Europe's Losing Battle For Recovery

Tyler Durden's picture

Via Nick Andrews via Evergreen Gavekal,

The wobble in world markets continues, with stock indices across all time zones down steeply in recent sessions. Investors are not only realigning their exposure in anticipation of tighter liquidity conditions as the US Federal Reserve finally brings its asset purchases to a close later this month. After today’s European Central Bank (ECB) meeting they are also looking nervously at the magnitude of the task facing eurozone policymakers. And they appear to be coming to the conclusion that generating a rebound in growth may be too tough a job for Europe’s leaders to accomplish in the near term.

With France and Italy - the eurozone’s second and third biggest economies - either stagnating or contracting, to achieve a convincing recovery will require policymakers to press home their attack on three fronts: structural reform to increase economic flexibility, fiscal easing to stimulate activity, and monetary expansion to support credit growth. On all three fronts they face determined opposition.

Structural reform: On Sunday President Francois Hollande’s ruling Socialist Party lost control of the Senate to France’s center-right Union for Popular Movement (UMP) party, a development which will only complicate the implementation of reform plans already facing staunch resistance from strikers in the transport, manufacturing and service sectors. Meanwhile Italy’s three most powerful trade unions agreed on Monday to form a united front in opposition to Prime Minster Matteo Renzi’s proposed Jobs Act. Worse, Renzi has failed to win over the left wing of his own party, which accuses him of slavish obedience to Berlin’s policy diktat. Although the party’s senior leadership pledged its support for the bill this week, a possible showdown in the Senate on October 7 could still see key reform proposals significantly watered down.


Fiscal policy: In recent days both France and Italy have revised their deficit reduction targets. Yesterday French Finance Minister Michel Sapin rejected austerity, saying Paris will not bring its deficit below 3% of GDP until 2017, two years later than it earlier targeted. The Italian government this week also pushed back the date when it expects to balance its books, postponing its target by a year. The two governments face an uphill struggle in selling their delayed targets in Brussels and Berlin, however. The recent appointment of France’s former finance minister, Pierre Moscovici, as Europe’s economics and financial affairs commissioner with the key role of approving national budgets had raised hopes that France and Italy would be given greater flexibility in meeting fiscal targets. But in a surprise move this week Commission President Jean-Claude Juncker curbed Moscovici’s powers, appointing hawkish Latvian commissioner Valdis Dombrovskis to oversee and sign off Moscovici’s budget approvals. The move was widely seen as aimed at placating opinion in Berlin, where Chancellor Angela Merkel is uneasily watching the rise in popularity of anti-European political part, anti-euro party (AfD). Although AfD is still small, the threat of losing voters to Germany’s Euro-skeptic right will only encourage the chancellor to take a tough line with France and Italy over fiscal policy, especially in the absence of significant progress on structural reform.


Monetary policy: Investors are looking to ECB president Mario Draghi to announce details of a major program of asset-backed securities purchases at the central bank’s meeting today. However, given the insistence of the Bundesbank that the ECB should only buy superior quality investment grade securities and the reluctance of the German and French finance ministries to back ECB purchases with government guarantees, there is a clear risk that markets will find Draghi’s program deeply underwhelming. To make things even more difficult, on October 14 the European Court of Justice is set to rule on the legality of the ECB’s proposed Outright Monetary Transactions program of secondary market sovereign bond purchases. A decision against the program would effectively rule out the possibility of full-blown quantitative easing in Europe.

With efforts to procure a European recovery belabored on all three fronts, and prospects for eurozone corporate earnings set to disappoint, it should be no surprise that investors are jittery. The only bright spot for Europe at the moment is the weakness of the euro, which has fallen nearly 10% against the US dollar since May; a decline that will both help to support eurozone exporters and to ease disinflationary pressure.

As the US moves closer to tightening monetary policy and with European policymakers facing an uphill struggle in their efforts to generate a recovery, the decline in the euro looks set to continue.

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km4's picture

Albert Edwards says watch Japanese yen and be very, very afraid

Greenskeeper_Carl's picture

Surely this guy isn't implying that the great draghi can't jawbone the EU into recovery ? Say it ain't so ....

philipat's picture

The only short-term consequence to Germany of keeping Draghi in check is a weakening Euro in view of NIRP-ana. Which of course is good for German exports.

Longer-term, the whole Euro experiment is looking is increasingly shaky but, as Farage has been saying for a long time, the peoples of Europe don't want a "United States of Europe" but a Free trade area of Sovereign Nations with their own customs, cultures and currencies. These voices are appearing more loudly now in france and even Germany. Of course, "The people" will never be actually allowed to conduct any type of democratic process because the unelected bureaucrats in Brussels would not allow that to happen. But they may be running out of time..........

Yen Cross's picture

 O/T. lmfao!


 I thought the EOQ shit would end. Nope, the " slope heads" are like flies on a carcass.

FieldingMellish's picture

Nikkei getting juiced. Talk about beating a dead horse.

FieldingMellish's picture

Yeah... everybody also thinks the same and the boat has all the passengers on the port side.... btw, the Fed won't tighten.


PS: Nothing wrong with deflation. It makes things cheaper for consumers.

Yen Cross's picture

 Yeah, those chinks are sure milking it. It's not the Japs.

  The Chinese are liquidating their f/x holdings. ( And we wonder why no-one trusts >the United States of Ponzi)

Stained Class's picture

Who's in charge over there? FRANK RIZZO?


ekm1's picture

Is that a joke or something?

EU is nanny continent. It is NATURALLY impossible for EU to recover economically if welfare contiues

Jack Burton's picture

I know one thing, America's demands that the EU go into massive ecnomic sanctions against Russia will be a giant boost to an EU recovery! sarc.

German cars and machine tools for one. What ,50K high paying jobs in the shitter? In one crack? Do what Obama demands and fuck your economy. The USA is loving it.

himaroid's picture

Better stock up on that Germanic Tech. While the getting is good.

Wahooo's picture

Why does anyone care what happens in Europe? Hardly seems like the next frontier in the economic or technology fronts.

Anusocracy's picture

Europe is doomed for the most part.

Their social welfare policies are a great attracting pheromone for the more aggressive third world foragers.

batsond's picture

There is no recession, we are experiencing the effects of the Technological Revolution. Just as telephone switchboard operators and secretaries with typewriters are a thing of the past, in a few years, highly automated mechanized computing machines will supersede nearly all tasks currently performed by human beings, thereby rendering human labor totally inconsequential. It is indisputable, it is the way things are and there is no going back to the way things were, only the timeline can be debated. A year or so ago Foxconn announced it was planning the acquisition and deployment of 1 million new robots, which means that just as western laborers complain about the Chinese stealing their jobs, soon Chinese laborers will be crying about robots stealing their jobs.  There is no recession, technology is slowly eating away at jobs, high unemployment is here to stay and eventually there will be no jobs. Human civilization is approaching an important milestone which is the transitioning out of the age-old human labor based economic system.

The Ruling Class has foreseen this for decades and has certainly tasked an armada of their think tanks brimming with Aspie Phds and Postdocs to work on the problem of what to do with the 7 billion soon to become superfluous human laborers.

tumblemore's picture

"The Ruling Class has foreseen this for decades"


So why did they import tens of millions of extra unskilled workers? The banking mafia don't foresee anything they act entirely on the basis of immediate short-term greed - which on a deeper level is ultimately driven by paranoia - like computer algorithms on legs.


BlackVoid's picture

Not gonna happen, we are running out of everything.

zerocash's picture

Who will buy all the stuff that the robots make when everyone is out of work?

Karaio's picture

Europe is fucked and not know. 

There is much less social mobility creativity. 

If the guy has a degree in Engineering, does not accept pick up a shovel and mixing cement with sand. 

The guy prefers the teats of government. 

I tell you one thing. 

I, with University - Bachelor & Geographer - a lot of extension courses was unemployed. 

Moved to town and opened a firm providing services shamelessly using the motto of Dr. Smith from Lost in Space series - 1960. 

- Fear not, with Alex ... no problem. In Portuguese rhyme. 

Cleaned water tanks, septic tanks, did premises telephony, electrical networks, cable, plumbing repaired many, had four employees in this endeavor that lasted four years. 

Everything you can imagine in maintaining a home and I do know we did. 

I won a lot of money but I spent a competition for public employee with reasonable salary and settled down. 

I went back to what I learned at the University today and gain a third of which earned the company. 

As incredible as it may seem to you, the four boys who worked with me in this venture were between 15 and 17 years old, they did not know the difference between a screwdriver and pliers. 

I taught them all about tools and how to work. 

Today has three firms as one where they worked, and the fourth is the manager of a department store, all with far more employees than they were four. 

The three firms have persisted in the business of providing reputable services. 

Another interesting thing, they use their employees with the same dynamics of work and money that taught them. 


1 - Attending carefully to the client. 

2 - Note down item by item the service to be contracted. 

3 - Estimate hours and pass detailed budget. 

4 - Never - I repeat - NEVER - extrapolate the budget even if you spend hours or days more to finish the job. 

5 - Always deliver a sublime service. 


1 - Reset tools - drills break, screws need to be purchased, rivets, brushes, drills need fixing etc. . 

2 - Taxes: Services does not collect taxes but some customers needed fiscal note, the solution is they buy the most expensive materials and the store owner paid the team. 

3 - What was left was distributed in $ 5 - five people after all, was a hands-Team! 


All the boys were studying degree second night, worked with me during the day, 

All with consent of parents - who regarded it as a great investment of cost / benefit / learning. 

On trial days sometimes had to do the job practically alone or with only one accompanying me. 

In the last three years of work, none of them took notes below 9.5 or A-in the areas that domino - Geography, History, Philosophy and Sociology. 

Even in mathematics and physics learned in the ass to convert meters to inches in caliper, and how much it hurts a drop of three meters. 

Yes, there were accidents. 

Yes, the Director of the School where they studied reported me. 

Yes, when things heated up, a lot of parents wanted me to put their kids on my team legwork earning money and a whore, without engendering drug. 

This was a real experience in the Catalan city, Goiás State, Brazil between 1998 and 2001. 

Never reported this anywhere in the network because I had many headaches with justice questioning about the social-security (the Obamacare of you). 

I had parental permission for the boys to work with me, in my naivety but that was enough, envy kills any venture that is working. 

I'm a married guy, I have two children of another marriage that are at the University who in 2015 will be Civil Engineers. 

These four boys are three of them married, the manager of the department store unfortunately married on the same day (December 6, 2014) that my youngest son (one in Catalan GO-another in Santos-SP). 

Would be present in both events, you can not, 1,100 miles away from each other. 

Returning to the beginning of the conversation, depend on the state for everything as Europe does, and linking bitolando a diploma for a job - and unless you have the job meets the needs of the state - is an insane stupidity. 

College or university is something that you pay every month, I paid my. 

If you study a month, you pay, if lacking much to classes, they make you repeat a year and another year you pay month to month. 

Here it does not exist out of a university and owe. 

You leave the University and - falls in the world - fuck! 

No debt! 

Said too much. 

I hope you understand. 



tumblemore's picture

Europe's losing battle for recovery:


1) mass immigration destroys disposable income

2) money-lending for consumption (eventually) destroys disposable income

3) legalized counterfeiting (aka the central banks) (eventually) destroys disposable income


so duh!


(all three make the banking mafia richer though hence why it's happening anyway)



Karaio's picture

That too, a lot of unskilled immigration. 

Many ghettos. 

Many young people on the teat of government. 


jubber's picture

well with the Hang Seng up 1000 points overnight as problems solved and the Dow up 200 points from the lows we have the:-
DAX up 100+
CAC up 55
FTSEMIB up 375
IBEX up 160

Haus-Targaryen's picture

Good. How much longer can these governments hold on? We need political chaos in just one of the seventeen to bring the whole thing to an end.