Europe's Good, Bad, & Ugly Reality (In 3 Simple Charts)

Tyler Durden's picture

Mario Draghi unleashed his ultimate "spend-it-all-now-or-you'll-lose-it" Keynesian demand-pull bazooka this week when he went full negative-rate-tard. While plenty of time has been spent discussing the "low-flation" and the total lack of credit creation (Keynes ultimate kryptonite), we thought the following three charts might bring home just how entirely broken (and dependent) Europe's economy/market has become...

 

First - the Good... European Sovereign Risk (GDP-weighted) is at an all-time low...the central-bank front-runners have front-run themselves to death as they fund cheap and pile into sovereign risk, forcing the banking system and sovereign ever closer together in a 'if rates ever rise, we are all doomed' vicious circle...

 

And just exactly how much "pressure" does this exert on policy-makers to make thenecessary change and tough reforms that are required? (spoiler Alert - None!)

 

The Bad... European Macro-economic data is in the toilet... just as not one of the super smartest economists in the world could envision rates falling this year, it was evident last year that the "Europe is recovering" meme was as viral as herpes at spring break... odd, how things don't work out as planned eh?

 

The Ugly... European corporate earnings are tumbling and expectations have collapsed...

 

But apart from that - TLTRO and negative rates will fix it all... well played Draghi.

But, as Bloomberg notes, not even the European establishment believes Draghi's efforts will have any impact...

President of the German Institute for Economic Research Marcel Fratzscher tells Handelsblatt that large and not unlikely risk remains that euro zone economies may fall into stagnation and deflation from which it may be difficult to exit.

Newspaper also cites Fratzscher as saying:

ECB measures won’t solve the fundamental problems of the banking system and lack of structural reforms

 

More expansionary fiscal policy may be helpful in short term but won’t resolve fundamental problems, including excessive national debt

 

DekaBank economist Ulrich Kater also tells newspaper that politically generated economic upswing may collapse into sluggish economy and higher debt when it expires, warns against implementing large scale, debt-financed spending programs

Charts: Bloomberg and @Not_Jim_Cramer