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
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