On July 14th 1789, a group of French revolutionists stormed into the French Bastille prison. This assault symbolized the Old Regime’s fall, as well as the beginning of a new time period: the French Revolution, which would later lead into an actual Democratic system. July 14th has since then marked the day the French celebrate the Federation Party, in which they commemorate the Bastille Storming.

After Miterrand left the Presidency in 1995, there has not been any socialist President of the French Republic until recently, due to President Hollande, so the Federation Party had the incentive of seeing a left wing President again.

Two months have already passed since Francois Hollande came to power. He reached it with a lot of nice words and promising speeches. Today, these words have not evaporated, and he continues with his positive speeches. On the 14th of July the French President spoke on TV, reminding all that his economic policies will remain different from those that are obliterating the European Welfare State, especially from Spain and Italy. These are countries that keep on taking austerity measures instead of boosting the economic growth. “My mission is to help France recover and give it a future. Jobs are my priority,” said Hollande.

But if anything has marked this July 14th, it has been Peugeot’s announcement of closing their company in France, which will leave 8.000 french workers without jobs. Hollande accused the automobile company of misconduct and said that this restructuring plan cannot be accepted, especially after the company received important financial help months ago. “The plan is not acceptable as it stands and therefore it will not be accepted,” said Hollande on TV.

On the 14th of July celebration, the President also pointed out all of what he has done in the first eight weeks of his term. They have been eight weeks in which he has spent most of his time “defending France interests in the international appointments, and respecting the promises made during the political campaign,” remembering that the pillars are still “justice, growth and employment.”

Hollande seems to face the crisis calmly, without following the manual that Brussels dictates. Social dialogue, justice, common sense and transparency prevail for Hollande over the liberal demands of Europe.

“We owe a debt of 90% of GDP, have 10% of unemployment and a foreign trade deficit of 70,000 million euros,” he said. “We must make a pact to improve competitiveness productive, well-studied labor costs. We will put all our resources into play, imagination and intelligence. And we will make a major tax reform for the rich contribute more, unlike what happened with the previous government.”

On July 14th of 1789 a group of French revolutionaries made a huge step into history. Who knows if Hollande French President policies of boosting economic growth will turn Europe’s tide.

Image Courtesy of  Parti socialiste

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The multiplicity of global economic complexity of the recent past and a fragile economic future has led the Asian economic linchpin, China, to cut its growth forecast. Recently, the country cut its economic growth rate to 7.5 percent from its previous 8 percent, which had been in place since 2005.

Premier Wen Jiabao, in his annual state of the union, announced at the National People’s Congress in Beijing that the government has a gross domestic product target of 7.5 this year. This is the lowest economic growth target for China since 2004.

Across the board, there are plenty of problems that may impart great damage on the Chinese economy. Starting with a decline in European services and manufacturing output, a fall in US factory orders for the first time in three months, and an impending Greek debt storm, China is going through a radical demographic makeover.

The main suspect for this turnaround in growth forecast is the debt crisis in Europe and the US. This is because there is an iron-strong connection between what China produces and with whom it exchanges goods.

Demand for Chinese goods declined in troubled economies due to falling employment, diminishing domestic production, dragging corporate profits, high borrowing costs for the government, and perhaps only a few ways to get out of it. After years of a torrid growth rate of at least 9 percent, China needs better quality development over a longer period of time. Economists and investors agree that China is now entering a new era of slower growth rate, where the 8 percent growth figure is no longer important.

On the other hand, what happens in China does not stay in China. China had been the number one trading partner for most Asian countries, and a declining economy for the dragon will hit many Asian economies negatively. On the face of it, Chinese commodity imports may slow down, impacting economies from Australia to Brazil.

Interconnections at the global economic platform have created a scenario where it is legitimately impossible to imagine escaping from these  events.  It is ubiquitous that a lower phase of GDP growth in China will diminish import demand in the country, affecting economies or trading partners directly.

In a globalized environment, interconnection is interdependence. Suppose, for example, X is partly independent, and Y and Z are mostly dependent on X.

Any event that has a direct forbearance on Y and Z that takes place in X will for sure impact both Y and Z. In this case, export-oriented economies, like Australia, whose economic growth was derived from fast and partly unfettered GDP run-up in China, will suffer. On the face of it, prices of copper, gold, and the Australian dollar have fallen immediately after the announcement in Beijing, mining stocks in the Australian stock exchange felt headwinds, and the region’s stock market closed on a weak note.

Gerard Lyons, chief economist at Standard Chartered Bank in London, stated, “What the authorities are trying to do is to move from strong to sustainable rates of growth. No one is quite clear where sustainable is, but clearly, it’s one that’s slower than we’ve seen in the recent past.”

At the end, we could say there is a possibility of radical economic transformation in China, emphasizing development, rather than an erratic chase for economic growth.

Image Courtesy of  BartlomiejMagierowski / Shutterstock.com

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The European Central Bank cut its economic growth forecast for the Euro zone amid rising fear for the economic health of the continent. This move is a downward revision of earlier forecast by ECB. ECB President Jean-Claude Trichet said at a press conference that “there is a risk that growth will slow to near standstill nest year.”

The downward spiral of the European economy has been so powerful that it has casted clouds over the future prospect of whole Euro zone. A crisis of sovereign debt might develop unprecedented fissure in the union which perhaps may lead Greece to exit the EU. Furthermore there has been growing concerns over the future of the Euro as currency.

On the possibility of the Euro zone sinking back into recession, Trichet said “it is difficult to make forecasts in the current situation.”An unfortunate economic situation in Europe is emerging from fiscal disintegration among nations in the Euro zone, coupled with an overall fragile economy. Even so, authorities could have averted the debt dilemma if the economy would have been functioning well.

The confidence in the 17-nation currency area was further dented when Italy was forced to pay the highest interest rates since joining the EU. “I think there is a possibility, if wrong steps are taken, that the system goes off the rails” said Sergio Marchionne, CEO of Italian car maker FIAT. Markets have already taken interest rates on Italian bonds to much higher levels indicating the risks involved in the vehicle.

Yields on bonds are determined according to market sentiment — if investors feel very edgy and uncertain, interest rates may soar and vice versa, leading to a breeding burden on governments. Five year bond yield hit a Euro lifetime high of 5.60 percent recently. Domenico Lombardi, president of the Oxford institute of Economic Policy said “European policy makers must act fast to ward off a full-blown market attack on Italy.”

On the other hand, Moody’s rating agency downgraded two top French banks over fear of their exposure to Greek sovereign debt. Moody’s cut the rating of Credit Agricole bank, one of biggest of Europe from Aa1 to Aa2 and also downgraded the rating of Societe Generale from Aa2 to Aa3.

Banking industry in the Euro zone is in the circle of gloom for being exposed to various potentially unsafe securities of government bonds. The institute of international finance told that prolonged inability to deal with Europe’s debt issues put its banking system at severe risk.

In his description of the magnitude of severity of economic uncertainty, European commission head Jose Manuel Barroso said “the most serious challenge of a generation. This is a fight… for the economic and political future of Europe.” It all depends on how the financially big countries of Europe behave in a bid to rescue the area — how well they hear the brawl of economically beleaguered nations by designing a suitable rescue package that optimally saves the EU from disintegration in the future.

What is needed is a temporary bail-out and stringent fiscal integration among nations in the future in order to ward-off economic demons.

Image Courtesy of  http://www.flickr.com/photos/worldbank/

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