It appears the eurozone has entered a deeper recession than the one caused by the 2008 financial crisis. The eurozone’s unemployment rate now stands at 10.7 percent, half a percentage point higher than at the peak of the last recession and the highest in the euro’s history. The rates for the most troubled countries are even more shocking, with 19.9 percent for Spain and 23.3 percent for Greece. Unemployment among the young is simply dismal, with rates of 48.1 percent in Greece and 49.9 in Spain for workers under 25 years of age. Carl Weinberg, chief economist at High Frequency Economics, called the numbers “appalling.”
Though world leaders praise the latest bailout for Greece, economists anticipate another global recession arising from Europe’s debt crisis, and a serious one at that. With Europe having a larger population, a larger banking system and more Fortune 500 companies than the U.S., a European financial system crash is sure to send shockwaves through markets around the globe.
[click to continue…]
Greece has spent itself right up to the edge of the abyss, yet Greeks don’t want to give up their cushy jobs, extravagant perks and early retirements. No, they think that someone else should continue to pay so that they can continue to play.
Now they’re protesting in the streets to protect their lives of leisure, but we’re pretty sure that none of the protesters were willing to protest any harder than they work:
[click to continue…]
You know how you sometimes see an event unfolding in what seems to be slow motion and yet you remain frozen in place and unable to react? That’s exactly how the EU is now reacting to the Greek fiscal fiasco.
Unlike its recently deposed leader, the International Monetary Fund is impotent. They’re pretty sure something needs to be done but no one agrees on what. So the Eurocrats have worked up a dandy selection of equally unworkable plans.
[click to continue…]
Do you remember when the housing decline first appeared on the radar screen a few years ago, and all the “experts” told us that it would be contained to certain states? Then, when the subprime loan crisis hit, these same experts told us that the it would be contained to only subprime loans. Later, when Lehman fell, the experts again told us the banking problems would be contained as well.
The “experts” are once again dead wrong on another issue about to be “uncontained.” Now we’re being told that the Eurozone sovereign debt issues will be contained to the problem countries like Greece, Portugal and Ireland. Not only will Europe as a whole be just fine and dandy in the end, but so will the United States (which is quickly becoming a synonym for Greece).
Endgame author John Mauldlin, one of my favorite reads on Europe’s problems, begs to differ. Here he is in this video with Aaron Task of The Daily Ticker.
[click to continue…]
Please allow us – or in this particular case, please allow Paul de Grauwe of the University of Leuven – to dissuade you from any lingering fantasies regarding the future of the Euro.
We’re talking DOOMED. In all caps.
De Grauwe does a brilliant job of analyzing and summarizing the key differences between the Euro and the Pound:
[click to continue…]
Michael Darda, chief economist and chief market strategist for MKM Partners, says despite the mirage of low central bank interest rates, monetary policy really doesn’t look very loose in Europe.
With the ECB tightening monetary policy now, with the first hike in almost three years, the European periphery will be forced to essentially contract and deflate, and endanger the entire Eurozone. With this backdrop, austerity will fail.
When you look at the total Eurozone nominal GDP growth, it slowed to a 1.2% annualized rate. That means the the ECB benchmark rate of 1.25% is higher than GDP. That’s not easy money, that’s a prescription for a recession.
With the rest of the Eurozone flat on it’s back, the strength of Germany will not be enough to save Europe.