The euro area’s flagging economy

The shadow of recession

Faltering growth will exacerbate the crisis

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Readers' comments



There is no correct solution to fix the debt problem in Europe and I find it ridiculous that Germany has to be the country to aid all of the other countries that are suffering such a large debt. Yes work does need to be done to help the euro from faltering but serious budget cuts need to be made all over Europe in attempts to try and save money to work their way out of debt. It seems like they are looking for a quick fix which is why they are rejecting all other ideas but its going to be an uphill battle.



Tell me that little minnow GREECE who is over 300BN euro debt and lied about its GDP and GND DATA for years who entered into swaps with GS and did not tell the ECB about this so it could go into the EZ and at end of the day Greece and wall street have a lot in common dont they.


The root of the problem stems from an over ambitious goal trying to give the citizens of the country to many benefits. As the government went into debt it continued to give out more and more benefits. This is the root cause of the problem. Now the governments in Europe need to look long term. As China and Russia and places of that nature begin to resurge as growing powers the countries of Europe need to be looking into strategies that go long term to rebound the economy. The fact that there are new economic forces on the planet needs to be ignored so that Europe can look long term instead immediate success. The reduction in benefits that will accompany the raise in taxes and rough economic times need to be looked beyond so that after a dip in economic activity the foundation can be laid for a resurging economy. Germany is put in tough spot because there economy is not in the same place as the rest of Europe so they are receiving the pressure of other countries. Germany will eventually be forced to help the surrounding countries but the only way that Europe can save its economy is through cutting of its lavish economy and accepting hard times in order to prepare for its future.


With all this Sturm und Drang it is easy to forget that this whole mess was triggered by Wall Street crooked banksters who still walk free and keep raking in oversize bonuses. Standard & Poor, also of the crooked repute, still issues upgrades and downgrades at will - although in a just society it would find it difficult to do so with its executive behind bars. Anyway, why do the Europeans still pay any attention to these crooked weasels and pile further hardship through higher interest rates on profligate minnows like Greece?


"Dealing with the debt crisis just seems to get harder and harder."

Kicking the can down the road just gets harder and harder. Maybe it's time to actually deal with the crisis.

What do I mean by saying "actually deal with the crisis"? Greece is insolvent - bankrupt. Face it. Stop trying to deny it. Accept that it's true, and start acting like it's true. Devalue their bonds - perhaps 60%. That's going to make some banks insolvent. Accept that they are, in fact, insolvent. Deal with it. Clean them up. Stop trying to pretend that none of this is true.


Regarding the South Mediterrean countries, if they need to pay a higher interest on their debts (as they are doing now), they will be neve able to fully recover from this recession. Greece is already a basket case (Ireland as well). Spain and italy would have the abilities to enhance growth, but again, they are left with few options. Reforms which bring effects on the medium-long term and privatization. Here it comes my point. Maybe some countries from Northern Europe are waiting for the big clearence. Maybe I am too rational but I refuse to think that in this tunderstorm European leaders have still not figured out a decent plan to mitigate the pressure from markets. There is something missing on this tale, and I guess this could be one of them.


....a beastly observation...

the only thing currently growing is debt everywhere.......

I have only common sense at my disposal, so could please somebody explain: Why is devaluation of a currency so desirable (unless all other options are exhausted, e.g. Greece)?

Assuming I am not living in a country with loads of commodities that I can export, I need to pay more for imports (e.g. oil) and I get less for everything I export? You need a set of very specific additional assumptions to make that work, I assume?

Apart from the inherent uncertainty (I have heard "markets" saying they do not like that) created by the unresolved sovereign euro crisis, the US Mortgage misery, ditto unsresolved, what others uncertainties are part of the mix that needs to be removed? Intransparant reporting of Chinese figures? Any more?

To come back to Europe -

@ TE

I am waiting for weeks for a special on the exposure of the ECB (one of the factors of uncertainty) to the crisis:

a) how it works (very intransparent as well)
b) a rough estimate of exposure to everyone, including France, including the remaining usual suspects through the following, but not not limited to;

ba) Target 2 (gross split) of creditors and debtors
bc) Exposure per country (may be big banks) from repos, and idea of the collateral posted - you have noticed that the rules have been eased considerably during the week? - and the relationship between the two - I would like to know how big the ECB gross exposure is?
bd) Volume of all active ELS (not precisely ECB, but related closely enough, we are talking "loans" by national central banks to local banks, called "printing of Euros" by cynics, theoretically forbidden.
be) Volume of periphery (and may be French, Belgium) bonds bought in the secondary market by the ECB
bd) Whether there is the stomach to buy the majority of Italian bonds that are necessary to cover Italy's refinancing needs till December 2011 only? (rough estimate EUR 230bn)
be) the capacity needed to "save" all the big banks in the Euro Zone?

c) How the sum of b) affect the centrals banks of the core - and thus their governments credit ratings and ability to reduce debt/spent money on growth? With muddeling through or defaults?

Looking forward to a very interesting article very soon.


Thankfully, there is one country bucking this trend, Ireland.

It posted a 1.6% gain in GDP in the second quarter, despite a 0.8% cut in government spending. This is on top of a revised figure of 1.9% growth for Q1.

This puts Ireland near the top of the Euro growth league, second only to Estonia and, if maintained for the year, will cap the debt-to-GDP ratio at slightly under 100%.

An annualised growth rate of 6.4% is far, far higher than any of the big western economies are achieving right now, especially since Germna growth fell through the floor.

Aly-Khan Satchu

The Disconnect between the Markets and the Policy Makers keeps getting wider. The Markets are moving at the speed of Light and Policy Makers at a comparatively Glacial Pace. The inherent unwieldiness of the European Policy Making Apparatus is not unlike an Oil Tanker trying to make a Turn. The Countries that are writing the Cheques have to keep facing down [or not] their Electorates, who have no interest in covering anyones overdraft, when they are having difficulty underwriting their own. Its now crystal clear that this is going to get a lot worse, first.


It seems to me We are headed into a Giant Margin Call and the consequences will be not unlike Mellon's prescription.

Aly-Khan Satchu

Kevin Sutton

Before the developed economies of the world threw the brakes on the world economy could be said to be improving very, very slowly. Today the economy is tettering towards collapse #2 and deficits and debts are even worse than before. It is instructive.



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