Europe is in trouble. “The combination of zombie banks, a rapidly aging population and, most importantly, too-tight money have pushed it into a ‘lowflationary’ trap that makes it hard to grow, and is even harder to escape from,” wrote Matt O’Brien, analyzing some of the most recent eurozone economic data earlier this month. The situation in Europe, he says, is worse than during the Great Depression. At Bruegel, Jérémie Cohen-Settonsays that “Europe appears stuck in a never-ending slump.”
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The EU mess slogs on. The European Central Bank met today and left interest rates unchanged, as the economic situation in Europe (well, France and Italy) looks to be worsening. ECB president Mario Draghi said during the press conference today, “the recovery remains weak, fragile and uneven.” The big news from the euro zone earlier this week, of course, was that Italy has unexpectedly fallen into a triple-dip recession. Ambrose Evans-Pritchard writes that Germany’s economy is also weakening, and certainly isn’t strong enough to make up for its southern neighbors.
The parent company of Portugal’s Banco Espírito Santo suspended trading this morning after shares fell 17% (its market value has declined 32% in this week alone). The bank — the country’s second-largest lender — missed interest payments on some short-term securities to “a few clients” earlier this week. Things haven’t been great for the Portuguese bank since December, when an audit revealed serious accounting irregularities in its parent company.
After the world’s most boring jobs report in history (seriously, misses consensus by 1,000, unemployment and wage growth in-line with expectations, and revisions over the last two months amount to a total decline of 6,000 jobs, which is a pittance), the bond market is catching a bit of a bid again. That shouldn’t be a surprise given the way this market is still taking its cues from the European bond market, which is soaring on what would otherwise be a quiet Friday. (Those of you who read Richard Leong’s story yesterday noting the likely rally in bonds post-jobs would have been all over this – just sayin’.)
The EU has finally wrapped up its parliamentary election results. Discontent in Europe runs high, mostly because of the persistently terrible economy. To the horror of many, populist euroskeptic parties continent-wide — nationalist, anti-immigration, anti-EU, and often openly racist — scooped up roughly 140 of the 751 seats, up from about 60 in 2009. (Here’s a decent rundown of six of the parties).
European growth is weak. As a whole, eurozone GDP grew just 0.2% in the first quarter, and no individual economy grew more than 1.1% (Poland and Hungary). Germany, the UK, and Spain all reported modest growth, but Portugal, Italy, and the Netherlands all saw negative growth while France was completely flat. The latest OECD report on the global economy, noted that the euro area is expected to grow by 1.2% this year, but “monetary policy needs to remain accommodative” and “ interest rate reduction is merited, given low and falling inflation”.