Europe’s economic crisis is slowly but steadily eroding the political systems of many countries on the Continent. New actors are emerging and threatening the supremacy of the traditional players. Alliances and events that seemed impossible only a few years ago are now being openly discussed across Europe. On Dec. 3, for example, Sweden announced it would hold early elections, partially because of political moves from the far right.
Germany’s Bundesbank has again publicly resisted the European Central Bank’s call to expand its monetary stimulus program, as the German bank president dismisses monetary moves as ineffective.
“Calls for a public fiscal stimulus plan in Germany to boost the Eurozone economy are amiss,” Bundesbank president Jens Weidmann said in an economic summit in Germany.
EC President Juncker is set to unveil a new investment program. It sounds good: a fiscal complement to the monetary policy stance of the ECB. Expectations are running high that the ECB will move to more aggressively expand its balance sheet, record low bond yields in many euro area countries, and negative 2-year yields in at least five countries and below 5 bp in another three countries.
The European Union saw an acceleration of economic growth, according to new figures. Seasonally adjusted GDP rose by 0.2% in the Eurozone and by 0.3% in the European Union in the third quarter of 2014, according to Eurostat.
Three companions enjoyed a midday meal. The first says, “I’m satiated. The food and drink have done the trick. I’m ready to return to work.” The second says he still has room for a dessert to top off the wonderful meal. They look to the third, who doesn’t know quite what to do. She did not eat much to begin and needs her energy, but she is too disciplined to have dessert.
Non-performing originations in the top 130 European banks have reached 8.8% of the Eurozone’s total GDP, in a sign that high debt loads, bankruptcies, deflation, and stagnant unemployment is making it impossible for Europeans to pay their debts.
European equities saw broad declines in Monday trading as the European Central Bank saw over two dozen failed Eurozone banks amidst the debut of its small bond-buying program.
The European Central Bank has begun purchasing covered bonds in its latest effort to lift the European economy and save the eurozone from deflation. The ECB is planning to buy as much as 700 billion euros’ worth of bonds in its latest round of quantitative easing.
The US dollar is trading broadly higher as the divergence thesis gains ground with the latest batch of disappointing euro area data. Soft UK BRC sales and price indices suggest that Britain is being pulled closer to the euro area than the US. Separately, for the second time this month, the People’s Bank of China has cut its 14-day repo rate. These global headwinds are seen a potentially delaying the beginning of the normalization of US monetary policy, and are spurring a leg up in the bond market rally, with 10-year Treasury yields dropping to 2.20%.
Finland has lost its most recent credit rating due to eurozone instability and more Italian assets are being sold to Chinese investors as instability accelerates in the European Union and the ECB fails to convince Germany of the need for quantitative easing.
Over 5 million people between 15 and 25 years of age are unemployed in the European Union, and youth unemployment trends are worsening in many parts of the eurozone. That joblessness amounts to around $150 billion annually in lost wages and spending as young Europeans remain unable to purchase basic services and goods such as food, housing, and health care.
A quarter of young Europeans cannot find a job, according to a European Commission study on youth unemployment. That number is twice as high in Greece and Spain, where youth unemployment has surpassed 60% in some areas.
