The truth about the EU’s financial situation in one word

BANKRUPT

predictions vindicated on all fronts

The Slog: In recent weeks, the Slog has consistently questioned the official version of the European Union’s ‘situation’: the wisdom of the German electorate, the mysteriously missing eurozone investment data, the state of Spanish banks, the real nature of Greek debt repayment schedules and possibilities for a recovery, the obviously mendacious nature of the Italian economic data, the insolvency of the Monte del Peischi Bank, and even whether David Cameron had genuinely secured a reduction in the EC budget. In particular, the slurry of poor data that followed Merkel’s victory last weekend seemed to me on Monday and Tuesday worthy of comment. Judge for yourselves as to what the real situation is in the light of what follows below.

French Bank SocGen just issued this damning commentary on credit and growth in the eurozone:
‘Loan production to the private sector growth dropped further by €8bn or 1.5% yoy. Looking forward, this suggests that a recovery in private investment at the area level is not something to expect in the near future. Private-sector credit growth remained negative in August, falling by 2.0% yoy. Adjusted for sales and securitisation, private-sector loan production dropped by €8bn, after respective tumbles of €35bn and €44bn in July and June. Loan production to the private sector stood 1.5% below its year-ago level in August.’

As regards capital/investment money flight, the ECB’s own data now makes the reality of it obvious: although a new ECB report shows wild divergence across sectors and countries, loan production to non-financial corporates plunged by €11bn in August (2.9% yoy), after respective €19bn (2.1%yoy) and €12bn (2.3%) drops in July and June. That is an aggregate €42bn collapse/flight, and confirms that a recovery in business investment is well nigh impossible in the near future. Here’s the chart that says it all:

As you can see, there hasn’t been a positive lending to non-bank business figure since June 2012. That is the real nature of the EU’s dead stop: it’s not so much liquidity light as an arid desert of lending.
And here’s one that finally spells out the dysfunction of the Spanish banking system….a reality I’ve been bashing on about since late 2011 – and the dire insolvency across Italian banking:

From last Autumn, bank lending in Spain has plummeted catastrophically, and Italy is going the same way. France will soon follow.
As for any chance of EC cloth-trimming for the bureaucrats, the turkey Cameron must now consider himself well and truly trussed up: European Union
Budget Commissioner Janusz Lewandowski last night said. “We are going to need additional funds to meet our legal obligations”, and promptly demanded a £3.5 billion bailout from national governments…or it will “run out of cash within months”. The news breaks only six months after the EU was granted an extra £6.4 billion to keep it afloat. The extra cash will take the total EU budget to £126 billion – an 8.4% increase on the previous year, as opposed to the 13% cut heralded by Dodgy Dave last year.
Bear in mind that this ‘organisation’ called the Commission has overspent its budgets every year since it came into existence, and no auditor anywhere in the world has been willing to sign off the accounts for nineteen years, so ‘irregular’ are some of the monies recorded therein. (For a look at where €2.1bn went, see yesterday’s Slogpost).
So we can now add all the above to the list of cynically post-Bundestag election bad news released in just four days this week: LTRO2 from Mario Draghi, Monte del Paschei going bust, a mega-dodgy forecast from Deutsche Bank, and Poland’s pension raid.
Enjoy the weekend – and next time you hear about recovery, mending, corner-turning and all the rest of the bollocks, simply give the jerk who’s talking the link to this piece. America is in a mess, the Dollar is in a bigger mess, Europe is stagnant and insolvent, and China’s fantasy soft-landing is impossible without those markets at least buying their goods bigtime.
To restate the conclusion to The Slog’s German election prediction from September 11th, ‘…as is so often the case, the external data suggest that the German majority is hopelessly wrong….The Germans who love to go a-wanderung are, in truth, meandering towards disaster with the same blasé optimism of the Weimar middle class after 1931.’
And to restate yesterday’s closing advice, ‘fiscal and financial globalist capitalism is in a deep pit of poo created by naive neoliberal academics and psychotic banking greed. There is no way out: accept that, and prepare accordingly.’

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Art by WB7