Fear and Uncertainty Spreads to Germany

July 22nd, 2012
in econ_news, syndication

Econintersect Eurocrisis News Digest:  Most do not understand that once an economic system looses equilibrium, the rate of degeneration can begin to accelerate.  Evidence of the distress was first seen in the fall of interest rates paid by the strong economies such as Germany.  Logically, this should be a positive dynamic for Germany - yet it appears now the financial and business planning is shifting to "hunkering down".  Per Spiegel:

.... The euro crisis and the higher capital requirements being imposed by regulators have adversely affected almost all European banks. And because of growing fears within the banks of a collapse of the euro zone, they are preparing for the worst by withdrawing to their home markets and winding down many investments.

Follow up:

This has serious consequences for the economy, not just along the periphery of the euro zone, but also in Germany, which had proved to be crisis-proof and was in fact booming until recently.

.... "Of course we sense the reluctance to spend money in the euro zone," says Olaf Wortmann, an expert on the economy with the German Engineering Federation (VDMA). Some investors have become wary and are postponing contracts, Wortmann explains.

What follows is not cherry picked Eurozone headlines to correspond to the lead paragraphs - but a synopsis of global media headlines on the Europe.

Background article for this post:

The common currency union was supposed to benefit the economy of the entire European Union. Now that the euro is struggling, however, it is bringing growth down with it. Germany's economy, once seemingly immune to the crisis, is now facing mounting difficulties. By SPIEGEL Staff

Other Europe and Eurocrisis Headlines:

A senior economist at the institution spearheading the bailouts of three eurozone countries has lambasted its lack of leadership and said its first female chief is not fit for the job.
PARIS (Reuters) - The euro zone is not in danger of breaking up despite some analysts' worse case scenarios, European Central Bank President Mario Draghi said, judging that the bloc was inevitably marching towards closer union among its members.
Market turmoil triggered by the eurozone crisis is still putting the squeeze on the City’s struggling small-cap brokers as private punters take fright.
With millions of euros in debts and an inability to pay back its loans, the operator of Germany's fabled Nürburgring racetrack, home to many of the country's Formula One races, could declare bankruptcy next week. It may be the end of the legendary racecourse, which first opened in 1927.
No renegotiation of Greek austerity cuts: GermanyGerman Foreign Minister Guido Westerwelle ruled out any renegotation of Greece's budget austerity programme in an interview published on Saturday.

Head of Greek privatisation fund resigns: sourceThe chief executive of Greece's privatisation fund has resigned, his office said on Friday, citing a lack of government support, planning delays and forecasting paltry asset sales this year.

MEXICO CITY (Reuters) - Cutting the deposit rate the European Central Bank offers lenders in the euro zone below zero is an option, ECB Executive Board Member Benoit Coeure said on Friday.
Emerging markets: Dream on? FIFTEEN years ago this month, Thailand at last allowed its currency, the baht, to fall against the dollar, abandoning a long, losing battle with market forces. “I haven’t slept for two months,” said the governor of the central bank on the day of the devaluation. “I think that tonight I’ll be able to sleep at last...

EIB to pump €1.4 bn into GreeceThe European Investment Bank will pump 1.44 billion euros ($1.8 billion) into the struggling private sector in crisis-hit Greece by 2015, the ministers of finance and development said on Saturday.

Lending conditions in emerging economies deteriorated in recent months as the deepening crisis in the euro zone weighed on banks around the world, according to an industry survey to be released Friday.
Bank bailout fails to ease Spain concern - IBNLive.comIBNLive.comBank bailout fails to ease Spain concernIBNLive.comBrussels: Even as eurozone finance ministers unanimously approved a loan package of up to €100bn to repair its banks, a surge in the country's bond yields suggested that doubts about its financial position were rapidly mounting.Euro nations seal $122 billion bail-out deal for Spanish banksThe HinduSpain's In Trouble Again: But Is 7% The Danger Level?ForbesSpanish bailout go-ahead fails to ease fearsVictoria Times ColonistPhiladelphia Inquirer -Times of Omanall 3,127 news articles »
Spain engineering giant SENER is tapping overseas opportunities in response to a collapse in its home market, which has been swept into the eurozone crisis.
FRANKFURT (Reuters) - EU regulators will allow a bid by Hongkong's Hutchison 3G to buy France Telecom's Orange Austria if the new combined group permits other Austrian operators to access its network, an Austrian daily said on Saturday, citing sources.
The Bank of England rebuffed calls for stronger oversight of the interest-rate benchmark at the center of a global scandal, according to internal emails and documents.
More bad news for the UK government as a larger than expected public sector deficit in June pushed the government's deficit reduction target for the year further out of reach.
After rising 0.8% on Thursday, up some 3.3% from the closing low seen on 12 July, the FTSE All World index is down 1.1% on Friday. In a day light on economic releases, markets appear to have turned their focus back to the Eurozone, which has hit risk appetite.
A wash-out summer means UK retail sales slumped in the second quarter. Cold and wet weather, combined with ongoing worries about high unemployment, a darkening outlook and the rising cost of living, means the consumer is acting as a drag on the economy and not, as the Bank of England and others had expected, helping to revive the UK from its double-dip recession.
Departing IMF economist rips fund's leadershipA departing senior IMF economist has excoriated the fund, alleging it failed to address Europe's crisis and "suppressed" its challenges, according to a letter published Friday.

U.S. and European stocks fell Friday and the euro hit record lows after Spain’s heavily indebted Valencia region asked for financial aid, increasing investor fears that the Spanish government will seek a full-blown bailout. Read full article >>
The flash PMIs will give the earliest indication of how the global economy started the second half of the year. All will be watched closely by policymakers for growth, employment and price trends and will therefore provide a steer for future policy decisions.
'No Measurable Effect': ECB Interest Rate Cut Inspires Little HopeThe European Central Bank's interest rate is now lower than ever before. But, even with the cut, few believe it will do much to energize the euro-zone's flagging economy. The real problems are to be found elsewhere -- and they aren't getting better.

US greetings cards firm American Greetings’ swoop for 397 shops owned by collapsed Clinton Cards has caught the attention of the UK’s trading watchdog.
Spain bailout fears peak after black FridayA eurozone bailout for Spain's banks and a tough batch of pay cuts and tax hikes have not been enough to save the country from the risk of a full-blown bailout, analysts warn.


Steven Hansen

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