There's No Engine for Global Growth Pt 2 (Europe)

Phoenix Capital Research's picture


Swing by for more market commentary, investment strategies, and several FREE reports devoted to help you navigate the coming economic and capital market changes safely.


Yesterday we assessed how China will not longer be an engine for economic growth going forward. Today we look at Europe.


The world continues to believe that Europe is somehow savable. The reality is Europe is in worse shape than most people can imagine. Case in point, Spaniards took €75 billion out of Spanish banks in July. Why is this a big deal? The entire Spanish banking system’s market cap is just €114 billion!!!!


            Fears Rising, Spaniards Pull Out Their Cash and Get Out of Spain


In July, Spaniards withdrew a record 75 billion euros, or $94 billion, from their banks — an amount equal to 7 percent of the country’s overall economic output — as doubts grew about the durability of Spain’s financial system.


The withdrawals accelerated a trend that began in the middle of last year, and came despite a European commitment to pump up to 100 billion euros into the Spanish banking system. Analysts will be watching to see whether the August data, when available, shows an even faster rate of capital flight.


More disturbing for Spain is that the flight is starting to include members of its educated and entrepreneurial elite who are fed up with the lack of job opportunities in a country where the unemployment rate touches 25 percent.


According to official statistics, 30,000 Spaniards registered to work in Britain in the last year, and analysts say that this figure would be many multiples higher if workers without documents were counted. That is a 25 percent increase from a year earlier.


As I’ve stated many times before, Spain is an absolute disaster. The Prime Minister denied needing a bailout for weeks, then demanded €100 billion in one week, procured the funds and went to see a soccer match (no joke).


Now he’s openly threatening the ECB. Not a good idea when your entire banking system is on life support to the tune of €300 billion+ from the ECB.


Spanish PM Rajoy challenges the European central bank and Germany


Spain will consider seeking extra aid from Europe on top of a 100 billion Euro rescue of its financial sector but does not see any need for new conditions, Prime Minister Mariano Rajoy said in an interview published in European newspapers.


That one paragraph says it all: give me more money with no conditions.


This is coming from a man who demands €100 billion in bailout funds, threatens to blow up the EU, and then goes to watch a soccer match once he’s got the money.


However, in some ways you can’t blame Rajoy for this attitude as it appears to be endemic for Spanish politicians:


            Catalonia asks for €5bn bailout from Spain


Spain's north-eastern region of Catalonia, which represents around a fifth of the country's economic output, will tap a state liquidity facility for just over €5bn, a spokeswoman for the region's economy head has said.


We will not accept political conditions for the aid," she added. Of Spain's 17 regions, Valencia and Murcia have also said they would need recourse to the fund.


Again, give me more money with no conditions. Simply incredible.


Meanwhile, pretty much all of Europe is in recession now, including Germany. True, the ESM bailout fund has been ratified… but the question remains who actually has funds to support it (Spain and Italy are meant to supply 30% of its funding… and they’re the ones who will be requesting a bailout!).


So don’t count on Europe providing an economic growth to speak of. Which means… all that’s left is the US. And we’ll be assessing that situation tomorrow. Until then…


Swing by for more market commentary, investment strategies, and several FREE reports devoted to help you navigate the coming economic and capital market changes safely.


Graham Summers





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XtraBullish's picture

Graham: do us all a favour?

Give us a hint as to how one would benefit from your "advice". Are you setting up the "trade" from a U.S. dollar basis or is from a non-U.S. dollar base? Are we going short U.S. bonds and stocks with or without U.S. dollar hedges in place? You talk doom and gloom but are you long gold or are you short stocks or are you borrowing from the Fed at .5% and buying the 10-year for the spread? 

You have been crying "Wolf" since 2009 and since then the S&P has moved up about a double and a half. Were you short through that move? 

I won't spend a red cent on your "advisory service" until I know that you (or should I say more importantly, your SUBSCIBERS) profited from your advice.

I tell everyone in my world what I am writing a cheque for and if/when it blossoms/blows up, I WEAR IT.

Everything else is blah-blah.

Last point: Repeat this chap's name 20 times over starting now.

Bob Loblaw

Thanks in advance,

Mike Hunt

Jack Sheet's picture

XB good post but you are unfortunately wasting your time. GS is malware whose sole purpose is to hawk a newsletter and down-arrow comments that call his bullshit. I have not seen him reply to a single comment.He must be paying the TDs a hell of a rent is all I can estimate.

Zero Govt's picture

"Spaniards took €75 billion out of Spanish banks in July. Why is this a big deal? The entire Spanish banking system’s market cap is just €114 billion!!!!"

Good point Graham

so the ECB and Spanish Govt are effectively bailing out businesses/banks with rapidly declining customer bases

back to their usual of backing losers in a suicide nose dive rather than letting the green shoots of new market entrants strike for their opportunity to shine

and Bernanke, Draghi and King wonder why there's no recovery or return to normalacy when they support all this rotten deadwood just can't get dumber than Govt

roll on the village idiots competition at Davos, Switzerland

Meremortal's picture

So Zerohedge, you've decided to take us to pop-up ad hell.


Not me, goodbye.

GreatUncle's picture

Global growth what is it. Try this.

You farm an acre of land and plant wheat as you have always done for centuries. Now if the price does not continually rise then there is no growth if you are producing the same volume of output. So you harvest the same tonnage of crops so where is the growth?

There is none! An illusion of increasing price does not equal "worth" and the current final value we are trying to equate to worth is is horrendous. It is more to do with justifying the current value than it is on growth when growth will merely be an increase in valuel.

Sarcastically on worth ... not growth it's a misnomer.

If Greece has 200 billion in assets the debt is not a problem!

Now Mr USA "show me your assets" please for the 16 trillion debt and tell you what prove it and I will let you go to 30 trillion debt hows that.


It then comes down to how long they can keep it going until it goes bust and I reckon 2008 + 10 years "the length of the promisary notes" before the cycle restarts.

If in that period one goes bust with a bang all the kinds of assets they were using to support the level of debt flies through the rest of the economic system and not good. Seeing a central bankers are a global breed they will be using the same tricks so the situation is mirrored throughout the world.

It is not a specific asset but a type of asset that would be questioned.

No Euros please we're British's picture

Nice call, realising that Spain and Italy need to "cough up" 30% of ESM. But what about France? Why does everyone keep saying Germany will bail everyone out, when France is in the firing line for 20% and Germany not much more at 27%. Germany maybe like to give the impression it's their money, but how much hard cash has actually been committed? Even the supposed €100b Spanish bank bailout hasn't actually been handed over yet. There is no money, it's all hot air and IOU's

Bartanist's picture

The growth paradygm is over-rated. We do not need growth (or inflation) to benefit our species and our planet.

Meremortal's picture

We don't either now, and look how great we are doing.



PhilipAtticus's picture

It's really too bad to see such an oversimplification and indeed misrepresentation of such a complex problem on Zero Hedge. 

Regarding Catalonia: the only reason they are demanding this amount of money without pre-conditions is because they are already a major contributor to the federal budget in Madrid. In the Spanish system, richer regions like Catalonia are net contributors. What the regional government is now saying is that since the economic downturn is affecting its own tax revenue, it wants a "rebate" from the national government. 

So they aren't demanding money without pre-conditions - it's their money to begin with. 

For your information, the German Federal State of Bavaria has recently raised exactly the same complaint in Germany, regarding transfers to other German Federal States.

The situation in Europe and the United States regarding sovereign debt is bad and trending worse. There is absolutely no need to make it worse with superficial or misleading reporting of this type. 

Sandmann's picture

According to official statistics, 30,000 Spaniards registered to work in Britain in the last year, and analysts say that this figure would be many multiples higher if workers without documents were counted.


What does this mean ? Spaniards don't need documents to work in the UK - they  have almost the same citizenship rights as British nationals. They can enter the country and work, set up businesses, claim social security, vote in local elections, stand for local councils. They don't need to register to work in Britain because Britain is an EU Economic Zone just like you don't need to register to work when you move from New York to TexasOne day people living in the Us will actually understand what the EU is.


Zero Govt's picture

are you supporting national Govts restricting employment and requiring red tape for foreigners to work or set-up in other Euro countries?

Govt Immigration legislation is as bigger farce as Americas Prohibition on Alcahol and the total futility and abject failure of the global "War on Drugs"

why shouldn't people be free to move and set-up anywhere they like, that freedom built America, not Govt and its bloody ignorance and meddling

AnAnonymous's picture

China was not an engine for growth. It has served as fuel to allow more consumption in 'american' nations.

Europe, more exactly the EMU, is a place to watch as no one can solve an overconsumption issue by relying on kicking the non consumers in the teeth.

The EMU zone is the place that was elected to be pushed under the train so that other 'american' zones/nations can thrive better.

In this sort, as the EMU was just such a big consumption sink, the downfall of it might allow other 'american' places to grow.

Making it an engine for growth.

orangegeek's picture

And the Spaniards probably took it in Euros or pounds - both are going to take a beating.


In spite of Obama's wrecking crew, the US Dollar will be the one to own.

Vegetius's picture

Things look good in Europe.  It’s just a fun place to live, we have -



  •       The rise of extremist parties
  •       Destruction of wealth
  •       No Jobs
  •       Allowing the EU to suspend our own Legislatures, and declaring themselves invested with power to legislate for us in all cases.
  •         The collapse of any semblance of democracy in Europe and the rise of the unelected to power


Good Times


DoChenRollingBearing's picture

at Vegetius

"Good Times" indeed.

Here n Southern Italy there seems to be no hope for any decent future.  Sad really.  We head back after a delightful vacation, but can see the grim reality in this country.  Everywhere I go I see the "Compro Oro" signs, which I will write about (w/ pictures) upon my return.

To me, it loos kind of bad everywhere, even in Peru our sales are down, at least last I checked.

Sandmann's picture

and the rise of the unelected to power


The US perfected that one and called it The Supreme Court......that wasn't enough though so they created the Federal Reserve

Pitchman's picture

A response to Part 1 China:

The Chinese economy in two words:  Rehypothecated Steel!

In America and Western economies it's: Rehypothecation everywhere!

Did the American taxpayer bail out GM so it could become China Motors?

See: Truth, Liberty, "Transparency" & GM's Bailout - Down Goes The Republic


Once again the President promises one thing and works behind closed doors for the opposite outcome.  The Trans-Pacific Partnership trade agreement has been negotiated under conditions of 'extreme secrecy' without press, public or policymaker oversight, see: 'NAFTA on Steroids'

And, if you believe it will be different under Romney you haven't been paying attention.

Inflection Point:  The President says he's committed to creating jobs. However, his back room actions are an abdication his Constitutional Oath. At most such antithetical conduct is treason. And, until we hold our leaders to account, they will continue to sell out the Republic to their corporate and financial puppet masters. At the very least, saying one thing and doing the opposite deserves an honest appraisal.

See: Obama Claims He Will "Outsource Fewer Jobs" As His Trade Representative Secretly Works On "NAFTA ON STEROIDS"



"Or, in other words, lose-lose." - Tyler Durden