CRASH2 – A GLOBAL SUMMARY #2: The eurozone….it’s still running, but nobody knows how to stitch the head back on.

The usual “Harken not unto what they say but rather watch what’s happening” caveat emptor applies when it comes to the eurozone.

Two immediate examples. First, the Bundesbank is forecasting an acceleration in German growth. The German economy experienced “strong expansion at the end of 2014”, Germany’s central bank said two days ago. Herr Weidemann also foresaw “a continuation of the vigorous economic ascent” in the second quarter of the year. The main drivers of this he averred, are foreign demand, private consumption and, to a lesser extent, construction.

Stripe me, those are eccentric reasons for growth. But neither domestic consumption nor construction reduce deficits. Germany does export first class engineering (from cars to tools via aircraft, watches and oil refinement hardware) but more independent sources like World’s Top Exports disagree with the central bank:

‘German export sales at the product category level were flat’

….as does Reuters…

‘German exports fell by the largest amount in five months in January, dropping more than forecast’

….and Canada’s Globe & Mail…

‘Seasonally adjusted exports decreased by 2.1 per cent on the month [of January] after a sharp rise in December, data from the statistics office showed. They missed the Reuters consensus forecast for a 1.5-per-cent drop and undershot even the lowest estimate for a 2-per-cent decline.’

….and Defense News…..

Germany’s [arms] exports fell by 43%’

It’s always good to remember that most official data these days are issued within a context…and with an agenda in mind. The euro itself is obeying this reality at the moment.

As the capital flight from the eurozone has increased of late, so too has the unwillingness of the ECB to tell us anything about it. But the reality I get from a combination of personal sources, the FT and the Wall Street Journal is that liquidity in the region is worsening at a frightening pace…and the non-agreement about anything beyond staying for dinner in Berlin last Monday if anything has made things worse.

And yet, and yet….the euro is trading at 1.36 to Sterling today. Clearly, the ECB is buying it massively in order to give out a sense of stability. But that stability is a myth: I’ll give it at most a week before another Greco-EU spat breaks out. Meanwhile, the Dollar is now up to 91% of the euro’s value. Mario will be a very happy man: his plan for a Eurodollar va bene. Richard Barley writes in the WSJ’s Heard on the Street column that the ECB “is finding it trickier to get a grip on purchases of asset-backed securities. The ECB’s efforts to revitalize Europe’s securitization market are falling short of its rhetoric.”

In the same vein, we hear the avowedly corrupt Mariano Rajoy boasting of a Spanish recovery, but the stats simply do not back him up: Spain is full to the brim with abandoned construction sites – and the airports built during the boom years offer testimony to just how wrong governments got it…and how Trichet’s ECB ignored the issue until it was far too late. Out of Spain’s 46 publicly managed airports, only 8 are making a profit.

At airports like those in Burgos, Sabadell and Albacete, the terminals are deserted, and the luggage immobile for weeks on end.

Huesca-Pirineos Airport cost €65 million, and gets just 2,781 of the predicted 160,000 passengers for the year. Commercial flights have now stopped operating through it. Ciudad Real cost Spain €1.1 billion to build, and was project to carry 2 million passengers a year. It hasn’t hosted a commercial flight since 2012. The entrance to the airport of Castellón — a €175 million project also with no commercial passengers for three years — is dominated by an 80-foot statue representing the Province’s president, Carlos Fabra. Fabra is serving a four-year prison sentence for tax fraud.

This is the eurozone disaster of falsehood, pay-offs and crazy infrastructural spending that lies at the core of the European Union so eagerly supported by Britain’s two largest Parties. It is a headless chicken running about pretending that the prognosis is good. The prognosis is death, and it is time UK voters woke up to the fact.

Earlier at The Slog: Fiscal, financial and economic failure in the US

26 thoughts on “CRASH2 – A GLOBAL SUMMARY #2: The eurozone….it’s still running, but nobody knows how to stitch the head back on.

  1. Herr Weidemann: “Vot shall I tell them today my little Cupzcake?”
    Merkel: ” You vill tell them zat ze corner is turned, and we are all round ze bend”.


  2. That 80-foot statue (Really?) made me think at once of the poem which begins “I met a traveller from a distant land…”


  3. the eurozone disaster of falsehood, pay-offs

    That sounds more like the American banks, doesn’t it? I wonder who was behind the EU (Common market in those days) – not the Americans, by any chance? After all, the EU started with a falsehood: they never got their accounts properly audited from day one.

    and crazy infrastructural spending

    It would have worked better but for the US banking crash… but hey! The European private banks were swilling champers too, didn’t you know?


  4. In the North West of England the only people making money are those who are “custodians”of ISAs and pension funds are now on a spending spree in an area which is difficult to sell property.for a large property which will now be broken up into flats!Now these custodians are offering long positions in US Bonds as well.


  5. ‘ I wonder who was behind the EU (Common market in those days) – not the Americans, by any chance? ‘

    I think this man might have had something to do with its inception.

    Richard Nikolaus von Coudenhove-Kalergi


  6. “Might” is a very strong term in the circumstances. The entire point of the exercise was to get Europe into a tangle – yet all the time making it look like it was the dumb Europeans wot did it.


  7. Giant useless infrastructure projects -why isn’t that what all the major UK parties want to do to stimulate our economy?
    which, in case you didn’t notice, is still a basket-case.
    All of the statistics claiming good times are coming, are baloney.

    Rule No. 1- keep government out of everything except interest rates and taxation; actually maybe these too.


  8. Why else would the EU not wish to have its accounts signed off?

    Too much money traceable back to the US… that’s why. Any shortcomings in cash that the EU had in its early days was paid by a certain, very friendly group of people in Washington.


  9. Giant projects can often vicariously spawn other technologies or lead to new approaches that would never have attempted without the initial government safety net. It is all fiat paper – why not spend some on developing something innovative. The problem now is everything has to be tested to destruction by market forces before it gets built. What we need are some proper white elephants- manned mission to mars, moonbase Boris Johnson, hypersonic transcontinental Milibod.


  10. Not really….think Goldman Sachs and its seminar on how to cheat Brussels. Think Wall St Hedge Funds who bought Greek bonds at 10c on the dollar, then took a haircut at 40%, and walked away with 50% clear profit. REally reaching for what exactly?


  11. so we heard the voice recorder – what does the black box tell us about the aircraft systems?
    What? You found the black box, but it was EMPTY????

    No, this is ultra high stakes cold war re ignition. Look at our latest cyber weaponry that can kill your computers with targeted virus, and look at our Nuclear Electromagnetic Pulse weaponry. You guys are toast if you mess with us.



  12. The euro being pushed by ECB to reach parity with the dollar does indeed sound like a new euodollar could be the outcome, especially in association with the plan to create a single market between the US and the European Empire. That link has never been made explcit. Sign the TTIP petition, needs 2 million and has reached 1.6 million. Sign on by October 2015.


  13. Crazy American – I’m not blaming the Americans for the incompetence of the EU. The Americans knew full well that putting Germans and French in the same room would end up with either a farce or a tragedy. They didn’t bet on getting both though.

    But that was the game plan.

    And yes, Mr Ward. That is how to make money. It is not how to make an economy – however, getting small building firms to improve housing stock is one way to do this. That is to say, there are ways to employ the free market principles of greed to create things, rather than just create money for the bankers.


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  15. “Giant projects can often vicariously spawn other technologies”

    -when you have a banking system that cannot dream of lending to innovative ideas, a taxation system that won’t leave any profits in industry to fund heavy-duty R+D, and an education system which stifles all free-thinking, you aren’t likely to have any giant projects worth a candle in terms of technological advance.
    Oh, and a Planning system that says not in my lifetime mate.
    The only innovation coming out of HS2 is how to get away with spending £120 million per mile. Now that’s creative accounting.


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