Yves here. Note the comment at the end, that Sarkozy’s sales pitch to China on the levered up EFSF did not go so well. If the Chinese don’t relent, this greatly reduces of this scheme working, even in the short term. And further note that the flagging European growth is the result of the austerity hairshirt being imposed on highly indebted economies. Ambrose Evans-Pritchard has a pointed article on the consequences of the beggar-thy-neighbor German stance.
By Delusional Economics, who is horrified at the state of economic commentary in Australia and is determined to cleanse the daily flow of vested interests propaganda to produce a balanced counterpoint. Cross posted from MacroBusiness
Angela Merkel has been warning for quite some time that Europe’s economic woes will take up to a decade to fix and that it is time for Europe to rethink its economic strategy after years of living “beyond its means”. It seems fairly obvious from those statements that the rest of the world is going to have to get use to Europe moving into a slow growth phase while it attempts to adjust away from what it considers to be unsustainable debt.
In an attempt support the transition while keeping Europe together the European leaders have put together 3 part package to save Greece, re-capitalise the banks and provide a stability mechanism for countries that run into trouble. The problem is that once you understand the technicalities behind what they have come up with you come to realise that real economic growth is the only thing that actually matters. The latest news out of Europe for many of the 17 member nations is not good at all in that regard.
Belgium’s economy stalled in the third quarter as European leaders struggled to contain a worsening debt crisis and signs increased that the euro region is heading toward a recession.
Gross domestic product in Belgium, the sixth-largest economy in the euro area, was unchanged from the second quarter, when it grew a revised 0.4 percent, the National Bank of Belgium said today in a statement. That’s the worst performance since the country emerged from a recession in 2009.
Cyprus is looking far worse and as usual the IMF is calling for austerity:
The stagnant Cypriot economy — weakened by falling revenues, credit ratings and banks exposed to Greek debt woes — is in need of immediate measures, the IMF warned following an 11-day visit this month.
IMF’s Europe Department Assistant Director Erik Jan de Vrijer said the Fund considers the situation concerning.
“The fact that the government can not access capital markets is very serious and the risks to the banking sector compound that,” he said.
Amid fears that Cyprus may eventually need a bailout, de Vrijer said the first priority must be containing problems, chief among them, excessive public spending.
Portugal’s government said austerity measures contained in its 2012 budget, submitted to parliament Monday, will cause the economy to contract by a more than previously forecast 2.8 percent.
Finance Minister Vitor Gaspar told a press conference that the floundering world economy “will lead to a contraction of gross domestic product of 2.8 percent, following 1.9 percent this year,” in Portugal.
The government had previously envisaged the economy would shrink by 2.3 percent in 2012 and 1.8 percent this year. The Bank of Portugal had put the estimates at 2.2 percent and 1.9 percent, respectively.
And Spain‘s economy continues to deteriorate in the worst possible way:
The number of unemployed in Spain swelled to a record high of nearly 5 million in the third quarter, as a sputtering economy failed to create jobs amid mounting global financial uncertainty, according to government numbers released Friday.
The 4,978,300 unemployed amounted to a jobless rate of 21.5 percent, the highest since 1996 and up from 20.9 percent in the previous quarter. It remains the highest rate in the 17-nation eurozone.
Spain is struggling to recover economic growth after crawling out of nearly two years of recession prompted to a large extent by the collapse of a real estate bubble.
It now seems that France has little choice but to join the austerity budgeting brigade with Sarkozy warning his country of the coming budget cuts in a recent television broadcast:
“We will have to revise and adapt our budget plan to the new reality,” Mr. Sarkozy told an estimated 12 million viewers as he revealed that his government had lowered its forecast for next year’s gross domestic product growth to 1 percent from 1.75 percent. To compensate for an anticipated decline in 2012 tax revenues, he said that by mid-November he would announce a program of budget cuts of about $8.5 billion to $11.3 billion.
“It’s because of this debt crisis that we find ourselves in a situation of having to defend France’s triple-A” credit rating, Mr. Sarkozy said, noting that a rating downgrade would only increase the interest burden on the country’s public debt, already at more than $70 billion a year.
The German economy, Europe’s biggest, will fail to grow in the current quarter after expanding 0.4 percent in the previous three-month period, the DIW economic institute said.
With new reports suggesting that Sarkozy and Regling’s visits to China didn’t go as well as planned it would seem that Europe still has a long way to go before the end of this crisis and the rest of the world is going to have to get used to Europe in the slow-lane for a lot longer.
This post originally appeared at naked capitalism and is reproduced with permission.