EU Begins To Crack Further And To Implode: BUNDESBANK CUTS GERMAN 2013 GDP FORECAST, Call It A Recession, ECB Considers Negative Interest Rates, Italy And Spain Are Selling Off, And Fitch Will Downgrade The UK’s AAA Rating!!!

Just How Bad Is It In Europe?

EURUSD is ‘weak’ (under 1.2900) this morning, having given a week’s worth of gains back in just 2 days as it appears (quite unsurprisingly) that even the core or Europe is now becoming embroiled in a total economic depression. While it seems unlikely that the much-discussed optimal-strategy of Germany leaving the EUR will occur before Merkel’s re-election, we suspect there will be growing angst that their economic woes are due to their other European cousins. To wit, Germany’s Industrial Production Capital Goods (just as we have also seen in the US) have fallen off a cliff in the last two months (almost -3 sigma); it has only been this bad twice in the last twenty years. Perhaps, we need to replace the youth unemployment records with German Capital Goods production as the ‘new’ scariest chart in Europe, since it seems the Money McBags of the disunion has mounting troubles of its own.



(h/t Sean Corrigan of Diapason Commodities)

A Huge Miss In German Industrial Production

German industrial production fell 2.6 percent in October.  Economists were expecting this number to be unchanged.


ECB head Mario Draghi recently warned that the economic crisis in Europe’s peripheral countries is seeping into core countries like Germany.

Weeks ago, we learned that unemployment in Germany climbed for the eighth straight month.


UK Industrial Production Unexpectedly Drops

UK Industrial production unexpectedly fell 0.8 percent month-over-month in October, reports Bloomberg’s Linda Yueh.  This was much worse than the 0.8 percent increase expected by economists.


Manufacturing fell 1.3 percent versus and estimate for a 0.2 percent decline.


BUNDESBANK CUTS GERMAN 2013 GDP FORECAST TO 0.4% FROM 1.6%. Call it a recession

Germany’s central bank sharply cut its 2013 economic growth forecast to 0.4% on Friday, while poor industrial production figures underlined expectations of a weak winter for Europe’s biggest economy.

The Bundesbank cut its outlook for gross domestic product growth next year from the 1.6% it predicted in June. It also lowered its forecast for 2012 to 0.7% from 1%.

That put the central bank’s outlook well below the government’s prediction of 0.8% growth this year and 1% growth in 2013.

The eurozone is in a recession that the European Central Bank has this week forecast will continue next year. The ECB cut its 2013 GDP forecast for the eurozone from 0.5% growth to a 0.3% decline.


Italy And Spain Are Selling Off

Markets have lost their early gains and they’re now trading near their lows in Europe.

England’s FTSE 100 is down 0.2%.

France’s CAC 40 is down 0.3%.

Germany’s DAX is down 0.2%.

Spain’s IBEX is down 1.1%.

Italy’s FTSE MIB is down 1.2%.

One of the big stories of the year has been Italy’s falling borrowing costs, which have been attributed to the leadership of Prime Minister Mario Monti.. However, Italy faces an election early next year, and Monti’s approval rating has been falling.

Here’s an intraday look at Italy’s FTSE MIB via Bloomberg:


italian market




Monetary Insanity: ECB Considers Negative Interest Rates, Looking for Clues From Denmark; Anteaters and Hurricanes

The ECB is now pondering monetary insanity: ECB’s Coeure says negative bank deposit rate an option

 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.

Speaking in Mexico, Coeure said the bank needed to take the rate down 25 basis points to zero to match its cut in the reference rate.

He said policymakers would need to consider whether it could take the deposit rate below zero, which would mean the central bank would start charging banks for the privilege of parking spare cash in the ECB.

“It’s still possible,” Coeure told students at an event in Mexico City. “It’s true that we are hitting a psychological limit at zero. And it’s unclear whether markets can function at negative interest rates. Some of them can.”

“Some of them apparently can’t. So before making the next step, which would be moving the deposit facility to a negative yield, we’ll reflect about it,” he added.

Denmark introduced a negative interest rate this month and the ECB is watching closely how the move plays out.

Negative Rates in Denmark, Switzerland



Fitch warns Osborne’s debt slip could see AAA credit rating downgraded

Chancellor George Osborne has reacted to the threat of Britain losing its coveted AAA credit rating by saying it was important but not the only measure affecting the country’s borrowing rates.

His comments came after rating agency Fitch declared Britain’s credibility had been damaged as new Government forecasts in yesterday’s Autumn Statement revealed that Britain would miss a key debt-cutting target.

Fitch already has a negative outlook on Britain’s triple-A debt rating, and said it would review this again early next year.


Asked if it would matter if Britain lost its top triple-A rating, Osborne told BBC TV: ‘It wouldn’t be a good thing but the credit rating is one of a number of ways in which people look at countries.

‘Because when people look around the world and they look at countries to invest in they think Britain is a good investment,’ he said.