European Economy


Europe’s growth gulf

European Q1 GDP data came out overnight. Germany was better than expected with a rise of 0.5% in the quarter and to 1.2% over the previous 12 months. France stagnated and the periphery continued to contract. The German data was obviously a highlight, but as I spent much of last year explaining, good German data


How much does Greece owe?

Cross-posted from the excellent Sober Look: As discussed earlier, Greek exit from the Eurozone may be the only way the nation could gain some control over its monetary system. Given the complete “credit isolation” of Greece’s banks and the private sector from the rest of the Eurozone, the ECB is powerless to improve liquidity conditions in


Europe’s black cygnets grow

And so the black cygnets waddle from the shadows again. Over the weekend, Angela Merkel’s Christian Democrats suffered an 8.3% swing in North Rhine-Westphalia as the Social democrats (SDP) and the Greens garnered a majority. Although this is only a state election, called after the previous SDP led minority government was unable to get approval


When the blood is up

by David Llewellyn-Smith Ten years of running The Diplomat magazine, and following many civil and military conflicts in detail, taught me one very important lesson about political economy. Times of crisis and conflict always begin innocently enough. As tumult develops, leaders of various stripe represent the crisis as “under control”. But if whatever it is


ECB talks money (and the lack thereof)

The May monthly bulletin from the ECB came out last night covering March data. As usual its a big document but in the context of Europe there really isn’t anything important that wasn’t already covered in the April banking survey. The chart on page 27 pretty much tells you the story of what is happening


Europe’s problems multiply

Overnight, Greek Leftist leader, Alexis Tsipras, gave up on his attempts, or at least pretence of them, to form government. The gauntlet has now been handed to PASOK leader, Evangelos Venizelos, who again has 3 days to attempt the same. Given that New Democracy, Venizelos’s potential coalition partner, has already failed to create a workable coalition


Greece contemplates the extremes

Given the Australian Budget overnight I didn’t have time to spend on Europe’s events this morning. However there have been some important developments so I thought I would spend a minute or two highlighting what is going on. As I explained yesterday Greece’s New Democracy leader has already passed on trying to form a government and


France simmers, Greece boils

Back in early February I wrote a post about 2 key things that I was watching out for in Europe that I thought the economic world was underestimating the impact of. I called these things “black cygnets”. One was Spain, the other was elections. My concerns about Spain came to pass and now it seems elections are


Draghi departs the solar system

Last night the ECB met in Barcelona and once again held on rates.  Mario Draghi opening statement is below. Ladies and gentlemen, the Vice-President and I are very pleased to welcome you to our press conference. I would like to thank Governor Fernández Ordóñez for his kind hospitality and express our special gratitude to his


Is Europe in a Depression?

Another night of Eurozone PMI data, this time manufacturing, and, much the same as last time, the news was not good at all. As BeyondBrics reported the previously performing ‘core’ of Europe is now getting dragged down: Any hopes that central Europe could decouple from the troubled eurozone and continue growing were dashed when Poland,


France prepares to integrate Europe

Over the weekend French Presidential candidate, and current front-runner, Francios Hollande gave a speech to his faithful. Although the speech was obviously full of the usual fanfare associate with political candidacy there were some very interesting things said that I think need to be highlighted in the context of Europe’s future path. For some background


The pain in Spain

Back in January S&P downgraded most of Europe under the following statement: Today’s rating actions are primarily driven by our assessment that the policy initiatives that have been taken by European policymakers in recent weeks may be insufficient to fully address ongoing systemic stresses in the eurozone. In our view, these stresses include: (1) tightening


S&P downgrades Spain

Find below the full text of the recently announced Spanish downgrade, which would make Delusional Economics proud (in a sad kind of way): We believe that the Kingdom of Spain’s budget trajectory will likely deteriorate against a background of economic contraction in contrast with our previous projections. At the same time, we see an increasing


The ECB is on Mars

Overnight the president of the European Central Bank, Mario Draghi, gave a speech to the Hearing at the Committee on Economic and Monetary Affairs of the European Parliament. The speech was not particularly out of line with what Mr Draghi usually says, such as: Available indicators for the first quarter of 2012 broadly confirm a


Europe sets course for perpetual recession

Another evening of Purchasing Manager Index (PMI) data from the Eurozone. As readers may be aware my major macro theme on Europe under current policies has been the same for quite some time now: Periphery nations weakening, France in the middle, Germany outperforming, but the whole ship slowly sinking. A few weeks ago, when the


Europe’s lunatics rise

Back in December last year while discussing the ongoing woes of Europe, I suggested that the fiscal compact may never actually be enacted because attempts to do so would have such a disastrous outcome that European nations will inevitably give up. I also mentioned in February that one of the things that could potentially effect any


Be bullish on a Spanish bank bailout

Overnight Spain managed to sell €3.18 billion worth of bills which was ahead of the target of €3 billion. The sale appears to have been the catalyst for a surge of optimism with a rally on the European markets. Short term debt is well within the LTRO window and so we are still working in


Spainaly under pressure

Sorry for the lateness of this post, one of those days I’m afraid. Italian borrowing costs were seen rising overnight as the country moved into a second day of auctions of  bonds and bills. Of note €2.884 billion in three-year debt at a yield of 3.89% were sold. The last auction of few weeks ago came in


Spain has only denial

There seems to be a pattern emerging as stressed Eurozone nations struggle against the austerity based policy that slowly strangles them. The first stage is a denial that anything is wrong, the second is that there is some problems but with renewed vigour the issues will be solved and the third stage is when reality


Spain’s balance sheet recession

So I return after the Easter break to find Europe in much the same shape as when I last saw it, with one minor difference.  Spain is no longer an unrecognised risk, but a known issue: Spanish bond yields rose today, after surging the most since January last week amid investors’ concern that Rajoy’s government may


Chart of the Day: LTRO2 weakness

Todays chart follows from the one I posted pre-Easter on the ECB (European Central Bank) LTRO (long term refinancing operation). This comes from a great piece of research from Nomura (h/t Delusional Economics – see below) and charts the weakness in 5 year Italian and Spanish bond yields since the introduction of the 2nd tranche


Eurozone recession baked in

Another night of Eurozone Purchasing Manager Index (PMI) reports, this time in services, with remarkably similar results to the manufacturing indexes: Overall outside of a few upside surprises, such as that from Ireland, the data continues to follow my overall theme of “Periphery nations weakening, France in the middle, Germany outperforming, but the whole ship


On Spanish banks and Greek bonds

Recently there has been mounting evidence that although the ECB’s 3 year LTRO has been successful in both supporting sovereign bonds and banking system recapitalisation, it is failing to restart lending in the private sector. To those who understand that banks are never reserve constrained, but capital constrained, this makes obvious sense. However, it isn’t just


Eurozone’s miserable March

There was a barrage of data out of Europe overnight with the major flow being manufacturing purchasing managers indexes – PMI. I thought, given the volume of data, I would just provide a summary of each document and if you are interested to read further you can follow the links yourself. Overall outside of a


Spain’s severity is not sustainable

The pain in Spain continues with the government releasing the country’s latest budget which has been described by some Spanish economists as ‘the most severe since Franco’: Spain’s government has announced $36 billion in new budget cuts, as it attempts to reassure the European Union that it will not need a financial bailout. The budget savings will take the


Europe moving beyond the LTRO

So it appears, at least in the short term, that the ECB’s LTRO effect is starting to wear off as markets finally catch up on the story of the underlying economy’s of periphery Europe: Euro zone bond markets Thursday received their first jolt since the Greek debt exchange was clinched earlier this month as Italian and


European banks aren’t lending

European monetary aggregate data for February was released overnight by the European Central Bank. This is one of the pieces of data I have been waiting for in order to get a better handle on the broader success of the 3 year long term refinancing operation (LTRO). The annual growth rate of the broad monetary


Reindustrialization of Europe

Cross-posted with permission from MacroTragedy, a Greek-based macro-analyst who you can also follow on Twitter It certainly is no secret that the west is de-industrializing fast and has been doing so for some time now. This trend has been present since the 1980s. Nonetheless, some countries, did manage to buck this trend and re-industrialized. Now


The rain in Spain

Back in November last year I posted on my confusion over the jubilation shown by the citizens of Spain as they elected Mariano Rajoy as their new political leader. Mr Rajoy’s strategy during the election campaign was to say very little about what he was actually intending to do to address his country’s financial problems, preferring