Reply #41: Europe’s Economy is Falling Apart naked capitalism

[Demeter]

http://www.nakedcapitalism.com/2011/10/europe%e2%80%99s-economy-is-falling-apart.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+NakedCapitalism+%28naked+capitalism%29

Yves here. Note the comment at the end, that Sarkozy’s sales pitch to China on the levered up EFSF did not go so well. If the Chinese don’t relent, this greatly reduces of this scheme working, even in the short term. And further note that the flagging European growth is the result of the austerity hairshirt being imposed on highly indebted economies. Ambrose Evans-Pritchard has a pointed article on the consequences of the beggar-thy-neighbor German stance.

By Delusional Economics, who is horrified at the state of economic commentary in Australia and is determined to cleanse the daily flow of vested interests propaganda to produce a balanced counterpoint. Cross posted from MacroBusiness

Angela Merkel has been warning for quite some time that Europe’s economic woes will take up to a decade to fix and that it is time for Europe to rethink its economic strategy after years of living “beyond its means”. It seems fairly obvious from those statements that the rest of the world is going to have to get use to Europe moving into a slow growth phase while it attempts to adjust away from what it considers to be unsustainable debt.

In an attempt support the transition while keeping Europe together the European leaders have put together 3 part package to save Greece, re-capitalise the banks and provide a stability mechanism for countries that run into trouble. The problem is that once you understand the technicalities behind what they have come up with you come to realise that real economic growth is the only thing that actually matters. The latest news out of Europe for many of the 17 member nations is not good at all in that regard.

It became obvious that Belgium was in trouble when it was forced to nationalise Dexia, and over the weekend the Belgium central bank reported that economy is now stalling...Cyprus is looking far worse and as usual the IMF is calling for austerity...On top of that property prices continue to fall and the real estate industry is reported to be in meltdown as construction activity has fallen by over 40% this year. Economic news from Portugal continues to be poor which is expected under the circumstances...And Spain‘s economy continues to deteriorate in the worst possible way...It now seems that France has little choice but to join the austerity budgeting brigade with Sarkozy warning his country of the coming budget cuts...And then there is Europe’s economic engine, Germany, which on the back of the latest European PMI is now predicted to stall into the new year...

With new reports suggesting that Sarkozy and Regling’s visits to China didn’t go as well as planned it would seem that Europe still has a long way to go before the end of this crisis and the rest of the world is going to have to get used to Europe in the slow-lane for a lot longer.