The European House of Cards is About to Collapse

February 6, 2013 http://gainspainscapital.com

 

http://albertpeia.com/europeanhouseofcards.htm

 

‘The following is an excerpt from our most recent issue of Private Wealth Advisory. In it we outline how the EU’s economy is beginning to collapse again, at the precise moment that Spain, Italy and Greece are becoming embroiled in major corruption scandals.

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The house of cards that is Europe is close to collapsing as those widely held responsible for solving the Crisis (Prime Ministers, Treasurers and ECB head Mario Draghi) have all been recently implicated in corruption scandals.

Those EU leaders who have yet to be implicated in scandals are not faring much better than their more corrupt counterparts. In France, socialist Prime Minister Francois Hollande, has proven yet again that socialism doesn’t work by chasing after the wealthy and trying to grow France’s public sector… when the public sector already accounts for 56% of French employment.

France was already suffering from a lack of competitiveness. Now that wealthy businesspeople are fleeing the country (meaning investment will dry up), the economy has begun to positively implode.

The first sign of this came actually came from Germany. As we noted a few months ago, Germany had prepared a working group to examine the impact of an economic collapse in France.

German Finance Minister Wolfgang Schaeuble has asked a panel of advisers to look into reform proposals for France, concerned that weakness in the euro zone’s second largest economy could come back to haunt Germany and the broader currency bloc.

Two officials, speaking on condition of anonymity, told Reuters this week that Schaeuble asked the council of economic advisers to the German government, known as the “wise men”, to consider drafting a report on what France should do…

The biggest problem at the moment in the euro zone is no longer Greece, Spain or Italy, instead it is France, because it has not undertaken anything in order to truly re-establish its competitiveness, and is even heading in the opposite direction,” Feld said on Wednesday.

“France needs labour market reforms, it is the country among euro zone countries that works the least each year, so how do you expect any results from that? Things won’t work unless more efforts are made.”

http://uk.reuters.com/article/2012/11/09/uk-germany-france-economy-idUKBRE8A80MN20121109

This German concern has proven to be well founded, as the recent spate of French economic data has been truly horrific.

Auto sales for 2012 fell 13% from those of 2011. Sales of existing homes outside of Paris fell 20% year over year for the third quarter of 2012. New home sales fell 25%. Even the high-end real estate markets are collapsing with sales for apartments in Paris that cost over €2 million collapsing an incredible 42% in 2012.

Since the EU Crisis began in 2008, France and Germany have been the two key countries backstopping the implosion. The fact that France is now facing an economic implosion does not bode well for the future of the Euro or the EU.

The other sovereign backdrop for the EU, Germany, is also experiencing an economic slowdown.

The German economy was hit hard by the euro zone crisis in the final quarter of last year, shrinking more than at any point in nearly three years as traditionally strong exports and investment slowed, the Statistics Office said on Tuesday…

Gross domestic product shrank by 0.5 percent in the final three months of 2012, the worst quarterly performance since Germany fell into a recession during the global financial crisis in 2008/2009 and only the second contraction since it ended.

The parlous fourth quarter pushed overall growth for the year down to 0.7 percent, a sharp slowdown from the 3.0 percent registered in 2011 and a post-reunification record of 4.2 percent in 2010. The 2012 figure was a tad below a Reuters consensus forecast for growth of 0.8 percent.

http://www.reuters.com/article/2013/01/15/us-germany-gdp-idUSBRE90E09Q20130115

Thus, we find that Europe’s primary political market props (EU leaders including ECB head Mario Draghi) are coming unraveled at the precise time that EU banks are showing warning signs and the most important EU economies are heading sharply south.

2013 is going to be a very interesting year for Europe.

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