) current account balances of the European Union (EU28) Member States.
The highest surpluses were observed in Germany (+€63.8 bn), the Netherlands (+€16.8 bn), Italy (+€10.5 bn), Ireland (+€10.2 bn) and Denmark (+€3.6), and the largest deficits in the United Kingdom (-€20.7 bn), Romania (-€2.6 bn) and Belgium (-€2.4 bn).
The Euro Area, China, Canada, Mexico and Japan together account for over 70% of U.S. trade. Have these countries (including the Euro Area group of countries) manipulated their currencies to boost exports? In this century (2000 onwards) the Chinese Yuan, the Canadian Dollar and the Euro have appreciated against the dollar. The Japanese Yen has been largely unchanged against the U.S. dollar since the start of this century and only the Mexican Peso has weakened against the dollar.
We couldn’t find any official Money Velocity numbers for the Euro Area (Eurozone) so calculated it using the Equation of Exchange
Equation of Exchange
Money Supply (M) * Money Velocity (V) = Price level (P) * Real economic output (Q)
Which means Money Supply * Money Velocity = Nominal GDP
Therefore, Money Velocity = Nominal GDP/Money Supply
We have the numbers for both Money Supply (from OECD – Organization for Economic Co-operation and Development) and Nominal GDP (from Eurostat) for the Euro Area.