Euro Area PMI Data Confirm Ongoing Contraction

Markit has issued its monthly crop of flash PMI data on Wednesday – as was widely expected, the euro area's economic contraction continues more or less unabated (although the rate of change of the contraction eased a bit in the 'core'). The Flash Eurozone PMI Composite Output Index clocked in at 45.8 (against 46.1 in September), a 40-month low. Below are the links to several of the reports (all are in pdf format):

 

Euro-zone Flash PMI

Germany Flash PMI

France Flash PMI

 

A 'Surprise' Decline as the Downturn Spreads

Meanwhile the latest IFO business sentiment survey in Germany showed its 6th drop in a row, which apparently was 'unexpected'. According to Reuters, it was “a surprise fall that was bigger than even the lowest forecasts, signaling that the euro zone debt crisis is hitting home in Europe's largest economy”.

Below are the charts from the IFO survey, including the 'business cycle clock' that compares the current downturn with previous ones and shows where things stand at the moment relative to them.

 

 

 

 


 

IFO Business climate survey

 


 

The IFO 'business cycle clock'. Things are already worse than in 2001, but not as bad as in 2008.

 


 

The idea that the economic downturn that has the periphery in an iron grip is now thoroughly infecting the previously stronger 'core' nations in the North is also confirmed by recent earnings reports and guidance given by publicly listed companies. Targets are being cut left and right.


“The European debt crisis is moving north into the region’s corporate engine room.

Companies from Schneider Electric SA to Daimler AG reduced forecasts for the year, while Sweden’s Sandvik AB said it will cut production. Pernod-Ricard SA, BASF SE  and ABB Ltd. cautioned for a continued slowdown.

“The current economic situation is marked by a growing insecurity and volatility,” Daimler Chief Financial Officer Bodo Uebber said on a conference call today. Daimler “can’t hold onto targets that are then not realistic. We have to accept that it is so.”

Almost half of the companies in the Stoxx Europe 600 Index that have reported earnings this quarter missed estimates for net income as consumers and governments rein in spending. The effects of the debt crisis that started in Greece in 2009 have spread to Germany, the region’s largest economy. Business confidence there fell to the lowest in more than two and a half years this month as neighbors’ demand for its exports waned.

“The problems of southern Europe are spreading to the core of the continent,” said Markus Steinbeis, who helps manage about 1 billion euros ($1.3 billion) at Huber, Reuss & Kollegen Vermögensverwaltung GmbH in Munich. “The earnings figures are showing slowing growth trend in the core. We will see slow growth ahead of us in Europe as a whole.”

The German economy may shrink in the current quarter after expanding in the previous three months as weaker global growth weighs on export demand, the Bundesbank said on Oct. 22. “North of the line that used to define southern Europe things are not going as well as they used to,” said Remy Cointreau SA CFO Frederic Pflanz last week.”

 

(emphasis added)

This doesn't sound particularly comforting. The eurocrats will have their work cut out for them if they want to convince the restive citizenry of euro-land that what they are doing is all for the best. Economic downturns have a nasty habit of occasionally upsetting all sorts of plans, but of course the centralizers are pushing onward anyway. It's not as if they had to ask anyone's permission.

This brings us to the next point – emerging disagreements over the EU budget.

 

Jan Kees de Jager: Read my Lips, No More Money!

 


 

Dutch finance minister Jan Kees de Jager (left) tells JC Juncker what he can do with his EU budget increase.

(Photo credit: AP)


 

Apparently the EU commission thought it deserves an 11% budget increase in the coming financial year, even while several of its member states chafe under the austerity measures the 'troika' has imposed. This has initially brought forth an announcement from the UK's prime minister David Cameron that he would of course veto this egregious waste of tax payer funds. Before anyone could assert that the Brits were once again the 'odd man out', he was joined by a very determined Dutch finance minister, who is apparently also no great fan of the spendthrift ways of the bureaucracy in Brussels. We hereby cheer him on.

The Telegraph writes:


Jan Kees de Jager, the Dutch finance minister, told his country's parliament that the Netherlands "would dig in its heels" to stop an above-inflation EU budget for 2013 and a demand for an 11 per cent rise in European spending between 2014 to 2020.

"This is unacceptable to us, and we will fight tooth and nail against it," he said last night. "It is incomprehensible."

Mr De Jager attacked the European Commission and MEPs for demanding an "unbelievable" seven per cent rise in spending next year despite a request from governments that EU expenditure is reduced to reflect painful austerity and reductions in national budgets.

He pledged to join with Britain and other countries to form a "blocking" vote to stop the 2013 increase which increase the Brussels bill for national government by £7.3 billion at a time when the Dutch, a eurozone member, are implementing painful national cuts that have demanded by the EU to tackle the single currency debt crisis.

The Dutch finance minister echoed Britain by vowing to veto a demand by the commission for an £80 billion increase on long-term EU spending between 2014 and 2020.”

 

(emphasis added)

Below is a video that shows how tax payer money is wasted by the EU. When money goes missing and accountants refuse to sign off on such outrages, they apparently simply get fired. However, one of them has returned as a member of the EU parliament and now tries to continue the good fight. She has provided the makers of the video with some background information.

45% of the EU's budget is spent on agricultural subsidies – which is undoubtedly one of the most colossal wastes of tax payer money ever devised anywhere. Many of the subsidies are in fact actively destroying wealth as you will see below. 

 


 

How tax payer money is wasted in the EU

 


 

Obviously it would be a grave mistake to pour even more good money down this rat hole. The Moloch in Brussels is clearly a beast that needs to be starved.

 

Addendum: Italy's 'Ndrangheta -Sponsored by EU Subsidies

Not long after writing this, we had opportunity to watch a documentary regarding a highway that is built in Calabria in the South of Italy with the help of generous  EU subsidies. Amazingly, it seems as though the construction will never be finished, although it has so far cost nearly € 900 million.

The local mafia, known as the 'Ndrangheta, is siphoning off all the funds Brussels indefatigably keeps sending into the region in the vain hope that the highway will one day actually get built. To watch this was as fascinating as it was repulsive. Not surprisingly, no-one in Brussels is prepared to accept responsibility for this giant boondoggle. The eurocrats neither investigate, nor try to stop the mafia's involvement (their standpoint is that as soon as entrepreneurs in the region get the funds, it legally becomes their problem. The 'Ndrangheta mostly gets the money from construction firms, via extortion rackets, but it is also involved in the construction business directly, as this opens up countless possibilities to fraudulently obtain and steal EU grants, launder money, etc.). The astonishing thing is that in spite of the huge cost overruns and the fact that the construction is as far from being finished as it was years ago already, the EU not only does not investigate, it also doesn't stop sending money. And now it wants even more?

 

 

 

 

Charts by: IFO


 

 

Emigrate While You Can... Learn More

 


 

 
 

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