Euro zone back in recession
Euro zone back in recession
The French and German economies both managed 0.2 percent growth in the July-to-September period but their resilience could not save the 17-nation bloc from contraction as the likes of The Netherlands, Spain, Italy and Austria shrank.
Economic output in the euro zone fell 0.1 percent in the quarter, following a 0.2 percent drop in the second quarter.
Those two quarters of contraction put the euro zone's 9.4 trillion-euro ($12-trillion) economy back into recession, although Italy and Spain have been contracting for a year already and Greece is suffering an outright depression.
A rebound in Europe is still far off. The debt crisis that began in Greece in late 2009 is still reverberating around the globe and holding back a lasting recovery.
Analysts said even the euro zone's top two economies were likely to succumb in the final three months of the year.
"That was the last good number Germany for the time being," said Joerg Kraemer, chief economist at Commerzbank. "I don't expect the German economy to return to decent growth rates until the middle of next year." "
Most economists expect Germany to contract in the fourth quarter for the first time since the end of 2011. And where Germany goes, France is likely to follow.
"We expect the French economy to contract again in the final quarter of this year," said Joost Beaumont of ABN Amro.
For all of 2012, the European Commission sees the euro zone contracting 0.4 percent, while growing just 0.1 percent in 2013. Business surveys point to difficult times ahead and the public's backlash to austerity polices is growing.
A Reuters poll of more than 70 economists predicted the bloc's new recession will extend until the end of the year and 2013 promises little better than stagnation, in line with what the Commission is forecasting.
Conducted before yesterday's data were released, the consensus was for a 2012 contraction of 0.5 percent and just 0.1 percent growth next year.
Millions of workers went on strike across Europe on Wednesday to protest the government spending cuts they say are driving the region into a deeper malaise but which Germany and the Commission say are crucial to healing the wounds of a decade-long, credit-fueled boom.
"We are now getting into a double dip recession which is entirely self-made," said Paul De Grauwe, an economist with the London School of Economics. "It is a result of excessive austerity in southern countries and unwillingness in the north to do anything else," he said.
The Commission says the euro zone's economies will be much healthier overall next year than in 2009, which was the nadir of bloated budgets when Greece's fiscal deficit reached a record 15.6 percent of GDP and Ireland was not far off at 13.9 percent.
The threat of a euro zone break up has also diminished after the European Central Bank promised to buy euro zone government bonds in potentially unlimited amounts, should a country first seek help from the bloc's permanent rescue fund.
There have been fledgling signs the Italian economy is improving. Consumer confidence has risen and the pace at which industrial output has fallen is slowing.
Nonetheless, the country's "acquired growth" at the end of the third quarter stood at -2.0 percent, meaning that if GDP is flat in the final three months of the year, the economy will have shrunk by two percent over the year as a whole.
Spain, which has kept the euro zone on tenterhooks over a decision on whether or not to seek help from the euro zone rescue fund, is also in recession. It contracted 0.3 percent in the third quarter.
The Dutch economy shrank much more sharply than expected, by 1.1 percent on a quarterly basis, the biggest drop in the quarter of any euro zone country. Austria's economy contracted 0.1 percent. Tiny Cyprus shrank 0.5 percent.
Figures out earlier this week showed the Portuguese economy shrank 0.8 percent quarter-on-quarter while Greece tumbled further, casting doubt on whether Athens and its lenders can come up with a credible plan to put its finances back on track.
EU policymakers seem aware that government spending cuts cannot keep up at the current pace, particularly after shocking suicides in Spain by people who had their homes repossessed.
Spain's Economy Minister Luis De Guindos has repeatedly called for EU-mandated budget cuts to take into account the euro zone's recession, while Greece has been given two more years to make the cuts demanded of it.
"The last couple of days have created a new momentum for a change in policy, because up until this week, social tension was not part of the equation," said Steen Jakobsen, chief economist at Saxobank. "It seems like the tone has shifted dramatically."
Power-sucking Bitcoin ‘mines’ spark backlash
- Local US authorities pushing back against bitcoin miners as power prices rise
- Firms insist they bring revenue, investment and talent to mining locations
NEW YORK: Bitcoin “miners” who use rows of computers whirring at the same time to produce virtual currencies began taking root along New York’s northern border a couple of years ago to tap into some of the nation’s cheapest hydroelectric power, offering an air of Silicon Valley sophistication to this often-snowy region.
But as the once-high-flying bitcoin market has waned, so too has the enthusiasm for bitcoin miners. Mining operations with stacks of servers suck up so much electricity that they are in some cases causing power rates to spike for ordinary customers. And some officials question whether it’s all worth it for the relatively few jobs created.
“We don’t want someone coming in, taking our resources, not creating the jobs they professed to create and then disappear,” said Tim Currier, mayor of Massena, a village just south of the Canadian border, where bitcoin operator Coinmint recently announced plans to use the old aluminum plant site for a mining operation that would require 400 megawatts — roughly enough to power 300,000 homes at once.
In Plattsburgh, where two cryptocurrency operations have been blamed for spiking electricity rates, the prospect of more cryptocurrency miners plugging in spooked officials enough in March to enact an 18-month moratorium on new operations. The small border village of Rouses Point also is holding off on approving new server farms and Lake Placid is considering a moratorium.
For local officials, the power struggle has been a crash course in the esoteric bitcoin mining business in which miners earn bitcoins by making complex calculations that verify transactions on the digital currency’s public ledger.
Since it often uses hundreds of computers that throw off tremendous heat and burn a lot of power, it has tended to gravitate toward cooler places with cheap electricity, such as geothermal-rich Iceland or along the Columbia River region of Washington state.
The stretch of New York near the Canadian border similarly fits the bill. Cheap hydropower from a dam spanning the St. Lawrence River is doled out by a state authority to local businesses that promise to create jobs. Additionally, some municipalities such as Massena and Plattsburgh receive cheap electricity from a separate hydropower project near Niagara Falls.
In Plattsburgh, electricity is so cheap most residents use it instead of oil or wood to heat their homes. The couple of commercial cryptocurrency mines here can get an industrial rate of about 3 cents per kilowatt hour — less than half the national average.
But Plattsburgh Mayor Colin Read said its largest operator, Coinmint, which has two plants employing 20 or fewer people, can consume about 10 percent of Plattsburgh’s 104 megawatt cheap electricity quota. When the city exceeded its allocation like it did this winter, customers ended up paying $10 to $30 more a month for the extra electricity. For a major employer like Mold-Rite Plastics plant, it cost them at least $15,000 in February.
State regulators have since given municipal utilities the ability to charge higher rates to cryptocurrency miners. At least one bitcoin miner in Plattsburgh says he’s working with the city on solutions to the power worries.
Ryan Brienza, founder and CEO of the hosting company Zafra, said those could include mining on behalf of the city for an hour a day or harnessing the heat from mining computers to warm up large spaces.
While the direct number of jobs associated with mines can be small, Brienza said they can bring revenue, investments and talent to the city while employing local contractors.
“It can start snowballing,” Brienza said.
Coinmint’s plans for a new plant in Massena, for example, come with a promise of 150 jobs. That’s welcome in an area that in the past decade has suffered though the loss of aluminum-making jobs and the closure of a General Motors powertrain plant.
“J-O-Bs. Yup. What we need up here,” said Steve O’Shaughnessy, Massena town supervisor.
Coinmint had asked for a cheap power allocation from the New York Power Authority for Massena for part of its energy needs, but that request was deferred.
The power authority has separately enacted its own moratorium on allocating hydropower to cryptocurrency operations — mirroring municipalities that have effectively pushed the “pause” button on a rush of miners coming in.
Coinmint representatives said this month they hope to begin the Massena operation in the second part of this year. The company stressed that mines can be a good fit for this job-hungry area.
“They’re also going to get substantially more efficient over time,” said Coinmint spokesman Kyle Carlton. “So to the extent that Plattsburgh or Massena or anybody else can get in on that and establish themselves on the ground floor, I think that’s going to help those cities to be successful.”