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The European North-South Divide Is Exploding

Tyler Durden's picture


While a lot of time is spent scrubbing through the details and nuance of each and every macro data point, auction result, earnings comment, central-banker hint, and politician's demeanor, from the top-down the imbalances created by the euro between the North and the South are, in Michael Cembalest's opinion, skyrocketing. They are far greater than any that preceded the Euro, even during the bouts of inflation and devaluation which beset the South in prior decades. Nevertheless, the region appears committed to soldiering on with it, despite the costs. These developments are amazing for a project like the Euro, which was designed to harmonize and sustain Europe’s post-war social, political and economic integration.



The JPMorgan CIO's perspective is that "Europe will slog through a period of low growth and complicated politics, and that the ECB may have to resuscitate both its 3-year bank repo operations (LTRO) and outright bond purchases (SMP) later this year" and we remind readers that every bond that the ECB purchases is now creating lower recoveries and higher default/restructuring risk for Spain - hardly the win-win that markets are expecting. Be careful what you wish for.

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Tue, 04/17/2012 - 13:13 | 2351990 Timmay
Timmay's picture


Tue, 04/17/2012 - 17:13 | 2352737 ajax
ajax's picture

and Switzerland is right in the middle. The Portugese and Spanish licence plates are more in evidence now than at any other time ever.  Everyone seems to have a cousin or some other member of some extended family to stay with here and then keep staying and then work... In Lausanne you rarely hear French spoken on the streets anymore.  

Tue, 04/17/2012 - 13:14 | 2351991 idea_hamster
idea_hamster's picture

So where's the European "Mason-Dixon" line?  The Alps?  Where's Hannibal when you need him?

Tue, 04/17/2012 - 13:24 | 2352026 Cognitive Dissonance
Cognitive Dissonance's picture

Hannibal's Euro elephant sat on Hannibal. Go to Plan B.

Wed, 04/18/2012 - 02:58 | 2353931 StychoKiller
StychoKiller's picture

What, fava beans and Chianti?

Tue, 04/17/2012 - 13:27 | 2352035 TheGardener
TheGardener's picture

Northerners needed to gather hard and as much as they could
to survive a long hard winter.

Modernity calls it work ethic and looks down on more relaxed southern lifestyles.

Wed, 04/18/2012 - 08:04 | 2354203 Martel
Martel's picture

Modernity allows the South European slackers to borrow to the hilt, and when in trouble, borrow some more. Brussels bureaucrats want to keep their dream of (E)USSR alive, hence there will be no limit to borrowing and bailouts. If the Northern "rich" countries won't lend any more money to the South, ECB will create the funds out of thin air.

In the end, the euro and its purchasing power will be completely destroyed. That's a great equalizer. The Greek will return to riding donkeys, bitter that the selfish North didn't give them more money. The Finns will return to backbreaking forestry work, bitter that the Southern idlers stole their money. Germany will survive, but the European Union will not.

Tue, 04/17/2012 - 13:42 | 2352083 LFMayor
LFMayor's picture

LOL, nice call.  My question was who is wearing the gray uniforms this time? 

Tue, 04/17/2012 - 13:12 | 2351993 Dick Darlington
Dick Darlington's picture

But but but...

04-17 12:51: ECB's Costa says Euro-area fundamentals are strong


It's precisely this kind of denial, hubris and perverse obsession in one dead-born political utopia which has brought us here and will inevitably bring the whole current system down.

Tue, 04/17/2012 - 13:21 | 2352019 centerline
centerline's picture

Hopefully there is no one left here at ZH who doesnt think that the TBTF and central banks wont claim all is well right up to the point they run for the bunkers.

Tue, 04/17/2012 - 13:28 | 2352032 Cognitive Dissonance
Cognitive Dissonance's picture

The elite evacuations have already begun. Didn't you get the memo?

I didn't either. I hate it when they don't update their phone tree.

Tue, 04/17/2012 - 13:45 | 2352095 Vince Clortho
Vince Clortho's picture

New Zealand.

Tue, 04/17/2012 - 13:24 | 2352015 carbonmutant
carbonmutant's picture

Maybe the PIGS should form their own economy...

Club Med Union

Tue, 04/17/2012 - 13:28 | 2352033 Rubicon
Rubicon's picture

Financed with pigswill?


One bucket of swill = 2 Euro

Tue, 04/17/2012 - 14:28 | 2352243 Harbanger
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They tried.  Wasn't the Euro created to challenge the US Dollar as reserve currency.

Tue, 04/17/2012 - 14:37 | 2352277 EcoFlow
EcoFlow's picture

The Euro is still 12% higher since its introduction, at a time everyone is beting on its collapse.

Sorry man but if the Euro does not collapse, change your dollars for Euros

Tue, 04/17/2012 - 15:05 | 2352364 sockratte
sockratte's picture

you still compare to the greenback? lol

Tue, 04/17/2012 - 15:34 | 2352456 Harbanger
Harbanger's picture

Maybe because hard currency is still priced in greenbacks.

Wed, 04/18/2012 - 07:04 | 2354112 Ar-Pharazôn
Ar-Pharazôn's picture

you're gone crazy or what? BUY GOLD ASAP

Tue, 04/17/2012 - 17:37 | 2352811 Ghordius
Ghordius's picture

"Wasn't the Euro created to challenge the US Dollar as reserve currency."?

Nope - the Euro was created to cope with the US Dollar global reserve currency. After the Nixon Shock and endless FX debacles, we europeans said enough.

Tue, 04/17/2012 - 14:00 | 2352138 q99x2
q99x2's picture

The ECB and the FED have more than all the money in the world.

So, they can take over Europe and the US if they choose to do so -- to a point. I don't think the central banks are going to stop before everything is in flames. I'd just move to Paraguay or Costa Rica and let it play out if I were them. That means a heck of a lot more bailouts and burnt out cities to go. And a lot of room to the upside for stocks.

Tue, 04/17/2012 - 14:00 | 2352143 Dr. Engali
Dr. Engali's picture

So when do people start getting fed up on both sides? The core has to be fed up with dragging the dead weight and the periphery has to be tired of getting the table scraps. Sooner or later this has to blow up. In the mean time the bankers are laughing it up.

Tue, 04/17/2012 - 15:19 | 2352410 Harbanger
Harbanger's picture

Did the bankers bail themselves out or did they get bailed out by our elected Govts.  Who bailed who out?  If they weren't bailed out, then all the big Govt.'s ponzi scams would collapse.  It's all about shifting blame so they can come back "new and improved" to save you, again.  It's all 3rd world fairness politics, limiting the size and power of Govt over their citizens is not in the cards.

Tue, 04/17/2012 - 14:12 | 2352176 SmittyinLA
SmittyinLA's picture

"Complicated politics" LOL   lets hope Brevik doesn' tread ZH

Tue, 04/17/2012 - 14:19 | 2352215 walküre
walküre's picture

You know what's exploding? AAPL is exploding today. So what happened yesterday? Someone sold off their Apples by mistake? And bought them back today?

LOL you can't make this shit up! I'm trying but clearly I'm not as gifted as Jim Cramer.

Tue, 04/17/2012 - 14:36 | 2352278 Hobbleknee
Hobbleknee's picture

You can't trust any chart that says unemployment anywhere in Europe is less than 10%.

Tue, 04/17/2012 - 14:44 | 2352293 Silversem
Silversem's picture

All this makes for great trading opportunities. For that i prefer a contract for difference. That way i am flexible in playing the up and down side of the market and that is exactly what you need in times like these.

Tue, 04/17/2012 - 18:10 | 2352873 Zero Govt
Zero Govt's picture

Europe is most certainly being "harmonised"

we have every Govt drowning in debt and every bank fully toxic with over-leveraged books and both are "harmonising" around the very last stop of central banks

I never knew The Fed as well as the ECB was there to back-stop Europes kamakazi Govts and banks until recently ...so we now have across-the-Golden-Pond harmony too

what politicians and bankers need is to face the music, not sing in harmony like a zombie choir .it's individuals mistakes not a socialist collective

Tue, 04/17/2012 - 19:21 | 2353037 lolmao500
lolmao500's picture

Time for civil war!

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