The Delicate Greek Debt Picture

Here's a chart via Deutsche Bank showing European government debt held by foreign banks.



The co-ordinate to note is that, of course, of Greece. At end-Q3 foreigners held EUR216bn of Greek government debt (72.3% of the total market, 90.2% of GDP), This is double the Greek debt held by foreign banks as recently as end-04.

DB concludes:

Given recent downgrades and another round of revisions to budget data from previous years, a sharp slowdown or even reversal of inflows from foreigners into the local debt market has become an increasing risk.

FT adds:

Matters are made worse by the fact that the ECB has taken a hardline stance on the collateral criteria for its liquidity ops. That means if Greece is downgraded by Moody’s (the only agency still rating it at the A-level) its debt will no longer be eligible for the ECB facilities once the central bank raises its collateral-threshold back to its original level of A-.

And that's how close Greece is to a major financial crisis.

It could very well mean their pulling out of the EU in an attempt to bring back the drachma as their own currency (versus using the Euro) in a mad attempt to print their way out of the crisis.

Europe and Japan Officially in Recessions

From The Independent: It's official: eurozone collapses into its first recession:

Europe's economy officially collapsed into recession for the first time since its inception during the third quarter ... The eurozone, made up of the 15 countries that use the euro as their primary currency, shrank by 0.2 percentage points between July and the end of September, having contracted by the same margin during the preceding three months as well. ...

Germany and Italy, the continent's largest and fourth largest economies, dragged the eurozone down – both slipped into recession during the third quarter. Spain also suffered its first quarter of negative growth in 15 years. However, France just managed to maintain a positive growth rate.

From Bloomberg: Japan's Economy Shrinks 0.4%, Confirming Recession:

Japan's economy, the world's second largest, contracted more than economists expected in the third quarter, confirming it entered its first recession since 2001 as companies cut back spending.

Gross domestic product fell an annualized 0.4 percent in the three months ended Sept. 30 ...

The United States has not yet been officially declared in recession, Jeffrey Frankel who directs the program in International Finance and Macroeconomics at the National Bureau of Economic Research, where he is also a member of the Business Cycle Dating Committee, says:

The weight of evidence is now overwhelming: We are currently in recession.

The EU In 2009: A Breath of Fresh Air

Cindy Cerquitella reports:

In January of 2009 a breath of fresh air may roll through Europe. The Czech Republic will take over the Presidency of the European Union, and they have promised to “Sweeten Europe” (A Czech phrase that can mean, make it tough) EurActiv.com states that the Czech Republic hopes to foster a more entrepreneurial spirit amongst the people of Europe during their time in power. And most excitingly, they don’t plan to propose any new laws in 2009, they would rather focus on eliminating laws that create barriers for market cooperation among member nations.

While we can’t place too much hope on politicians it is exciting to hear such refreshing ideas coming out of Eastern Europe.

Europe of the Future: Germany Shrinks, France Grows, but UK Population Booms

Britain will overtake Germany and France to become the biggest country in the EU in 50 years' time, according to population projections unveiled yesterday. A survey of demographic trends by the EU finds Britain's positive birth rate contrasting strongly with most other large countries in Europe.

The survey predicts that Britain's population by 2060 will increase by 25% from the current figure of just over 61 million to almost 77 million.

Germany is the biggest country in the EU, with more than 82 million people, but it is likely to shed almost 12 million by 2060, says the report.

The French population will rise to almost 72 million by 2060.

Of the biggest six EU countries (Germany, France, Britain, Italy, Spain and Poland) Britain has by far the greatest birth rates. Only Luxembourg, Cyprus, and Ireland are growing faster than the UK.

The average age of Europeans is now just over 40; this will be 48 by 2060. The average age for Britons is 39 and will be 42 in 2060 - the lowest age in Europe with the exception of Luxembourg.

The EU's population now stands at 495 million and is projected to rise to more than 520 million by 2035, before falling to 505 million by 2060.

The strongly Roman Catholic countries of Europe are having fewer babies. The Italian population will stay the same over the next 50 years, while Poland's and Lithuania's will shrink considerably. Spain's population is forecast to increase by 6 million. Life expectancy is also rising. In Ireland, women will live to 89 and men to 85. Almost one in three Europeans will be of pensionable age if 65 remains the threshold.

Eurozone Economy Contracts For The First Time

The eurozone economy has contracted for the first time since the launch of the euro a decade ago.

Gross domestic product in the 15-country region fell by 0.2% in the second quarter, reported Eurostat, the European Union’s statistical office. That marked a sharp turnaround from the first three months of the year, when GDP expanded by 0.7%.

Eurozone inflation hit a record 4 % in July, which is holding back the ECB from cutting nterest rates.

Germany’s economy – Europe’s largest – contracted by 0.5% in the three months ended June.

Michael Glos, Germany's economics minister, said a weaker second quarter had been expected but Germany had improved “by a good measure” its international competitiveness and resistance to global shocks. Berlin stood by its forecast for overall German growth of 1.7 % this year, down from 2.5% in 2007.

France reported a significantly worse-than-expected 0.3% cent fall in second quarter GDP, after a 0.4% rise in the first three months of the year.

Christine Lagarde, the French finance minister, down played the possibility of a recession. There is “no question of a recession” with the fundamentals of the country’s economy remaining healthy, she said..

Spain saw a sharp deceleration in economic activity – although GDP growth remained positive, at 0.1% in the first quarter.

As in the United States, housing has been at the forefront of economic problems in Europe.

No Show European Union Parlimentarians...

..or to be more accurate, 7:00 AM "shows" to sign in, and then off for the weekend.

A six minute German documentary with English subtitles. Watch the bureaucrats squirm and run from the camera. They really look like cockroaches when light is shined on them. Running and hiding in corners, no kidding. BTW that 14,000 Euro monthly salary that is mentioned is equivalent to US$20,900, at today's exchange rate.:



via Stefan Karlsson.