The latest economic and political news out of Europe is quite discouraging. As you know, my base case for Europe is now a disorderly breakup because I believe events on the ground are moving quicker than politicians can adjust. Recent events bear this out.
In France, the country slipped into economic contraction in Q2, while Greece is expected to shrink 6.9% this year. Most of this can be laid at the feet of shrinking public and private sectors at the same time. The EU, for instance, expected Greek growth to be above EU growth as late as December 2008.
Meanwhile the flight out of periphery assets continues with Denmark, Switzerland, and Germany all seeing negative yields as a result. Europe has needed something to stop the bank runs. But the EuroTARP deal hammered out last weekend doesn’t look like it will de-couple sovereign and bank issues as the text post-meeting said. There is no real solidarity in Europe. It is really every nation for itself now. I see this backtracking as a very negative sign – the most obvious sign to date that Europe can’t get it done and that a disorderly breakup is coming.
Lastly, Slovenia is in the news now too because it will likely succumb to the euro crisis soon. ALl in all, Europe is an unmitigated disaster. There is no cohesion. Europe is disintegrating.
European Dispute Emerges – WSJ.com
German banks fear EU union would loot deposit fund – MarketWatch
Euro zone to decide on debt relief to Ireland in October – The Irish Times – Tue, Jul 10, 2012
Euro-Krise: Slowenien wackelt | FTD.de
Erste Unterstützer distanzieren sich von Sinn – SPIEGEL ONLINE
Europe’s banking union: 172 German professors can’t be wrong | The Economist
ekathimerini.com | Greek economy to shrink 6.9 pct this year, IOBE says
Denmark Central Bank Cuts Interest Rates – WSJ.com
BBC News – Eurozone ministers agree 30bn euros for Spanish banks
“Alemania vive una burbuja con el dinero que sale del sur” | Economía | EL PAÍS
Sober Look: Draghi’s zero deposit rate policy put an end to euro money market funds
EconoMonitor : Don’t Shoot the Messenger » And Then There Were Six – Is Slovenia Next?
Neither Grexit, Nor Spexit, It’s Fixit or Fexit | A Fistful Of Euros
France Joins Germany to Sell T-Bills At Negative Yield – WSJ.com
In China, the data on trade shows a worrying deceleration in imports suggesting that domestic demand is weakening quickly. Ambrose Evans-Pritchard points to money supply figures as corroborating this. He believes China will try to export its way out of this problem of excess capacity despite the real problems in the west. I still believe a hard landing is likely. And tied into this is the Australian story. If China can reflate and socialise the losses from its latest bubble, the demand for commodities in Australia will remain robust. Otherwise, slackening demand will add urgency to the situation in Australia’s weakening housing market and cause the RBA to need to cut aggressively. Andy Xie thinks this looks like Spain, which it does because of the low unemployment and booming economy plus high mortgage debt and current account deficits balanced by low government debt and deficits. This was how Spain looked in 2006 or 2007 before the housing bubble popped.
China exports yet more excess capacity to crippled West – Telegraph Blogs
China heads for a deflationary shock – Telegraph Blogs
China’s Import Growth Misses Estimates for June – Bloomberg
Problemas financieros, no económicos | Economía | EL PAÍS
Australia Could Be The Next Spain, Warns Andy Xie – www.capital.gr
Roach Says China Has Scope for More Rate Cuts as Inflation Slows – Businessweek
That’s it. Here are the links.
Many Wall Street executives says wrongdoing is necessary: survey | Reuters
The new retirement age: 70 – MarketWatch
Real Estate Prices Are Going Back Up – Bloomberg
Apple seen selling up to 6 million ‘iPad minis’ this holiday
Police Have Asked for 1.3 Million Cellphone Users’ Records
Samsung Wins U.K. Apple Ruling Over ‘Not as Cool’ Galaxy Tab – Bloomberg
Finance industry’s multimillion-pound lobbying budget revealed | Politics | guardian.co.uk
City of London Corporation: a lesson in lobbying | Business | guardian.co.uk
Consumer Credit: Reason for Gain as Important as Gain Itself – MarketBeat – WSJ