When PIIGS don't fly: The fall of western europe and the UK

[EZLivin]

Just got back from Europe - Switzerland, France, and Holland did not look on the verge of collapse. No homeless, roads in better shape than here, actual train service, crowds at all hours of the night in Amsterdam cafes. Did not see the caliphate on hand, though i did see very fashionable young women of Middle Eastern origins in tailored head scarves heading to McDonald's with their infidel high school pals.
In Holland young couples go on dates sharing a bike, balancing a bottle of wine, etc.
I agree with EZ the GREAB-LEAP stuff is interesting.

Thanks for the observations. Some folks here will ignore any data or observations that are at odds with their TEOTWAWKI bunker mentalities.

Edited (forgot to add): If we end up having an all-out nuclear war all bets are off. Otherwise, a new monetary system is coming and world commerce will continue.

 

[Burt Gummer]

The financial collapse is coming and cannot be stopped. It is by design and purpose. In the USSR in 1989 and in the USA 1929 people were partying it up like it was 1999 so these observations mean nothing. False prosperity almost always comes before a collapse. It is just a race to see who gets thrown under the bus first. Us or the Euros.

Those that prepare now will survive, those that have their heads in the sand about the facts will be victims of their ignorance. The time has come for TPTB to thin the herd and tighten their grasp on those that remain. The coming collapse is not going to be a blip on the radar. It will last years or possibly decades. The days of living in false prosperity based on perpetual debt are coming to a close.

A Financial Nightmare For Italy: The Yield Curve For Italian Bonds Is Turning Upside Down

 

[MikeE]

The financial collapse is coming and cannot be stopped. It is by design and purpose. In the USSR in 1989 and in the USA 1929 people were partying it up like it was 1999 so these observations mean nothing. False prosperity almost always comes before a collapse. It is just a race to see who gets thrown under the bus first. Us or the Euros.

Those that prepare now will survive, those that have their heads in the sand about the facts will be victims of their ignorance. The time has come for TPTB to thin the herd and tighten their grasp on those that remain. The coming collapse is not going to be a blip on the radar. It will last years or possibly decades. The days of living in false prosperity based on perpetual debt are coming to a close.

A Financial Nightmare For Italy: The Yield Curve For Italian Bonds Is Turning Upside Down

I agree that financial unraveling is happening right now, both in Europe and here. In this case, who will do better:
A. A society that in the best of times allows people to sleep under bridges, bankrupts people who seek medical care or university training, cuts funding for infrastructure, forces even the poorest people to depend on private automobiles, and privatizes public services like the military and postal services?

OR

B. A society that in good times has invested in education, public transportation, urban design that reduces car dependency, energy efficiency, and public health?

Both Europe and the US have similar sleazy politicians and are under the thumb of unaccountable financial corporations. But Europe's more intelligent allocation of resources might mean that it navigates through bad times in better shape than we might find ourselves in.
On the other hand, our entrepreneurial spirit is a source of great strength.

 

[kenno]

I figure we are weeks away from Greece falling into chaos and the hands of the comming Caliphate and though my previous threads were locked a few months back because I breached the impossible subject of financial collapse I'm going to give this topic another try. Feel free to speculate here and if the "Occupy Movement" ( now present in every major Western city) seems to you to be connected in some odd way to what is comming don't feel shy about including that in your posts as well.

That post is now 8 days old and what has happened since?
Well the caliphate may well be a fact within 12 months, the stumbling block is not IF but Whom will be the big dog of the middle east. Will Iran exist as it does now? Will Egypt or Turkey be on top? The deciding vote will be cast by the Muslim Brotherhood (same guys as in the WH using a different name).
Greece is now run by a banker, next by a Junta, next by a revolution/civil war, next by the caliphate.
Italy is sinking much faster than Venice and like Greeks the Italians see thier DOOM approach despite European goverments seizing citizens retirement accounts, impoverishing millions for decades in a last desperate attempt to stave off total melt down and save thier collective politico necks. Chaos or Dictatorship follows as sure as the sun rises, IT WILL ROLL ACROSS EUROPE.
Once again europe is learning what Thatcher warned of "The problem with Socialism is that you eventualy run out of other PPL's money." That is exactly what we are witnessing now world wide.
China is on the verge of revolution with over 1000 demonstrations daily and nearly 200 confrontations each day.
Occupy Movement can now add multible homicides to thier list of accomplishments (child prostitution, rape, assualt, arson, extortion, drug dealing ect.) but keep in mind that this is just a training excercise, a dry run, the uniforms, the Venezualian RPGs et. al. have yet to be passed out to the true believers. There are currantly Boots on the ground inside the USA and they follow Mao's edict of being a fish in the ocean of the society you wish to destroy, the fish were spawned right here in the USA. Oh, there are others, imported for the task of mass slaughter, but the Occupy Movement, the commies, nazies, islamists, racists, socialists are pretty much home grown and all feel they deserve what you worked for, what you pay taxes on every year, that is thier's ,if not by right then by force, just like thier song says. Occupy is the front, the face of the insurection.
Why? To destroy America with out destroying the planet. Asymetrical warfare. If the war starts inside America and STAYS inside America then the nukes are useless, and besides who has the key to the box with the big red button? The same guy that can shut down all civilian communications nationwide for any amount of time with no congressional approval or review. The same guy that can appoint any 10 govenors to the Govenors Council he wishes who will rule over the new united states, the 10 Regions of america.
Again why? because as Sun Tsu says: "It is always better to capture your enemy intact."

 

[kenno]

Socialism Eats The Rich
LONDON – German insurer Allianz SE on Friday reported an 84% drop in third-quarter net profit as took impairments of €931 million ($1.27 billion) related to investments in the [COLOR=blue !important][COLOR=blue !important]financial [COLOR=blue !important]sector[/color][/color] and Greek debt. Allianz also said its tax rate surged to 60%, up from 34.4% in the year-ago period. Third-quarter net profit fell to €196 million against €1.26 billion in the year-ago period. Total revenue fell 1.8% to €24.07 billion against €24.52 billion. A survey of analysts polled by Dow Jones Newswires had forecast net profit of €600 million on revenue of €24.1 billion. Oliver B�te, [COLOR=blue !important][COLOR=blue !important]chief [COLOR=blue !important]financial [/color][COLOR=blue !important]officer[/color][/color][/color] of Allianz SE, said the group is "well able" to withstand uncertainty and high volatility of capital marekts right now. "We remain committed to achieving our operating profit target for 2011 of €8.0 billion, plus or minus €500 million."

 

[EZLivin]

Why do you guys even bother getting up in the mornings when you have such fatalistic mindsets? Why are you all even bothering to work, or post on the computer, or go to the mailbox, or whatever else you do? Why bother if you are just serfs anyway? All I keep picturing is you guys getting down on all fours and making "oink" sounds while some authority figure you live in fear of sticks... (and I really really hate that image )

Yes, the world financial system is imploding. Yes, something new will replace it. But that doesn't necessarily mean we are all *****d. It means there is going to be massive change; NOBODY at this point knows what it will look like on the other side. Anytime this has happened before humanity has come out of it, devised a replacment, and continued to advance living standards and longevity.

This sight does not look kindly upon religous discussions, so I am not going to bring that into it. But, personally, I watch for a time when things WILL go down differently than in the past. When/if that period comes I will speak and think differently than now. But for now (in the present situation), I think you fatalists are doing yourselves a disservice by constantly acting like victims who have no future.

Geez that felt good!

 

[Sling Blade]

Thank you, EZLivin, for that burst of rationality.

 

[Burt Gummer]

Ignorance is not bliss. It doesn't mean a person has to be a depressed headcase to see the facts. Facts are facts. Knowing what is coming gives peace of mind that one has done what they can to prepare. Fear comes from the unknown. The coming economic collapse is not an unknown, it is a certainty. The short truth is people believe what gives the comfort. That is why so many believe the ridiculous and will pay a price for trading truth for short term comfort.

Anyone that has done their homework knows that the country has been hijacked by bankers and their puppets out to profit from wars of profit, hundreds of TRILLIONS in derivatives, and elimination of the middle class. Go to Netflix and get the movie Inside Job about how all these robbing bastards are in top positions in our government standing shoulder to shoulder with the head banker puppet. The corruption is of epic proportions. The deluded 98% haven't a clue.

Delusion and apathy kills. Mythology and Politics go hand in hand, both are staged puppet shows. You have zero say, just in case you think your input matters.

Like a giant blood tic these parasites are bleeding us dry and when they have had their fill they will move on and leave the corpse behind.

 

[kenno]

So who, besides myself, will stay up past midnight to see Occupy Portland get evicted?
Oh BTW Italy has rid itself of it's latest sex/drug/power crazed tyrant and will be installing a New Tyrant next week.
Bunga Bunga
Chio Italia

 

[kenno]

Yes, the world financial system is imploding. Yes, something new will replace it. But that doesn't necessarily mean we are all *****d. It means there is going to be massive change NOBODY at this point NOBODY knows what it will look like on the other side. Anytime this has happened before humanity has come out of it, devised a replacment, and continued to advance living standards and longevity.

So this change which you allude to would another term for Massive be Fundimental as in "Fundimentaly Change America, And The World"?
And this New Financial System would that re-establish Order? Sort of a New Financial Order for the World? Could that be termed a New World Order?
I think ALOT of PPL know what "This" will look like and it's called Communism

 

[kenno]

But Europe's more intelligent allocation of resources might mean that it navigates through bad times in better shape than we might find ourselves in.
On the other hand, our entrepreneurial spirit is a source of great strength. "

The trouble with Socialism is that you eventualy run out of other PPL's Money and then resort to generational theft to float the greed fueled worker's paradise.
See example below:

 

[kenno]

<broken link removed>


Quote:
The European Financial Stability Facility (EFSF) last week announced it had successfully sold a &#8364;3bn 10-year bond in support of Ireland.

However, The Sunday Telegraph can reveal that target was only met after the EFSF resorted to buying up several hundred million euros worth of the bonds.

Sources said the EFSF had spent more than &#8364; 100m buying up its own bonds to help it achieve its funding target after the banks leading the deal were only able to find about &#8364;2.7bn of outside demand for the debt.

The revelation will be seen as a major failure and a worrying sign of future buyers strike after EFSF officials and their bankers had spent recent weeks travelling the world attempting to persuade key investors, including China's national wealth fund and Japanese government funds, to buy its bonds.

<broken link removed>
Quote:
"The EFSF did not buy its own bonds and the book was 3 billion euros," an EFSF spokesman said, referring to the 3 billion euros raised in last Monday's 10-year bond issue.

Then Who Did buy the bonds? Not europe, not asia, not anyone in the western hemisphere! The PPl that bought the bonds are the Irish people and thier decendents.

 

[EZLivin]

So this change which you allude to would another term for Massive be Fundimental as in "Fundimentaly Change America, And The World"?
And this New Financial System would that re-establish Order? Sort of a New Financial Order for the World? Could that be termed a New World Order?
I think ALOT of PPL know what "This" will look like and it's called Communism

I think one has to look at Europe and the US as two different entities. We know America has become more socialistic year after year, but more fascist in some ways too. Europe was/is more socialistic than the US, but we could very well be seeing the beginning stages of the death of socialism in many European countries (they have run out of other people's money!). Asia is becoming more capitalistic. Latin America is a mix as usual. The Middle East is acting like the Middle East always does. There are huge changes happening everywhere as always.

I just think you guys who are devoted to the "New World Order" mindset are focused too much on trying to lump everything together into one neat little package. Where you guys see everything coming under one "New World Order" entitiy, I see history repeating (rise and fall of nations and economic systems). Dictatorships never last long, and an authoritarian one world dictatorship where everything you do is controlled is just too unrealistic. Yes, I think it will be tried one day, but only when it is facilitated by something outside this realm we exist in. It would last a brief time, and would fail also. But short of that, Mao, Stalin, Hitler, Alexander, Napolean, etc., etc., are all examples of why it ain't goinna happen.

Irrregardless of how things play out, since we know major changes are occurring, and the financial system under the current world currency is collapsing and is going to be replaced, it makes sense to figure out how to survive and prosper in what will follow rather than constantly dwelling and whining over the most extreme and unlikely outcome. The "NWO" advocates probably think I am nuts, but that is how I see it.

 

[A.I.P.]

^ to clarify the point above^
What the article does not explain is that "buying one's own bonds" is actually a scheme to allow the printing of more worthless paper money while hiding behind the skirts of "The Law", otherwise this is known as 'economic warfare'. This practice has one effect, reduceing the value of people's wages and savings while driving up prices due to goverment induced inflation.
This has long been concidered a way of robbing the wealth of entire nations, George Soros has done this 4 times and has a death penalty against him in Indonesia as a result.
The end result of Goverment caused inflation has historicaly been revolution.
UK Government draws up contingency plan for eurozone breakup; France begins to fear contagion as spread with German bund reaches highest level since euro introduction

Friday, November 11, 2011
Prime Minister David Cameron has said the UK Government is drawing up a contingency plan in the event of a breakup of the eurozone, a scenario Business Secretary Vince Cable described as &#8216;"Armageddon" for the UK's banking system. The Guardian reports that the planning covers emergency measures to keep the banking system going and involves the Financial Services Authority, the Bank of England and the Treasury.
German Chancellor Angela Merkel has moved to deny rumours that France and Germany were discussing plans for a smaller eurozone, arguing, "We have a single goal and it is to stabilise the eurozone as it is today." Separately, FTD reports that the German budget deficit in 2012 will be &#8364;26.1bn, which the opposition has described as a violation of the constitutional debt brake.
Open Europe's Director Mats Persson appeared on BBC World News Today and CNN, and Open Europe's Research Director Stephen Booth appeared on BBC Radio Wales yesterday, both discussing the concept of a slimmed-down eurozone. Open Europe's Economics analyst Raoul Ruparel was quoted by Channel 4 News, arguing that a smaller eurozone "would be possible, I think a country leaving from the top is better than someone dropping out of the bottom."
The attention of the bond markets turned to France yesterday, with the spread between France and Germany's ten-year bonds reaching its highest level since the introduction of the euro. Fears of contagion mounted when Standard & Poor's mistakenly announced that it had downgraded France's credit rating. France's financial watchdog AMF has now launched an investigation into the issue.
Greece's newly formed national unity government, led by former ECB Vice-President Lucas Papademos, is due to be formally sworn in today. Raoul Ruparel is quoted by the WSJ and WSJ Americas, Greek daily Ta Nea, and The Australian, arguing that Papademos "is the best person for the job, but the plans are still flawed, whoever enacts them." Separately, Dutch Central Bank Governor Klaas Knot yesterday ruled out the possibility of the ECB adopting more aggressive measures to tackle the eurozone crisis, as he told Dutch MPs, "We have gone pretty far in what we can do but there is not much more that can be expected from us."
Meanwhile, Italy's ECB Executive Board member Lorenzo Bini-Smaghi yesterday said that he will resign and take up a teaching post at Harvard University from January 2012, although Italian media reports suggest that he could potentially be appointed as Economy Minister in a Mario Monti-led government of national unity. In what is widely seen as a victory for French President Nicholas Sarkozy, Bini-Smaghi will almost certainly be replaced by a Frenchman
So Bini, one of the architects of the Euro collapse finds a haven,,,among the American east coast elite

 

[A.I.P.]

More on the collapse:
Guardian: PM Cameron is tabling &#8216;relatively modest demands' in return for accepting EU Treaty change
The Guardian reports that Angela Merkel has warned David Cameron that unless he accepts unconditional changes to the Lisbon Treaty, then the 17 Eurozone states will draw up their own separate treaty. (Germany kicks the UK and tells em to tow the line or the money stops)
The paper goes on to report that relations between the two have improved since Cameron indicated he &#8216;will table relatively modest demands' in return for his agreement and that &#8216;the repatriation of social and employment laws will be for a later treaty negotiation. (UK bows to Germany)

"Unconditional Change" Is that like Fundimental Change?

 

[A.I.P.]

AP/LaPresse

Nov. 13, 2011: Italy's new premier-designate economist Mario Monti meets with journalists at the Quirinale Presidential Palace after talks with Italian President Giorgio Napolitano in Rome. Monti told reporters Sunday night he will carry out the task "with a great sense of responsibility and service toward this nation."
MILAN &#8211; Economist Mario Monti accepted the monumental task Sunday of trying to form a new government that can rescue Italy from financial ruin, expressing confidence that the nation can beat the crisis if its people pull together.

His selection came a day after Silvio Berlusconi reluctantly resigned as premier, bowing out after world markets pummeled Italy's borrowing ability, reflecting a loss of faith in the 75-year-old media mogul's leadership. Berlusconi quit after the Italian parliament approved new reform measures demanded by the European Union and central bank officials -- but even those are not considered enough to right Italy's ailing economy.

"There is an emergency, but we can overcome it with a common effort," Monti told the nation, shortly after Italy's president formally asked him to see if he can muster enough political support to lead the country out of one of its most trying hours since World War II.

"In a moment of particular difficulty, Italy must win the challenge to bounce back, we must be an element of strength and not weakness in the European Union, of which we are founders," he added.

Monti must now draw up a Cabinet, lay out his priorities, and see if he has enough support in Parliament to govern. Rival political parties offered various degrees of support, including one demand from Berlusconi's party -- the largest in Parliament -- that his government last only as long enough as it takes to heal Italy's finances and revive the economy.

The 68-year-old economics professor is no pushover, earning a reputation for staring down challenges as a tough EU competition commissioner. But he'll have to win a confidence vote in Parliament before he can lead the nation.

Monti told reporters he will carry out his task "with a great sense of responsibility and service toward this nation." Italy must heal its finances and resume growth because "we owe it to our children, to give them a concrete future of dignity and hope."

Berlusconi's party also demanded that only technocrats -- not politicians -- make up Monti's Cabinet in exchange for its crucial support.

Monti faces a daunting challenge -- preventing an Italian default that could tear apart the 17-nation eurozone and send Europe and the U.S. into new recessions.

Italy's economy is hampered by high wage costs, low productivity, fat government payrolls, excessive taxes, choking bureaucracy, and an educational system that produces one of the lowest levels of college graduates among rich countries.In addition, as the third-largest economy in the eurozone, Italy is considered too big for Europe to bail out like Greece, Portugal and Ireland have been.

The next Italian government needs to push through even more painful reforms and austerity measures to deal with $2.6 trillion in debt -- about 120 percent of the country's economic output. And many of those debts are coming due soon -- Italy has to roll over more than $410 billion of its debts next year alone.

Some political forces, including some from Berlusconi's ranks and that of his allies, have been clamoring for early elections. But President Giorgio Napolitano cited approaching treasury bond auctions -- one as early as Monday and other bonds maturing in the next few months -- as a main reason he decided to "avoid early elections and the consequent government vacuum" until a new one could be formed.

Asked by journalists if he thought Monti could form his government by week's end, Napolitano responded positively.

The yield on Italian 10-year bonds fell to 6.48 percent Friday, below the crisis level of 7 percent reached earlier last week, a level that forced the three other EU nations into international bailouts.

Centrist and center-left parties in the opposition during Berlusconi's rule offered their support for Monti.

"Italian parties are at fork in the road. Either they speculate on the situation, hoping that they can get some campaign capital from it, or they take up their responsibilities to save the country," said centrist opposition leader Pier Ferdinando Casini.

The leader of Italy's largest labor confedation, the left-wing CGIL, Susanna Camusso, expressed hope that Monti could pull together a government capable of "giving back the international credibility that we have lost in these years."

Union leaders, along with industrialists, have accused Berlusconi of doing virtually nothing to create jobs during his tenure.

Berlusconi's main ally in his 17 years of politics, Umberto Bossi, said his Northern League, a regional party with its power base in the affluent north, would stay in the opposition and insisted early elections are the true solution.

"We won't give him any blank check," Bossi said of Monti.

Warmly welcoming the new prime minister-designate were European Commission President Jose Manuel Barroso and European Council President Herman Van Rompuy.

"We believe that it sends a further encouraging signal," following Italy's final passage Saturday of new austerity measures, they said in a statement, adding that the EU will keep monitoring Italy's implementation of the measures "with the aim of pursuing policies that foster growth."

The measures that were passed Saturday include raising the retirement age to 67 by 2026 and to 70 by 2050 and selling off state property.
Some analysts expect the return of the property tax on primary residences, a tax that Berlusconi had abolished.

A crowd of supporters applauded Berlusconi on Sunday at his private residence in Rome -- in sharp contrast to the hundreds Saturday night who heckled and jeered him and popped open bottles of sparking wine to toast his departure.

It was an ignoble end for the billionaire media mogul, who came to power for the first time in 1994 using a soccer chant "Let's Go Italy" as the name of his political party and selling Italians on a dream of prosperity with own transformation from cruise-ship crooner to Italy's richest man.

While he became Italy's longest-serving postwar premier, Berlusconi's three stints as premier were tainted by corruption trials and accusations that he used his political power to help his business interests. His last term was marred by sex scandals, "bunga bunga" parties and criminal charges he paid a 17-year-old girl to have sex -- accusations he denies.

Berlusconi appeared on TV in a recorded message Sunday, pledging to stay a vigorous political force in Parliament, where he is still a lawmaker.

"(I) resigned out of a sense of responsibility and of state, to ward off more speculative financial attacks on Italy," he said.

Looking somber, Berlusconi said he was sad that his "generous gesture" of resignation was greeted by "hoots and insults" from the crowds.
Socialism=death

 

[kenno]

PARIS: President Nicolas Sarkozy is not ready to admit it, but France has begun to fear that it will be next in the markets' firing line as the debt crisis spreads from Greece and Italy.

The ratings agency Standard and Poor's gave Paris a jolt on Thursday, announcing "in error" it had downgraded France's credit worthiness. It withdrew the statement, but other signs of trouble are mounting.

The "spread" or gap between French and German 10-year bond yields has never been higher, as investors skip over France and invest in its safer neighbour, and the government's borrowing costs are rising.

France now pays 3.46 percent interest on its bonds, more than twice as much as Germany, although still around half as much as Italy does -- for now.

At stake is France's coveted "AAA" credit rating, any downgrade would be a humiliation for Sarkozy six months before he is due to seek re-election, and a blow for European leaders in their battle to save the euro.

"After Greece and Italy, France?" worried Le Monde's Friday headline, over a stark graphic showing France's 1.7 trillion euro debt just short of Italy's 1.9 trillion and dwarfing Europe's trillion-euro bail-out fund.
This week Sarkozy scrambled to promise a second round of austerity measures, but Brussels was quick to call them insufficient, markets were unimpressed and some believe the crisis is already here.

"Let's not have any illusions. On the markets French debt has already lost its AAA," said Jacques Attali, advisor to former president Francois Mitterrand and former head of the European Bank for Reconstruction and Development.

"When we see the state's borrowing costs over 10 years and the direction of the Franco-German spread, French debt is treated as AA," he said, judging the government's latest austerity programme "obviously insufficient."

The French government is still officially hoping for one percent growth next year, but the European Commission is more pessimistic, predicting only 0.6 percent, which would make it tough to meet debt reduction targets.

"Concerning 2013, further measures will be needed in order that excessive deficit is corrected," the commission's Economic Affairs chief Olli Rehn warned on Thursday, after studying the French austerity plan.

In the run up to what promises to be a difficult re-election battle, it is hard to see what Sarkozy might be able to cut -- and his budget minister, Valerie Pecresse -- insists there will be no new austerity package.

The last one, announced Monday, added seven billion euros in cuts or new revenue to the budget, following a 12-billion-euro plan announced in August.

Sarkozy's most dangerous opponent, Socialist candidate Francois Hollande, has accused Sarkozy of adding 500 billion to France's debts during his five year term with tax giveaways to big business and the rich.

On Friday, out campaigning, Hollande denounced Sarkozy's economic record and warned that "the markets have already anticipated" a French downgrade.

The right, in turn, denounces Hollande's spending plans -- which are limited by the situation but include hiring 60,000 teachers -- as "ruinous".

The last thing a Socialist does is what should have been the first thing.
A socialist's first recourse is theft, when the thieving ends the murder begins.

 

[A.I.P.]

I found this piece with a brighter outlook:
Autumn forecast: EU economy in &#8216;dangerous territory'

10.11.11 @ 18:18
Related

Rehn to get increased economic powers
EU economic growth is coming to a 'stand-still'
Papandreou pulls back from referendum
By Leigh Phillips
BRUSSELS - Europe's economy has deteriorated dramatically since the spring and growth has come to a standstill, the European Commission said on Thursday, warning that the bloc could very easily slip back into recession should "any further bad news" materialise.
"Growth has stalled in Europe, and there is a risk of a new recession," the EU's economy chief, commissioner Olli Rehn said upon the publication of the bloc's autumn economic forecast, whose predictions for growth have been revised down "substantially."
The document did not mince words: "The EU economy is moving in dangerous territory. The recovery has already come to a standstill and a slew of forward looking indicators paint a rather gloomy picture."
"Any further bad news could amplify adverse feedback loops pushing the EU economy back into recession," it said.

Already, the EU economy is "set to stagnate for some quarters before anaemic growth gradually returns."
The report recounts how only after a number of quarters of zero or close-to-zero growth, will the bloc see a "feeble" uptick in its economic fortunes.
The final quarter of 2011 will see "nil" growth and predictions for growth for 2012 have been ratcheted downward "substantially", by 1.25 percentage points to just 0.5 percent in both the EU and the eurozone.
Quarterly growth in 2012 will slowly increase from zero to 0.4 by the end of next year and then languish at the same rate throughout 2013.
Signs of domestic demand, particularly in core eurozone countries, in the spring were predicted by the commission to provide the key engine of a moderate recovery.
"These hopes have been dashed," the document continued, saying that domestic demand has "shrivelled".
Fearful of losing their jobs - or having lost them already - consumers are pulling back on spending and attempting to pay down household debts.
Companies are frightened that in the current climate they will not profit from new investments and are engaged what is in effect an investment strike. Even though firms are in a "generally strong financial position" and are able to borrow at very low rates, they are just sitting on the cash and refusing to invest.
Banks for their part are increasingly reluctant to lend and the report's authors even warn of a potential credit crunch early next year.
Meanwhile, the abysmal state of the global economy means that export markets have weakened. The US recovery lost steam over the summer and growth in emerging economies has moderated.
In such a situation, there are few directions in which to look that will jump-start the EU economy.
A flatlining real economy, fragile public finances and a banking sector that is in need of recapitalisation are beginning to create "feedback loops", mutually affecting each other in a "vicious circle".
The analysis predicts that uncertainty in the markets related to the eurozone crisis, which destroys confidence and intensifies financial turmoil, will "gradually fade over the forecast horizon" so long as austerity measures and structural adjustment policies are implemented.
Also, once "uncertainty dissipates", Germany, which will see "strongly" weakened investment, consumption and exports in the fourth quarter of this year, will see a resumption of "robust growth".
Yet at the same time, the report says that these very measures are "weighing on domestic demand" and will have a "moderately negative impact in 2012."
In essence, the document says that the medicine is as bad as the disease: austerity is necessary to end uncertainty, it argues, but this also depresses demand.
And the downward affect on GDP as a result of austerity is likely to be still more profound than the figures in the report, as fresh spending cuts and structural adjustment measures in France and Italy had yet to be announced when the report went to press, while a likely change in the Spanish administration shortly will almost certainly deepen the existing austerity there.
No countries will escape the slowdown, although some states will be hit worse than others, with those that grew the fastest from 2010-2011 will now decelerate the fastest.
France for its part, is struck with poor corporate investment although private consumption is softening to a lesser extent, but both will nevertheless produce a contraction at the end of this year. Moderate growth is expected to return in the second half of 2012.
Italy will see two quarters of slight contraction around the turn of the year, to be followed by "frail" growth thereafter as a result of subdued domestic demand. And Spain will stagnate in late 2011 and early 2012 before growth "gradually" returns.
Outside the eurozone, the UK like Spain will also stagnate in late 2011 and the first half of next year, while Poland will experience a "comparatively benign" slowdown as the year closes.

EUobserver.com / Economic Affairs / Autumn forecast: EU economy in

 

[kenno]

Not europe but Argis are very european-like:
Friday, November 18, 2011Argentina: A Coming Balance-of-Payment Crisis? (Guest Post)
By Daniel Volberg of Morgan Stanley


No sooner had President Cristina Fernandez de Kirchner declared victory in her re-election bid less than a month ago than the challenges for the administration had taken on new urgency. At the time we highlighted that the two most pressing issues for the administration would likely come on the fiscal front where a reduction in energy subsidies was likely and on the currency front.

While the authorities have made some initial announcements on the subsidies front, the first moves on the currency front appear to have created an even more challenging environment. The decline in international reserves &#8211; which have fallen by $5 billion (just under 10%) since July &#8211; has accelerated in the first days of November after having slowed somewhat in October.

A Balance-of-Payments Crisis?

At first glance, the reserve losses suggest that Argentina is suffering a balance-of-payments crisis where an overvalued currency has become unsustainable. Indeed, the view that recent turmoil is driven by an unsustainably overvalued peso appears to be gaining traction. However, we caution that based on Argentina's fundamentals, there should be no balance-of-payments crisis for two reasons.

First, while the real exchange rate has appreciated in recent years, it is by no means overly stretched. After all, the real effective exchange rate is still below the average of the 1990s. Of course, any conclusions drawn from looking at a long series of the multilateral real exchange rate must be taken with some skepticism. Still, given the terms-of-trade improvement that Argentina has experienced in recent years, it is hard to argue that the peso is dramatically overvalued.

Second, Argentina still has a current account surplus. While the current account has deteriorated, in the first half of the year it still posted a surplus of roughly $800 million. And in the following months the trade balance data have remained supportive, suggesting that the current account should have stabilized in surplus territory.

Expectations Challenge

We suspect that the recent turmoil is largely driven by a question of confidence. Recent policy actions and fundamental dynamics have resulted in deteriorating confidence in the value of Argentina's currency. We suspect that there are three key elements behind the recent currency turmoil.

First, the status quo does not appear to be sustainable. With annual inflation (near 24% according to our measurement) running well above the current nominal peso depreciation (7-10%), the real exchange rate has been steadily appreciating. Indeed, the deteriorating balance of payments suggests that a decade of an undervalued Argentine peso has come to an end. The status quo &#8211; single-digit nominal depreciation and double-digit inflation that result in real appreciation of the peso &#8211; does not appear to be sustainable and, if unchecked, seems likely to lead to an overvalued peso in the near term. That, in turn, could spark pressure for more rapid peso depreciation. Thus, some foreign currency demand in recent months may have been driven by the desire to preserve savings (in dollar terms) in light of the concerns that without major adjustments to currency policy, the peso would have to devalue within months.

Second, the tightening of capital controls announced in late October has led some to be concerned that a devaluation may come sooner rather than later. At the end of October the authorities introduced new restrictions on buying foreign currency for individuals and companies. Those buying currency now need prior approval from the tax agency (AFIP). The measures appear to have been prompted by the loss of international reserves and the FATF investigation of Argentina's anti-money laundering regime. Since the measures have been announced, there has been considerable confusion about the new regulatory landscape.

The authorities claim that the measures are largely informational (identifying those who purchase foreign exchange) rather than a more substantial tightening of capital controls. Authorities note that the approval rate for dollar purchases under the new regime is roughly 80%. However, some banks suggest that it may be significantly lower. And while dividend payments by large companies in foreign currency are currently exempt from the AFIP approval requirement, there are concerns that additional measures could be forthcoming that would further restrict access to foreign currency.

Our concern is that the authorities have not clearly communicated the logic behind the tightening of capital controls and the result has been an increase in expectations of devaluation and hence increasing demand for hard currency.

Third, others have viewed the latest capital controls as a sign that the authorities might be leaning towards some form of a multiple exchange rate regime. As we argued last month, there is some risk that the authorities may be considering a move to split the currency market into two parts: a stronger nominal exchange rate applied to agricultural exporters and a weaker one for the rest of the economy.

The move would presumably boost the authorities' peso revenues by allowing the central bank to buy dollars at a cheap rate that agricultural exporters are forced to sell to the central bank (within 180 days of exporting) and then allow the central bank to turn around and sell the dollars to others at a higher rate.

Furthermore, the move might allow the industrial sector to "regain competitiveness" by allowing them to export at much weaker exchange rate. However, we suspect that if implemented, this policy alternative could create significant market dislocations as uncertainty about policy and the need to preserve savings may prompt more widespread dollarization and significantly raise the risk of a hard landing.

Room for Optimism?

As the administration engages in an internal debate on currency policy, there is a proposal that could calm the recent currency stress: higher interest rates to compensate a gradual, but somewhat faster, pace of nominal exchange rate depreciation. Since 2009 Argentina has maintained domestic interest rates on large peso deposits near 10-11% and has allowed the nominal exchange rate to depreciate at a pace of 7-10% per year, preserving demand for local currency savings by making domestic savers largely indifferent between saving in dollars or in pesos. But that policy appears to have changed recently.

In recent weeks the authorities have restricted liquidity in the banking system, carrying out an orderly increase of interest rates. Indeed, after averaging near 11% in the first half of this year, the interest rate on large peso deposits now stands at near 20%. We suspect that this may be the first step in an orderly policy shift towards a faster pace of nominal exchange rate depreciation where rates at 20% could be associated with nominal peso depreciation of around 15-20% per year.

This policy shift towards a tighter monetary and looser currency policy &#8211; if it does not result in higher inflationary pressure &#8211; could provide an important offset to the 25% inflation driven real exchange rate appreciation that is threatening Argentina's &#8216;competitiveness' that is the foundation of the current import substitution mode

Bottom Line

Argentina's policy-makers are facing a serious challenge. The direction of currency policy continues to evolve, with two-sided risks to our outlook. Currency policy appears to be in the center of an internal debate within the administration: with some calling for higher interest rates and an orderly, gradual acceleration in the pace of nominal peso depreciation while others are proposing a severe tightening in controls and a multiple exchange rate regime.

While the new controls announced late last month could ultimately be consistent with either track (an accelerated pace of depreciation or a multiple exchange rate), we are concerned that the downside risks appear to be gaining ground. Argentina's fundamentals do not warrant a full-blown currency crisis; how the authorities handle the current situation, however, is likely to determine if such an outcome can be averted

 

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Sunday, November 20, 2011Spain: Euro Zone's Weaker Link With $41B Unsellable Real Estate
By Mike "Mish" Shedlock


Explaining the recent selloff in Spanish bonds is easy: The bond market has finally come to grips with the idea there is no solution for Spain's massive structural problems. Here is a trio of articles to show what I mean.

Spanish Banks Stuck &#8216;Unsellable' Real Estate, 50% of Real Estate Loans are Troubled

Bloomberg reports Spanish Banks Have $41B of &#8216;Unsellable' Real Estate

Spanish banks, under pressure to cut property-backed debt, hold about 30 billion euros ($41 billion) of real estate that's "unsellable," according to a risk adviser to Banco Santander SA (SAN) and five other lenders.

"I'm really worried about the small- and medium-sized banks whose business is 100 percent in Spain and based on real- estate growth," Pablo Cantos, managing partner of Madrid-based MaC Group, said in an interview. "I foresee Spain will be left with just four large banks."

Spanish lenders hold 308 billion euros of real estate loans, about half of which are "troubled," according to the Bank of Spain. The central bank tightened rules last year to force lenders to aside more reserves against property taken onto their books in exchange for unpaid debts, pressing them to sell assets rather than wait for the market to recover from a four- year decline.

Land "in the middle of nowhere" and unfinished residential units will take as long as 40 years to sell, Cantos said.

Land in some parts of Spain is literally worthless, said Fernando Rodriguez de Acuna Martinez, a consultant at Madrid- based adviser R.R. de Acuna & Asociados.

"If there were to be a proper mark to market of real estate assets, every Spanish domestic bank would need additional capital," said Daragh Quinn, an analyst at Nomura Holdings Inc. in Madrid, in a telephone interview.

&#8216;Enormous' Price Gap

There is an "enormous" gap between prices offered by banks and what investors are willing to pay, preventing sales of large property portfolios, MaC Group's Cantos said.

"Banks have already provisioned for a 30 percent loss, but if you are selling at 70 percent discount, you have to take another 40 percent loss. Which small and medium size banks can take such a hit?"
Wave of Debilitating Defaults in Subordinate RMBS Tranches

Reuters comments on Default pain in Spain RMBS

Extremely poor performance of assets in Spanish RMBS, which in some cases means there is simply not enough performing collateral in the portfolios to service required cashflows, could lead to a wave of debilitating defaults in subordinate tranches.
Eurozone's Weaker Link

The BBC reports Spain Becomes Eurozone's Weaker Link

Yesterday, when Spain actually borrowed &#8364;3.6bn of new ten-year loans, it had to pay 6.975%, the highest rate for 15 years and so close to the unaffordable 7% rate as makes no helpful difference.

In short, as Spain prepares for its general election on Sunday, it has become the weaker link in the eurozone chain. New fundamental research by the consultancy McKinsey sheds some light on why that should be.

The point is that if you add together all debts - government debts, corporate debts, financial institution debts, and household debts - Spain is a much more indebted or leveraged country than Italy.

In general Spanish businesses geared up, or took on huge amounts of additional debt, especially those in the property and utility sectors.

The indebtedness of households rose to 82% of GDP, government debt increased to 71% of GDP and financial debt - which is bank lending to financial vehicles that aren't banks - went up to 76% of GDP.

Italy's government debts, at around 120% of GDP, are a far bigger burden than Spain's.

And the debts of its financial sector are more or less the same: which may be another way of explaining why creditors' confidence in both Italian and Spanish banks has been seeping away in recent weeks and months.

But the debts of Italy's private sector are a fraction of Spain's. The indebtedness of Italian businesses is just 81% of GDP and the indebtedness of households just 45% of GDP. Italy's private sector, from the point of view of indebtedness, is in pretty good shape.

So Italy's total indebtedness at the end of last year was 313%, some 50 percentage points less than Spain's.

The point is that a government's ability to service and repay debts depends partly on the overall size of the debts, and partly on the health of the private sector that pays taxes.

A private sector relatively burdened by huge debts - as is the case in Spain but not Italy - is less able to spend and invest. As a result, it struggles to provide the momentum in the economy necessary for the generation of growing tax revenues.
Mission Impossible

With 22% unemployment and a hugely over-burdened private sector, the bond market has finally caught on that austerity measures are not going to help Spain meet its budget goals.

A new government will be elected this weekend in Spain. Will it raise taxes? Collect more revenue?

It's the latter that is important, and that is mission impossible.