Next Big Bash Economic Tsunami: Banking Union in Euro!! - Will Euro Survive Again?

     The Next Big Bash of Economic Tsunami is clouding over in the European Area. Yes, if you are following the European Crisis then by this time you would have guessed what I was talking about, the BANKING UNION in Euro. In last week Economist Print Edition (June 30^th – July 6^th, 2012) there was an article titled “Bankers of the Euro Area, Unite!” (Please click on the quote to read full article). It talks about the prospects of Banking Union and the reason behind forming this Bank Union. It gives insight on what are the problematic issues over the banking union. 

       Mr. Herman Van Rompuy, the President of European Council, published proposals of banking union with centralised banking supervision and to avoid banking collapse or run. Mr. Van Rompuy thinks that the banking union ought to cover the whole European Union (EU) to avoid fragmenting  Europe's single Market in Financial Services. There is another article titled "Without Banking Union the Euro is History" by Protesilaos Stavrou. The article talks about the need for recapitalisation of Banks and Banking Union. It went on to conclude that “A banking union, or at least steps towards that direction are of cardinal importance in order to escape from this policy-made morass, otherwise the euro will soon belong to history, with tragic results on the entire global economy.”

       Many Economist and Analyst say that banking union is the only option left for the Euro to survive. After reading these articles few questions raised in my mind

1. Is recapitalisation of banks is tougher than Banking Union ?

2. Will all the European countries accept for Banking Union? - Remember, the banking liabilities in Britain, Switzerland and Denmark are 4 to 5 times larger than their Nation Economies. Since, they have their own Central Banks they can print money if they needed and this cannot happen after Banking Union.

3. If Banking Union had occurred what will happen to those countries that are in verge of bank panic and those countries banks which are earning more profit? - Remember, a bank run is the sudden withdrawal of deposits of just one bank. A banking panic or bank panic is a crisis situation which occurs when many banks suffer runs at the same time, as a cascading failure. This will result in Economic Crisis. 

          

        The Banking Union may be helpful for the Euro to survive at present and it may make them to move further to certain period of time. But, the real question is Whether this Banking Union alone will solve the problem of Euro? If you ask me the same question I would say NO. Banking Union alone will not solve the problem but it may give further scope for Fiscal integration.What's your Call? Kindly let me know.

FINALLY A NEW SERIES FOR CPI

          The Central Statistics Office (CSO) of the Ministry of Statistics & Programme Implementation (MoSPI) announced that the new series of Consumer Price Index(CPI)  numbers for Rural, Urban and Combined (Rural +Urban) on base 2010 (January to December)=100 taking all segments of rural and urban population. The CSO, MoSPI releases Consumer Price Indices (CPI) on base 2010=100 for all-India and States/UTs separately for rural, urban and combined every month with effect from January, 2011. 

          These indices is classified into five major groups namely Food, beverages and tobacco; Fuel and light; Clothing, bedding and footwear, and Miscellaneous. It is believed that (at least now we can say!) past CPI numbers do not encompass all the segments of the population in the country and as such they do not reflect true picture of the price behavior in the country; hence the new series of CPI.

          In the new series (for urban areas) the regular price collections of 310 towns have been selected across the country which includes State/UT capitals. A total of 1114 price schedules containing an average of 250 Items are canvassed every month. For Rural areas, total of 1181 villages have been selected across the country. One schedule containing an average of 225 items from each selected village is canvassed for every month. CSO will compile the national CPI by Combining / merging CPI of both Rural and Urban with appropriate weights, as derived from NSS 61^st round of Consumer Expenditure Survey (2004-05) data.

   

New series of CPI-- All India weights
Sub group/group	Rural	Urban	Combined    (Rural+Urban)
Cereals and products	19.08	8.73	14.59
Pulses and products	3.25	1.87	2.65
Milk and milk products	8.59	6.61	7.73
Oils and fats	4.67	2.89	3.90
Egg, fish and meat	3.38	2.26	2.89
Vegetables	6.57	3.96	5.44
Fruits	1.90	1.88	1.89
Sugar etc	2.41	1.26	1.91
Condiments and spices	2.13	1.16	1.71
Non- alcoholic beverages	2.04	2.02	2.03
Prepared meals etc	2.57	3.17	2.83
Pan, tobacco  and Intoxicants	2.73	1.35	2.13
Food, beverages and tobacco	59.31	37.15	49.71
Fuel and light	10.42	8.40	9.49
Clothing and bedding	4.60	3.34	4.05
Footwear	0.77	0.57	0.68
Clothing, bedding and footwear	5.36	3.91	4.73
Housing		22.53	9.77
Education	2.71	4.18	3.35
Medical care	6.72	4.34	5.69
Recreation and amusement	1.00	1.99	1.43
Transport and communication	5.83	9.84	7.57
Personal care and  effects	3.05	2.74	2.92
Household requisites	4.48	3.92	4.30
Others	1.12	0.99	1.06
Miscellaneous	24.91	28.00	26.31
All Groups	100.00	100.00	100.00

My Reflection

             Finally, the new series of CPI has come into existence. Many people may not be aware that the CSO was supposed to release the CPI new series for States/UTs and all – India was expected to from 18^th February, 2011. But, the new series is released this year 18^th April, 2012. I can only say that “It's never late than never”.