The European crisis showed by the markets

The last financial “news” came out in the morning when the data on business confidence in Europe was published. The figure was far below expectations both in Germany and in France, and in return throughout the Eurozone, and marked a decrease compared to the previous month, which was immediately interpreted with concern in particular for the outlook for growth of the European Union. It was these data that led to the decline of the European stock markets and, at the same time, a drop in the euro against the dollar which fell below 1.18.
On the same day yesterday the corresponding indices were released in the United States and England. The American figure was above expectations at the highest levels since January 2019 and the British one, again above expectations, at the highest levels of the last 30 months.

It is too early to draw conclusions on the “recovery” of global macro-areas, but at the moment the distrust of the European one seems to be the most shared scenario. Just like, for the record, after the 2008 financial crisis.
The other “datum” of yesterday is the increase in the spread between Italian and German government bonds and the rise in the Italian ten-year yield. Nothing dramatic, but it is clear what “markets” think when they start worrying about

Europe. Nothing new under the sun for twelve years now: when there is a global recession, Europe does worse than other global macro-areas and the performance of its peripheral and secondary countries, including Italy completely disappeared from any table that counts, diverges from the center, opening disturbing questions for everyone.
The euro monetary area has some structural problems. One is an objective difficulty in “coordinating” different member countries with completely off-scale intra-European trade deficits without any monetary flexibility and which have a single possible outcome: the desertification of the periphery and of financially weak states.

The second is that the euro is an area that would have bet everything on exports and on the irresponsibility of other consumers in a world in trade war and with a rising currency and clearly unsustainable for the weaker countries. In this context, only a few gain in the long term. We write things that have been published and discussed amiably for years on the main international media from George Soros down. All elements that are part of a “normal” debate on the Eurozone since at least 2012.

For the most attentive since 2009 and for the really good ones since the mid-90s.
Even after this crisis, the least possible was done to save the euro; the difference with the previous crises is that the minimum necessary to save the euro is much larger and will be bigger and bigger because the structural problems of the area remain completely unsolved. Just as the problems of countries that can no longer afford such a strong currency remain unsolved and continue to borrow in a foreign currency that they cannot afford to maintain a lifestyle that they cannot afford. More debt in euros is not a solution, but a monster that sooner or later will present an astronomical account either in political and geopolitical terms or in financial terms or both.

Throwing another kick at the jar of problems by making more debt in a foreign currency, with the United States of Europe not even seen through binoculars, is not a solution. Everyone knows this and the markets explained it to us once again yesterday, which for now are only pretending not to see the problem. Meanwhile, British and American performances are recorded. Certainly irresponsible and debt-drugged just as European non-response is irresponsible and debt-drugged.

By Domenico Greco

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