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So Much For A European Recovery: SocGen Predicts Europe's Lost Decade Will Last Until 2018

Tyler Durden's picture




 

Back around the turn of the century, when the common European currency was introduced, there was much hope and excitement about the future. It worked... for about 7 years. Unfortunately since 2007 things haven't gone according to plan and now the continent is paying for the drunken sailor debt sins of its member countries as it slowly and painfully tries to grow into a balance sheet that is massively overlevered. Unfortunately, the future is just as bleak, at least according to Socgen (which incidentally has been quite bullish on the world economy in general) who in its most recent report predicts that Europe is only half way through its lost decade of 2007-2018. As the GDP per capita chart below shows, any Europeans (presumably of the unemployed kind) hoping for a quick rebound from the moribund economy of the past five years has at least this much longer to wait. Oh and for Greeks looking at the chart below and wondering "what went wrong?"... the answer is pretty much everything.

From SocGen:

Summer optimism on euro area recovery has faded to grey winter skies. Looking ahead we see continue weak growth in the region with a very gradual recovery only. For the 2007 to 2018, we expect GDP per capita to be essentially flat, marking a lost decade of growth for the region. We blame much of this weak performance on a slow policy response in tackling both the sovereign and banking crisis, and the still too slow pace of structural reform. The fear is now that the euro area is on the verge of deflation. The ECB toolbox is not empty, but in our central scenario of low inflation (and not outright deflation) we see an additional LTRO and extension of unlimited liquidity. The risk is that the euro will stay stronger for longer adding, to deflationary pressures.

 

Several headwinds remain for the euro area:

 

1. Private-sector deleveraging: Although progressing, private sector deleveraging remains a headwind for several member states, including Spain. Furthermore, as discussed in Box 10, Banking Union needs fast track politics, financial fragmentation has come with a high price tag for the periphery.

 

2. Softer, but still in austerity mode: The drag from fiscal policy has eased allowing exit from recession, but a long road of fiscal consolidation still lies ahead. The 22 November Eurogroup was clear: deficit/debt reduction and structural reform remain the prescribed policies. Italy and Spain, moreover, were noted by the Eurogroup as at “risk of noncompliance” on their 2014 deficit targets and have already promised that extra measures are in the pipeline. That these measures are in fact delivered is one of the key assumptions behind our below-consensus 2014 forecasts.

 

3. Still-high policy uncertainty: As discussed in Anchor Theme 3, policy uncertainty remains fairly high for the euro area and our baseline assumption is that this will be the case in much of 2014, easing only very gradually medium-term.

 

4. Slow progress on reform: Key to the medium-term outlook is continued progress on structural reform – at both the national and euro area levels. We assume that progress will continue, but only at a slow pace.

Of course, if BNP is right, and the ECB somehow manages to pull off a QE over the ever louder complaints of Germany, the matrix above will change: there will be a quick and brief boost some time in 2014, followed by an even quicker final tumble into the abyss.

Finally, it goes without saying that applying fundamentally-driven growth forecasts to a new centrally-planned normal will fail, and the final outcome in 5 or so years will be anything but. One thing we are certain of: that 216.1 indexed GDP per Capita forecast for China... we'll take the under any day, or else based on our simple calculations, China alone will have about 2-3 times more debt in 2018 than the rest of the world alone.

 

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Tue, 11/26/2013 - 13:52 | 4190999 ShrNfr
ShrNfr's picture

Sorry, but the US is not going to grow at any 2% real either.

Tue, 11/26/2013 - 13:57 | 4191011 Cognitive Dissonance
Cognitive Dissonance's picture

It doesn't matter if it's 'real'. Just that it's perceived as real.

<Don't underestimate the desperate desire of the general population to believe the lie no matter how obvious it might be. In fact the more obvious it is the more desperate the desire will be to believe.>

Tue, 11/26/2013 - 14:08 | 4191057 knukles
knukles's picture

No matter.  It's a typo.
They meant until 2118

 

What the fuck is wrong with these people?  How in God's name can anybody expect a recovery when nothing's changing for the better?
Jesus H Fucking Christ.

Tue, 11/26/2013 - 14:40 | 4191178 Anusocracy
Anusocracy's picture

The West doesn't have a ghost of a chance for a meaningful recovery unless it gives up its emulation of the Soviet Union.

Maybe they'll trot out some slightly used Five-year Plans next.

Tue, 11/26/2013 - 14:45 | 4191205 kaiserhoff
kaiserhoff's picture

Pre-owned five year plans?

Tue, 11/26/2013 - 14:56 | 4191255 Anusocracy
Anusocracy's picture

I think you can get them on Ebay.

Tue, 11/26/2013 - 14:43 | 4191199 kaiserhoff
kaiserhoff's picture

They promised us change, knuks, that's all.

Now come along with me for our senior coffees and we'll try to enjoy our change.

Tue, 11/26/2013 - 15:11 | 4191293 knukles
knukles's picture

Oh, you got that spot on, Kaiser
And The Wookie was honest as the day is long when she stated "Barack is going to change your life"
And what a change it's been, eh?

Tue, 11/26/2013 - 16:28 | 4191656 falak pema
falak pema's picture

the problem of being a senior is that our memory gets a "wee bit" shorter...It didn't start with Barak, he is only the latest in a line of decadent Caesars. 

 

Tue, 11/26/2013 - 14:47 | 4191214 ThirdWorldDude
ThirdWorldDude's picture

Relax knux, we all know even a dart-throwing lower primate is more accurate than these economists' crystal ball prognostications...

 

Reminds me of an old joke: a low class middle-aged guy went to see a clairvoyant and asked how his life would be in the future.

"You'll be poor and miserable until your 70th birthday - the clairvoyant said.

"And after that...?" . asked the dude with a sudden glimpse in his eye.

"After that you'll get used to it" - was the seer's reply.

Tue, 11/26/2013 - 15:15 | 4191315 knukles
knukles's picture

Oh, I just get fed up with all the BS/Propaganda.
The modus operandi of the Street is to encourage client transactions. 
Period.
So, every day, in every way, they've got to issue a new meme to generate the turnover.
Having dealt with the shit professionally for decades, it's just my knee jerk reaction.
They're whore, nothing but whores.

Tue, 11/26/2013 - 18:27 | 4192062 Offthebeach
Offthebeach's picture

Hense massive Islamist immigration in EU, and Hola Americans into the US. You can't have a recovery with broke, jobless, everyone sub-40 year olds as debt serfs/slaves.

Moar QE!

Tue, 11/26/2013 - 14:42 | 4191187 TheGardener
TheGardener's picture

And after 2018 demography will do the trick.

Aging will be counted as investment like software does in the US towards GDP.

Tue, 11/26/2013 - 14:09 | 4191067 Al Huxley
Al Huxley's picture

The US doesn't have to grow at all.  As long as the FED keeps the money hose open, everybody in the US just has to buy stocks, and then they don't even need to work - the profits from the stock market will more than make up for the lack of employment income.  So actually, the unemployment rate is also irrelevant.

 

I know, I know, not everybody knows HOW to buy stocks, so what I think we should do is, the GOVERNMENT should buy stocks for EVERYBODY, and then just SHARE the money EQUALLY.

 

And if they do the same thing in Europe, think how great it will be!  Not to mention that having all that money going into stocks will just drive the prices even HIGHER, FASTER, so we'll all get rich that much faster, and with NO EFFORT WHATSOEVER!!! 

Tue, 11/26/2013 - 13:54 | 4191002 Iam Yue2
Iam Yue2's picture

ECB's Cœuré: "Absent strong push for growth, Europe risks creating a lost generation, as happened in a more tragic way in 1914-18.”

 

Too late mate .......

Tue, 11/26/2013 - 13:55 | 4191008 falak pema
falak pema's picture

Well; now the banks are admitting that the shit they have unloaded on society will take a decade to clean up.

I think they are still being optimistic. Without renewables and, that will take three decades at best, we are in for a degraded and neo feudal planet; where the people become sheeple. No place for young to feel groovy.

Tue, 11/26/2013 - 14:05 | 4191046 prains
prains's picture

agreed this is a generational theft in the making and will be generational to fix notwithstanding a full blown violent reset which for intents and purposes will put us back into a modern version of the dark ages.......think wizards in the forest but this time with control of satellites and drones. 

 

I want to live a long time now to be able to help my grandkids get through it...

Tue, 11/26/2013 - 14:20 | 4191101 disabledvet
disabledvet's picture

starting to look more like the Pig in the Python actually. "people were amazed that such a creature could swallow something so much bigger than itself. But the pig refused to die anyways and just held its breath for a long time. Eventually the Python simply expired because it only had the enough energy to eat...not digest." LTRO? QEternity has barely put a dent in the US "growth-a-meter."

Tue, 11/26/2013 - 13:55 | 4191012 I am Jobe
I am Jobe's picture

Ah the lost decade is here to stay till 2030 or longer in AMERIKA. Forward . Nothing can change that, Growth is assumed in all of the CBO reports. Where is the Growth? 

Fast Food?

EBT

Shuffling Debt around

Killing workers

Making stupid IAPPS

Opening more Apple Stores

Opening more Cell phone Stores

 

Tue, 11/26/2013 - 13:58 | 4191018 SheepDog-One
SheepDog-One's picture

Very dangerous times right here. Desperate overlords will do increasingly desperate things to keep their control.

Tue, 11/26/2013 - 14:01 | 4191030 I am Jobe
I am Jobe's picture

Agreed. Not enough lipstick to cover this crap up. Not very many look past then what they see. I guess Ignorance is Bliss but no longer an option. 

Tue, 11/26/2013 - 13:58 | 4191020 babylon15
babylon15's picture

How does it end in 2018?  The median age in Europe will be almost 50 years old in 2018.  How the **** do you rebuild a country when the average person is about 20 years too old to have kids?

 

This is a lost century.

Tue, 11/26/2013 - 14:06 | 4191049 thisandthat
thisandthat's picture

This is a lost continent.

Tue, 11/26/2013 - 14:11 | 4191070 Rip van Wrinkle
Rip van Wrinkle's picture

"How the **** do you rebuild a country when the average person is about 20 years too old to have kids?"

 

You import them....from Somalia, from Syria, from Libya, from Yemen....well,from anwhere to be honest. As long as they'll work for dog food.

Tue, 11/26/2013 - 14:55 | 4191250 Anusocracy
Anusocracy's picture

Great idea!

Import people into an advanced technological society who possess ideologies that wouldn't be able to create that society, let alone support it.

Worked for Detroit.

Tue, 11/26/2013 - 14:03 | 4191035 lailapa
lailapa's picture

GERMANY, the DISGRACE of Europe

...the barbarians, who forced beautiful Europe to get down Zeus’ “back” and made her a prostitute.

http://eamb-ydrohoos.blogspot.gr/2012/02/germany-disgrace-of-europe.html

..

The German traitors of Europe along with the Phoenicians from Asia may have forced Europe to get down from the "back” of the Greek “bull”, but it remains to be seen how they shall pull it through with the “bull”.

Authored by PANAGIOTIS TRAIANOU

Tue, 11/26/2013 - 14:05 | 4191039 Al Huxley
Al Huxley's picture

Overlevered balance sheets - boring!  Anyway, who gives a fuck about Europe anymore, when everyone with even 20 bucks to their name can become a multi-millionaire in the US market.  Hell, you don't even have to be picky about what you buy, if it's listed and its not a gold stock, it's going up. 

 

In fact, I think that's what all those pinheads at the ECB should do - print a shitload of Euros and buy tech stocks.  They'll be loaded in no time.

Tue, 11/26/2013 - 15:02 | 4191271 kaiserhoff
kaiserhoff's picture

What to buy? Easy call -

  The worst pig with the most lip stick, because it well have the highest short interest.

  Run the stops, wash rinse, repeat.

Tue, 11/26/2013 - 14:08 | 4191062 PontifexMaximus
PontifexMaximus's picture

Should be good for 50% performance on the EuroStoxx50 at least!

Tue, 11/26/2013 - 14:23 | 4191111 SmittyinLA
SmittyinLA's picture

Europe is a roach motel, you can get in but never out.

Tue, 11/26/2013 - 14:45 | 4191212 Peter Pan
Peter Pan's picture

The table above is BS. Friends in Greece and Italy who are in their late sixties and have clear memories tell me that their standard of living is reminiscent of the early 1950's. Furthermore GDP measures are average measures so the divide between rich and poor, worker and unemployed is simply stunning at this point and not reflected in the table.

Tue, 11/26/2013 - 15:00 | 4191268 TheGardener
TheGardener's picture

Peace upon Europe, Peter Pan. And the 1950`s living standard
is already a catch up in some regions but this is my best long term estimate too for a new normal there.

But I`m being too optimistic with third and second world standards of living becoming commonplace throughout Europe
and population exchanges to match that impression.

Tue, 11/26/2013 - 17:43 | 4191935 Billy Shears
Billy Shears's picture

Translation for home gamers: NO END IN SIGHT!

Tue, 11/26/2013 - 18:27 | 4192060 pashley1411
pashley1411's picture

I'm not getting the "2018" end point.   And then what, are they planning to all get hit by an asteroid?

The only exit scenario I see is when the light-bulb suddenly goes on, and everyone collectively does a debt-default, hiding behind each other's skirts, similar to the fall of the Iron Curtain.  Probably will start with France.

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