Time for a quick snap shot of where we are in Europe. Bit like a school photo.
Spain – unemployment rose 1.6% in August. That gives a year on year rise of 9.4%! And remember a rise in August means unemployment going up during holiday season when Spain should be hiring. This is not good. Unemployment stands at 20% in Spain and is likely to go up further as GDP is forecast to shrink by 4% and more.
GB – House prices fell in August by 0.9%. That’s two months in a row. Anyone thinking of buying should try to wait for further falls. If people do wait, they will help cause the falls they are waiting for.
Greece – So far this year Greek banks have lost between a thrid and a full half of their value. That means the held capital versus their liabilities is ruined and all that is keeping them alive is access to ECB loans. Compounding this the banks have also lost 9% of their deposit base. The evidence is that this bleed is no longer just rich Greeks getting their wealth out of the country to avoid bank collapses and having to pay taxes. Neither is it just businesses getting poorer. The evidence is now clear that ordinary Greeks are not using whatever savings they have to make ends meet after two consecutive rounds of wage cuts and now a wage freeze.
The Greek banks are borrowing more and more heavily from the ECB because they cannot borrow anywhere else. In other words the entire Greek banking system is dead but doesn’t know it yet.
Ireland’s is also being dragged down by the leaden weight of its banks’ debts. The Irish bank system has been on its own life support called the EC’s Bank Guarantee Programme. This is scheduled to expire at the end of the year. Ireland knows its banks still cannot survive without it. This month alone Irish banks need to re-finance €25 billion just to keep the foo rs open. They, like Spain or effectively locked out of the bond market. Without the EC explicitly saying ‘We stand guarantee for these banks’, the banks would be closed this afternoon.
Hungary is the country that brightens my day. They are being crucified by the collapse of their currency, the Florint, against the Swiss Franc in which the bulk of its debts have to be paid. And yet the Hungarians continue to refuse to grovel. I have never been to Hungary but I would like to go just to shake some one’s, any one’s hand.
The latest wonderful quote from Mr Orban the Prime Minister is this,
“We interpret the deal with the IMF as a borrowing agreement. The IMF, however, sees it as an economic policy agreement. Well, that is not in our interest,”
Mr Orban readily accepts that without the IMF deal Hungary would not have made it this far. And yet he will not grovel. Some will no doubt think him reckless. I do not. I think he is entirely correct. You only have to look at the difference between Greece and Ireland. The Irish were the first to sign up to unbridled austerity. No argument. Complete compliance. What did they get for their ‘cooperation’? Nothing. The Greeks did a bit of rioting and their government held out just long enough to force the rest of Europe close enough to the edge of the cliff that they could see over. They felt ill and Greece got a borrowing and general bail-out agreement that the Irish government won’t get no matter how much they grovel.
The lesson for Hungary is clear. Being cooperative will get you shafted. Better to drag people to the edge of their own destruction and then sue for better terms. It’s what all the smaller countries need to do.
Lastly Germany and France. Germany’s car registrations this month are 27% down on this time last year. Basically, take away the Government payments for Cash for scrapping older cars , and you’ve got a big nothing left. The government bought all those cars with taxes. And it has done nothing to ‘kick start’ car sales or any other kind of sales.
In France the cabinet is reportedly having meetings to discuss possible emergency austerity measures.
So while the Stock Markets party like it was 1929 reality rolls on.
Hello Golem,
I've been following your blog for a long time now and like what you put up. It offers a very refreshing alternative to what one reads in the daily papers. One thing that occurs to me time and again is where do you get your information from, Internet? other sources? Would it be possible to put up a few. Concerning Hungary, I've only been to Budapest but it is a beautiful city. I'd reccommend going if you have the time.
The first two paragraphs of this article made me laugh.
Just to expand some on the Ireland siuation:
http://economix.blogs.nytimes.com/2010/09/02/in-ireland-dangers-still-loom/?ref=business
jma1975,
I am glad something in the blog speaks to you. As for Hungary I tend to use http://portfolio.hu/en/ and then follow stories from there if needed.
Most of my sources are internet. I have very little access to any inside info. I tend to check things with posts at Zerohedge and when they cite a paper I tend to follow through to the original. I also find useful hints of stories at Tickerforum. Of the mainstream I read Bloomberg, MarketWatch and Reuters. Depending on the story I consult local englisj language papers in China, Singapore and a few general European news web sites.
Is that good for a start?
Rob,
I could hardly beleive it either. Don't you just love the illogical logic of econmists. Imagine that thinking applied to a person. " He's so sick already he's bound to get better and certainly can't get worse!"
Sure doc, sure.
Thanks Lars.
I'll take a read this evening.
Hello Golem,
Yes that's good enough for a start. Thanks.