munKNEE.com Your Key to Making Money
Economic risk in the Eurozone and elsewhere appears to be escalating, and
what is said here describes what may prove to be the ‘biggest crack yet in Humpty Dumpty’s shell’.
So says Ian R. Campbell
Campbell goes on to say, in part:
Yesterday, the ‘rubber hit the road’, with the ‘leaked release’ of some of the apparent conditions that will be attached to the agreement reached by Eurozone country finance ministers two weeks ago [regarding the Spanish financial crisis]. These conditions, which are said to include
- the takeover of Spain’s financial system by the European Union;
- a write down on 67 billion euros of bank debt to be taken by existing creditors of the banks; and,
- a wind-down of at least one Spanish bank,
are being called ‘draconian’. This is likely for no reason other than such extreme measures have not previously been seen until now among Eurozone countries. That said, it seems obvious that ‘draconian measures’ are called for, not just in Spain, and not just in the Eurozone.
While this was going on, Spanish Premier Maiano Rajoy announced:
- an increase in Spanish VAT (value added, or sales tax) from 18% to 21% for products (and I assume most services) other than food where Spanish VAT remains at 4%; and,
- introduced 65 billion euros in austerity programs.
Take Note:
Consider the consequences of these measures, which on the balance of probabilities likely include:
- near-term reduction in retail sales from current levels. This given Spain’s current 24% overall unemployment rate and 52% youth unemployment rate;
- increases in at least the overall unemployment rate;
- a drop in Spain’s GDP;
- notwithstanding the austerity measures introduced, a continuing Spanish Federal deficit;
- absent Spanish currency controls, a run on Spain’s banks;
- a very unhappy ‘Main Street’ population with a very real chance of demonstrations and ‘less than happy’ social unrest;
- reduced tourist revenues if that happens, where tourism is very important to Spain; and,
- continuation and likely worsening of the current Spanish economic recession.
It typically is not a good thing when a ‘small shoe drops’ and Spain is a ‘big shoe’ in Eurozone terms.
Watch for things in Spain to get worse before they get better and, in particular, look for signs of negative economic related contagion issues flowing out of Spain to other Eurozone countries and possibly the world banking system.
Topical References:
- Debt crisis: Spain bows to EU ultimatum with drastic cuts
- Proud Spain again humbles itself to the euro’s demands
- ‘This is reality’: Spain slashes spending, raises taxes in $79B austerity plan
- Spain to Cede Bank Control
Editor’s Note: The above article may have been edited ([ ]), abridged (…), and reformatted (including the title, some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. The article’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article.
Related Articles:
I have a sinking suspicion – a feeling I just can’t shake – based on multiple fundamental, technical, and timing indicators….[that] the end is near. I’m not talking about some Mayan calendar apocalypse kind of thing….[but] a catastrophic, painful, epic meltdown-type endgame for this European sovereign debt crisis…[[Let me explain why I see that to be the eventual outcome.] Words: 810
2. Leeb: Europe at Risk of Totalitarian Governments Coming Into Vogue Again! Here’s Why
In the 1930s…when unemployment breached 25% you started seeing authoritarianism really come into vogue….and we are seeing those kinds of unemployment rates in Greece and Spain…. [In fact,] what’s going on in France is starting to look a little bit totalitarian – and this is in France of all places…The world and the global financial system are in an extremely dangerous situation so investors need to be careful and make sure they protect themselves.
3. Graham Summers: This Is What Is REALLY Happening In Europe!
I’ve often been labeled as “Gloom and Doom” in the past, but the situation in Europe today is beyond anything I’ve ever seen before. It is highly likely that the EU will not exist in their current form by the end of the year. I realize some of this may sound overly dramatic but the following should give you an idea of how serious things are getting: [Words: 715]
4. Germany Could Initiate the Collapse of the European Union Within Months – Here’s Why
As many of you know, my primary forecast regarding Europe is that the EU will be broken up and/or collapse within the coming months. The reasons for this are financial, monetary and political in nature [with much of the latter dependant on what happens in Germany. Let me explain.] Words: 516
5. This Picture of European Economic Reality is Worth 26,911 Words – Take a Look
The European economic situation is explained very simply in the illustration below. Take a look.
6. Europe Heading Towards a Full-scale Disaster – Here’s Why
Europe is heading into a full-scale disaster [because,] you see, the debt problems in Europe are not simply related to Greece. They are SYSTEMIC. The European banking system’s leverage levels alone position Europe for a full-scale banking collapse on par with Lehman Brothers. Again, I’m talking about Europe’s ENTIRE banking system collapsing. This is not a question of “if,” it is a question of “when” and it will very likely happen before the end of 2012. Words: 750
7. The Eurozone Crisis: A Quick Guide to Key Dates, Developments and Investment Implications
Follow the eurozone crisis as it unfolds with this quick guide to key dates, developments, and investment implications.
8. IMF’s Lagarde Warns: European Leaders Have 3 Months to Save the Euro!
As the focus of the euro crisis shifts to Italy, IMF head Christine Lagarde has warned that European leaders have less than three months to save the euro. Meanwhile top economist Nouriel Roubini has called on Berlin to drop its obsession with austerity, proposing that the German government give every household a 1,000 euro [$1,250 US equivalent] voucher to spend on a vacation in Southern Europe. Words: 990
9. PMI Data From Europe Shows Business Activity at Lowest level Since 2008/9 – What’s Next?
The Markit PMI data from Europe shows still more deterioration led by France, Italy, and Spain. Let’s take a look at a few countries.
10. European Union Will Collapse Before the End of 2012: This is NOT Doom & Gloom – This IS Reality!
11. The Euro System is Doomed and the End Will Look Like This
In every economic crisis there comes a moment of clarity. In Europe soon, millions of people will wake up to realize that the euro-as-we-know-it is gone. Economic chaos awaits them. [Let us explain why that is the case and how it will come about.] Words: 680
12. Here’s the “No BS” Situation with Europe – and Its BAD!
The media is rife with misrepresentations and analysis of the EU. Here’s the real deal, no BS situation with Europe – and its BAD! Words: 900
13. Why & How the Euro Came About and What the Future Holds
Introduction: “The crisis in the eurozone is the result of France’s persistent pursuit of the “European project,” the goal of political unification that began after World War II [with the hope] that a political union, a United States of Europe similar to America’s, would…prevent the types of conflict that had caused three major European wars…[and] also make Europe a power comparable to the United States, and thereby give France, with its sophisticated foreign service, an important role in European and world affairs.” [What went wrong and what does the future hold?]
14. Simone Foxman: “The Eurozone Crisis For Dummies”
Worries about an economic catastrophe in Europe are heating up again, and dramatic forecasts about doom are popping up everywhere. What’s important? How did we get here? Let’s put this all in perspective. Words: 2356
15. Nigel Farage: The Only Way to Avoid a Depression Is a Break Up of the European Union
We still don’t have many political voices [in the European Union] that have the courage to say, ‘We’re headed for the rocks, and before we hit the rocks, let’s take a different course. Let’s try to break this thing up peaceably, before it ends in disaster….The establishment always supports the status quo…but actually, I think the only way we can avoid a depression is to break this (the EU) up.
16. Graham Summers: Collapse of Europe is Guaranteed! Here’s Why
I continue to see articles in the media claiming that Europe’s problems are solved. Either the folks writing these articles can’t do simple math, or they don’t bother actually reading any of the political news coming out of Europe [so let me present 3 data points that guarantee Europe will collapse at some point in the near future]. Words: 722
17. Europe is Heading Off a Financial Cliff! Here’s Why & How to Protect Your Portfolio
Europe is heading off a cliff! From one end of the continent to the other, the numbers suggest a double-dip recession is striking with brutal force…and with the world as interconnected as it is these days, what happens in Europe WILL impact our companies and markets here so now is the time to position your portfolio to weather the storm. Words: 900
18. Americans Take Note: European Crisis is Adversely Affecting U.S. in MAJOR Way – Here’s Proof
Americans, don’t think for one moment that the crises in Europe are irrelevant! This past April the U.S had the largest monthly decline in exports to Europe in the past 7.5 years and this trend will only get worse – much worse – as the crises spread and linger. Exports to Europe are now down 2.7% from April 2011, the first yearly decline since February 2010. The chart below says it all.