Eurozone now in longest Recession —Unemployment and Debt at record levels — Is America next ?

Captain Rick: The 17-nation Eurozone economy contracted for a record sixth consecutive quarter, making this the longest period of recession in the Eurozone’s history. The recession has depressed business confidence, sent unemployment to record highs, inflation to record lows and blown attempts to cut government record debt.

Gross domestic product in the Eurozone fell by 0.2% in the first quarter. The GDP estimate was worse than economists were expecting, largely due to disappointing growth in Germany and could increase pressure on the ECB to take further action to try to stimulate activity.

Unemployment continues to hit new record highs. Unemployment broke through 12% for the first time in March, meaning 19.2 million people were without work in the Eurozone, 1.7 million more than a year ago.
Youth unemployment rose sharply, hitting 24% and leaving 3.6 million people under 25 looking for work.

Prices slumped and inflation has fallen way below the central bank’s target. Inflation posted its biggest monthly drop in four years in April. It fell to 1.2% and touched its lowest level since February 2010.

Eurozone debt hit 8.6 trillion euros, a record 90% of GDP, last year and is forecast to rise to 95% in 2013. As bad as this is … in contrast, U.S. debt to GDP ratio is 107%, trumping it as the worlds worst. One has to wonder if America is next in line to experience the hardships facing those in the Eurozone.

Future Concern: Economists are becoming increasingly concerned at the growing divergence between France and Germany, historically the twin motors of the EU economy and political integration.

France: French President Francois Hollande (shown above) who was elected a year ago after campaigning to put growth before austerity and introduce higher taxes on the rich, has seen his approval ratings fall sharply as unemployment continues to climb. In recent months he has begun to reform labor markets and pensions, and announced plans to cut capital gains tax. But he is moving too slowly for some, and his government continues to send mixed messages.

France, the Eurozone’s second-biggest economy, slipped back into recession. Its output fell by 0.2% for a second consecutive quarter as it suffered from weak exports and falling investment.  France faces a heavy financial burden from its labor unions and pension systems.

Italy: The pace of contraction eased. GDP shrank by 0.5% in the quarter.
Italy, the region’s third largest economy, nominated a new prime minister. Enrico Letta is a pro-European from Italy’s center-left. He wants Europe to ease up on austerity.

Spain: The recession deepened in the first quarter. The economy contracted by 2% compared with the same period a year ago, and by 0.5% compared with the final quarter of 2012. Spain has been stuck in recession for 21 months. It has been given two more years to bring its budget deficit to below 3% of gross domestic product. In contrast, the U.S. deficit ratio is 6.5% of GDP … more than twice as bad. One has to wonder if America is next in line to experience the hardships facing those in the Eurozone.

The number of unemployed in Spain broke the 6 million barrier during the first quarter, a new record. The unemployment rate rose to 27.2%, tied with Greece for the Eurozone’s highest. For Spaniards aged 16 to 24, the unemployment rate is 57.2%.

Greece: The jobless rate was 27.2% for January, tied with Spain for the Eurozone’s highest. In Greece, 34.2% individuals aged 25 to 34 are unemployed. It’s even worse for younger workers — 59.3% of Greeks aged 15 to 24 are out of work.

Portugal: Portugal was able to slow the pace of contraction to 0.3% from 1.8% in the fourth quarter.

I welcome your comments, likes, shares and following of my blog! (If not visible, click the red title above)

Info from previous reports:

European Debt Crisis: https://atridim.wordpress.com/category/european-debt-crisis/

Europe: https://atridim.wordpress.com/category/europe/

France: https://atridim.wordpress.com/category/france/

Germany: https://atridim.wordpress.com/category/germany/

Greece: https://atridim.wordpress.com/category/greece/

Italy: https://atridim.wordpress.com/category/italy/

Portugal: https://atridim.wordpress.com/category/portugal/

Spain: https://atridim.wordpress.com/category/spain/

Home page (all reports): https://atridim.wordpress.com/

European Debt Crisis: Enrico Letta sworn in as Prime Minister of Italy … Can he solve Italy’s serious economic challenges?

Captain Rick: Center-left Prime Minister Enrico Letta was sworn in Sunday to head a broad coalition of ministers from his own party and members of Silvio Berlusconi’s center-right party. The big question is … can he correct Italy’s current course of economic destruction?

In a speech to parliament Monday, Letta stressed the need to stimulate growth and create jobs, but said Italy couldn’t borrow its way out of trouble. “After more than a decade without growth, we can’t wait any longer for a policy of recovery,” he said. “Without growth and without cohesion, Italy is lost.”

Letta’s appointment ends two months of political stalemate with hope of economic stability, but many doubts remain about the coalition’s durability and uncertainty over how it will achieve its economic goals.

The priorities for Letta’s government mirror those of 87-year old Italian President Giorgio Napolitano, who was persuaded to accept a second term after parliament failed to agree on an alternative. Napolitano established two expert committees to work on overhauling Italy’s convoluted electoral system and political institutions, and making structural reforms to restore competitiveness, boost growth and make a dent in the debt mountain.

Debt Crisis in Italy is severe

Government borrowing totals about two trillion euros, equal to around 127% of gross domestic product, a ratio surpassed in the eurozone only by Greece. The economy hasn’t grown for years, unemployment is near 12% and rising, and living standards for many are tumbling.

The eurozone’s third-biggest economy was brought to the brink of collapse in late 2011 when yields on its huge debt pile climbed to unsustainable levels around 7%. Tax increases and spending cuts by a technocrat government led by Mario Monti reassured investors. But they led to a backlash against austerity in February’s elections, boosting support for comedian Beppe Grillo’s protest movement and leaving no party able to form a government on its own.
Letta wants to adjust Italy’s unpopular austerity drive, and Berlusconi has campaigned for a tax on property to be reversed, but it is unclear how the new government would make up for the revenue shortfall as the economic situation continues to deteriorate.

Captain Rick wishes ‘Best of Luck’ to Enrico Letta, new Prime Minister of Italy

Enrico, I wish you luck in turning around the massive debt problem in Italy. Social greed for welfare is a sure invitation for economic destruction. Italy is one of the largest consumers of welfare spending in Europe. The party you represent loves welfare. I equate it to the Democratic Party in the U.S.

The U.S. debt has not yet reached the percentage of GDP as in Italy, but I see it as just a matter of time before it does. Americans will be watching what happens in Italy … perhaps as a ‘crystal ball’ vision of what awaits America.

I welcome your comments, likes, shares and following of my blog! (If not visible, click the red title above)

Info from previous reports:

European Debt Crisis: https://atridim.wordpress.com/category/european-debt-crisis/

U.S. Debt Crisis: https://atridim.wordpress.com/category/u-s-debt-crisis/

Fiscal Cliff 101: https://atridim.wordpress.com/category/fiscal-cliff-course-101/

Italy: https://atridim.wordpress.com/category/italy/

France drags Eurozone into 4th quarter of Recession … A ‘crystal ball’ for America?

Captain Rick: France enters fourth quarter of recession as business activity slumps in Eurozone’s second largest economy. The French economy stagnated through the course of 2012. France’s performance in the first quarter of 2013 is shaping up to be the worst since the same period in 2009. Readings point to a contraction of 0.2% to 0.3% in Eurozone gross domestic product for the first quarter of 2013, after a 0.6% drop in the final quarter of last year.

America is not alone when it comes to difficult economic times. European countries have been experiencing similar economic problems to those in America…perhaps worse. The world, including America needs to pay attention to what our friends in Europe are experiencing. We all should see events unfolding in Europe as a ‘crystal ball’ to vision into the future for what is coming our way…especially for America, if it does not correct its current suicidal course of spending far beyond its means. 

Follow my reports of the European Debt Crisis: https://atridim.wordpress.com/category/european-debt-crisis/

Eurozone Recession Deepens + EU Leaders hope for U.S. Trade Pact to boost Economy

Captain Rick: The Eurozone suffered its third consecutive quarter of decline at the end of 2012 as exports from leading economies Germany and France sank, deepening a regional recession that has driven unemployment to record highs.

Gross domestic product in the 17-nation Eurozone fell by 0.6% in the fourth quarter, leaving its economy 0.5% smaller than it was at the start of the year. The region saw a contraction of 0.1% in the third quarter.
Performances in all four of the region’s biggest economies — Germany, France, Italy and Spain — deteriorated compared to the third quarter of 2012. Output is likely to shrink in 2013 for a second year running, according to the latest forecast from the International Monetary Fund.

17 Member Eurozone

Germany, the Eurozone’s biggest economy, which accounts for about 30% of Eurozone GDP, suffered a contraction of 0.6%. The decline in GDP was was mainly due to the comparably weak German foreign trade. Exports of goods went down much more than imports of goods.

France, the second biggest economy, suffered a 0.3% contraction. France also suffered a sharp fall in exports in the fourth quarter, down 0.6% after growth of 0.7% in the third.

Weaker growth will make it harder for Eurozone governments to meet their debt-cutting targets and intensify the debate about the impact of a strong euro on the region’s recovery prospects.

With fiscal policy tightening, and the ECB in a holding pattern, exports offer one of the few opportunities for the recession-ravaged region to return to growth.

A stronger euro threatens to cancel out some of the hard-won gains in competitiveness brought about by wage cuts in indebted European states.
 
Many of the 17 Eurozone countries are in the middle of austerity programs that are reducing demand, and prompting households and businesses to defer spending and investment.

While policymakers have signaled a willingness to give states more time to bring their budget deficits into line with European Union targets, if the economy continues to deteriorate, there is no sign of a major change in approach.

Wider 27 Member European Union

The economy of the of 27 states of the EU went into reverse in the fourth quarter, shrinking by 0.5%.

The U.K. contracted by 0.3% in the fourth quarter of 2012, bringing it to the brink of a third recession in five years. The Bank of England trimmed its forecasts for U.K. growth in 2013 Wednesday while raising them for inflation.

EU Leaders hope for U.S. Trade Pact to boost Economy

EU leaders are hoping efforts to remove trade barriers with the U.S. could provide a shot in the arm for growth. President Obama promoted this trade pact in his State of the Union Address on Tuesday evening.
Both sides said this week they wanted to move quickly to start formal talks on a trans-Atlantic free trade agreement. 

Captain Rick’s Vision

There are many benefits that could be gained by both economies with such an agreement, especially in the area of regulation…like agricultural, medical and automotive safety standards. Considering the complexities involved, it will require a multi-year approval process…perhaps a decade or more. After all, genetically modified crops, which are commonplace in the U.S., are known as ‘Frankenfoods’ by many in the EU.

A trans-Atlantic free trade agreement will not solve either the EU’s or U.S.’s monumental debt and financial problems. While it could be a tool to help both economies, the EU and the U.S. need to face the realism that their economies are in need of much larger repair…that continual deficit spending of money that does not exist must end. The course that both nations are currently on will not achieve success…more probably, eventual failure. Both nations will need a significant influx of politicians with some ‘serious spine’ to ‘right our ships’. That kind of courage is so rare that I fear for both of our nation’s ‘ships’. Both ‘ships’ are leaning heavily on the port ‘left-welfare’ side. The question that remains is whether our ships are leaning too heavily to prevent the inevitable ‘titanic’ maneuver.

I welcome your comments.

Eurozone Unemployment hits another record high

Captain Rick: Eurostat data published Tuesday showed unemployment in the 17-nation Eurozone hit a record high of 11.8% in November, leaving 18.8 million people without work – two million more than a year ago.
At nearly 27%, Spain has the highest unemployment rate in the European Union, and youth unemployment is more than twice as high at 56%. Thousands of Spanish bank employees will lose their jobs as a result of an EU-backed bailout of Spanish banks. Only Greece, which is facing a sixth year of recession, has a greater proportion of young people out of work.

The Eurozone economy shrank in the second and third quarters of 2012, and official data due next month are expected to confirm a contraction in fourth quarter output.

Forecasts for 2013 are not much better, ranging from stagnation to another year of recession as governments continue to grapple with the fallout of the credit crisis, cutting spending and raising taxes to rein in budget deficits.

Hopes that stronger growth in Asia and the U.S. could spark a Eurozone recovery also took a knock, as Germany said its exports fell 3.4% in November, from the previous month, and were flat year over year.

View other reports about Europe: https://atridim.wordpress.com/category/europe/

Japan nears “Recession” as economy contracts: GDP dives to negative 3.5%

Captain Rick: Japan, the world’s third largest economy, saw its economic growth sharply contract 3.5% in the third quarter of 2012. If its GDP (Gross National Product) growth rate remains in negative territory during the fourth quarter, Japan will officially fall into recession. Some economists have warned that looks likely. Some believe Japan is in recession already. Many fear that in light of China’s economic contraction, this is wake up call that the entire region might be headed for recession. I will help clear it up in my closing thoughts below.

Japan’s economy, especially exports, has been battered by the 2011 disasters caused by the earthquake, tsunami and subsequent meltdown of several nuclear reactors. China is Japan’s largest trading partner, but its diplomatic spat with China over disputed islands has made Chinese consumers reluctant to buy Japan-made products, especially automobiles.

Last year nearly 20% of Japanese exports were sold to China, compared to 15.3% to the U.S.

Captain Rick’s closing thoughts on Asia, Europe and the USA:

Japan has been busy gobbling up U.S. debt over the past year. Its current holdings of $1.12 Trillion might soon pass the current top holder of U.S. debt … China at $1.15 Trillion. I find this very interesting and hope to focus on it in an upcoming report as America nears the “Fiscal Cliff”.

To help clear up the controversy of whether or not Southeast Asia is headed for recession, we should consider the problems that our friends in Europe face. Several countries in Europe are already in recession and more on the brink. Europe is facing a very serious financial challenge.

The most serious of all world financial problems lies in the United States of America. Its called the “Fiscal Cliff”. If this financial “nightmare” is not addressed head on with real and meaningful cuts in spending, coupled with increases in taxes, I assure that the negative financial echo effect will have the potential to thrust all countries of our world into recession. Watch for more of my reports on this matter of major global importance.

U.S. October 2012 Jobs Report: . . . . . . . . . . . Hiring and Unemployment up slightly + Captain Rick’s Mathematical Jobs Analysis

Captain Rick: Hiring ticked up to 171,000 new jobs in October … along with the unemployment rate, up .1% to 7.9%. The biggest job sector gainers were business services at 51,000 positions. Health care added 31,000, construction 17,000. Caution…many of the jobs added were low-paying service jobs.

Captain Rick’s REAL Mathematical Jobs Analysis:

At least 150,000 jobs need to be created each month (1,800,000 per year) to keep pace with the growing population, as represented by my red line in the chart above.

In the past 12 months, beginning November 2011, America has added 1,950,000 new jobs. Subtracting the needed addition of 1,800,000 to keep pace with population growth, America added just 125,000 REAL jobs in the last year. That represents a move in the positive direction, but is far short of what is needed to regain the nearly 9 million jobs lost during the Great U.S. Recession in 2008-2009. At the pace American jobs have been restored during the past year, America will not experience a return to pre-recession job conditions for decades, if ever. Many economists share my feeling that what we are seeing now is the new job norm. The great job conditions of the mid 2000s will not be returning … possibly ever.

The U.S. Fiscal Cliff: This is the most important fiscal challenge facing America … perhaps the most monumental in U.S. history. How our legislators manage this crisis will determine America’s Jobs outlook and fiscal status for years to come. If not handled properly, our legislators are in position to reduce America to a third world country during the coming years. This is very serious ‘stuff’. I will do my best to keep you informed. Read my report on the Fiscal Cliff: https://atridim.wordpress.com/2012/09/26/fiscal-cliff-what-the-heck-is-it-how-will-it-affect-us/

Dow Dives 243 points, 1.82% … following slew of disappointing earnings … igniting fear that the global economy is on shakier ground than previously expected

Captain Rick: Big sell off on Wall Street as a result of three major U.S. industrial companies filing disappointing earnings reports, igniting fears that the global economy is on shakier ground than previously expected. DuPont, a Dow component fell 9% after reporting weaker-than-expected quarterly earnings and announced plans to cut 1500 jobs worldwide. United Technologies lowered its forecast and 3M missed revenue estimates. Continuing uncertainty about economic health in Europe and China contributed. This was the biggest Dow dive since June.

In September, 2012, the Dow came within 4% of the all time Dow high of 14164.53 reached before the 2008 market crash. This correction knocks it back to –7.5% from the all time high. The Dow is still up 7.24% for 2012.

I see lots of uncertainty lying ahead with the U.S. facing the “Fiscal Cliff” in January, the fiscal problems in Europe and the degrading effect that all of it is having on the economy of China, which are all working in unison as ingredients brewing a very volatile global fiscal and economic storm. I will do my best to report the important elements.

World Bank slashes Asia forecast and warns it could get much worse if U.S. does not solve ‘Fiscal Cliff’ debt crisis

Captain Rick: The World Bank lowered its growth outlook for Asia on Monday, and warned that a major unraveling in Europe could knock 2% off Asia’s GDP growth next year.

The institute warned of even slower growth in China and Asia if the Eurozone debt crisis were to cause a disruption of financial markets in Europe, or the so-called fiscal cliff in the United States went unresolved. A “major” Eurozone crisis could reduce growth in Asia by 2% next year, while the fiscal cliff would erase another 1%.

Weaker demand for East Asia’s exports is slowing the regional economy, but compared to other parts of the world, it’s still growing strongly.

The World Bank also forecasts a slowdown in China, where growth has been relatively tepid. GDP growth will fall to 7.7% this year, the institute predicts.

The downgrade is latest in a series as economists adjust expectations for China. Swiss banking giant UBS last month lowered its China GDP forecast to 7.5% from 8%.
Goldman Sachs has issued a slightly less dour outlook for China growth — dropping it to 7.6% from 8.0%.
While China is still growing fast, especially compared to less than 2% growth in the United States, it marks an uncomfortable soft patch for the world’s second largest economy. Over the last three decades, China has barreled ahead at an average growth rate of about 10% a year.

Economic momentum in China is expected to be weak during the coming months.

5 Global Risks to Grasp + 3 Fiscal Cliff Scenarios … including the current track of doing nothing, a formula for Recession

Captain Rick:  Click and Play the video below to get an excellent 3 minute summation of the world’s 5 Global Risks, each of which can completely change the global outlook. There are two in Europe, one in the Far East, one in the Middle East and one in the U.S. … the pending Fiscal Cliff … potentially the biggest global risk of them all. 3 Fiscal Cliff scenarios are discussed of which one is following the current course of doing nothing. This would cause a 4% contraction in GDP and cast the U.S. into Recession. For the first time in a very long time our kid’s generation would be worse off than ours. Two other scenarios are discussed that offer hope. The conversation includes a statement that a fix must include compromise of tax increases and entitlement cuts. Mathematically, the problem can’t be fixed by addressing one side only.  We are fortunate that we have a currency that everybody still wants, so we still have some time to get it right by enacting proper tax and entitlement reform. We just need politicians that are willing to compromise, which could be the most difficult job of all.

FORTUNE Video by PIMCO CEO: http://money.cnn.com/video/magazines/fortune/2012/10/04/f-el-erian-pimco-ceo-global-risks.fortune/

Party in Europe, but a hangover is coming

If you are following the debt crisis in Europe as I am, you will want to read this article: http://finance.fortune.cnn.com/2012/09/12/german-ruling-europe/?like=1&_wpnonce=77e4015c45

I have copied some excerpts to gain your interest:

But while the twin victories for the euro are worth popping a bottle of champagne, it isn’t enough to open an entire case. There were plenty of caveats in the German ruling that could cause some problems for the bailout down the road. And while the court gave the thumbs up to the bailout, they seem to have expressed some severe reservations to Germany’s role in a possible fiscal union with its eurozone partners.

This morning, traders across Europe nervously waited the decision by Germany’s highest court as to whether or not the eurozone’s largest member would remain its biggest booster. The court was considering whether or not it was legal for Germany to participate in the various eurozone bailout schemes, most notably the proposed 700 billion euro European Stability Mechanism. Those that oppose the bailouts believed that Germany had given up too much of its sovereignty to Europe and that the decisions made by their politicians to support the bailout circumvented German democracy. A “no” ruling would have been disastrous for the euro as it would have meant a German withdrawal from the bailouts, which some observers believed would be the final nail in the coffin for the common currency.

Euro rescue fund clears major hurdle

If you are following the debt crisis in Europe as I am, you need to read this CNN Money article: http://money.cnn.com/2012/09/12/investing/germany-esm/index.html

I have copied a few excerpts to ‘wet your whistle’:

NEW YORK (CNNMoney) — Europe’s latest rescue fund cleared a major hurdle Wednesday after a high court in Germany refused a request to block its ratification.

The German Constitutional Court ruled against a group of conservative politicians who requested an injunction that would bar Germany from ratifying the treaty governing the European Stability Mechanism.

The ESM board of governors will hold their first meeting on October 8, according to a statement from Eurogroup president Jean-Claude Juncker.

German Chancellor Angela Merkel welcomed the court’s decision, saying “it is a good day for Germany, it is a good day for Europe.”

The court’s decision is preliminary, with a final ruling on the legality of the ESM treaty expected later this year. But analysts say the court’s president has made it clear that the final ruling will not deviate from Wednesday’s announcement.

“Germany cannot allow the ESM to leverage itself up so that the potential German maximum liability could exceed the cap,”

Meanwhile, the court also supported the so-called fiscal compact that German Chancellor Angela Merkel and most other EU leaders signed in March.

The fiscal compact will become binding after 12 of the 17 euro area nations have ratified the treaty, according to Juncker. But it will not enter into force before January 1, 2013, he added.

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