Europe Is Literally Imploding From The Inside: UK Heading Toward Third Recession In 4 Years, Spain’s Tax Revenue Drops 20% And Budget Deficit Grew by 35.4% In January, Eurozone Industrial Production Worse Than Expected As Unemployment Rises To Record Levels, And Italy’s Industry Chiefs Have Warned That The Country Faces A “Full Credit Emergency”
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UK industrial production and manufacturing production dived in January, according to the latest official numbers released today.
The report raising fears that the UK is heading toward its third recession in only four years.
Sterling fell sharply on the news with GBP/USD reaching the lowest level of 1.4830, unseen since July 2010, before rebounding slightly….
Spain’s Budget Deficit Grew by 35.4% in January to 1.2% of GDP; Spain’s Tax Revenue Drops 20% in Face of VAT Hikes
Here’s a story you can expect to see in the Wall Street Journal or Financial Times tomorrow. You can read it here today.
Via Google Translate, El Economista reports Spain’s Budget Deficit Grew by 35.4% in January to 1.2% of GDP.
The government deficit in terms of national accounts in January reached 12.729 billion euros, equivalent to 1.2% of GDP, representing an increase of 35.4% over January 2012.
According to the budget execution data published in January by the Ministry of Finance website, the cash deficit in January came to 15,252,000, which are the result of a fall in net income of 37% (5.789 billion) and a expenses increased by 15.4% (21.041 billion).
Tax revenues fell 20% to 10.608 billion, among other causes by the accumulation of returns earlier this year, says Finance.
Italy’s industry chiefs have warned that the country faces a “full credit emergency” as thousands of companies run out of critical funding, threatening a slide into deeper depression.
Confindustria, the business federation, said 29pc of Italian firms cannot meet “operational expenses” and are starved of liquidity. A “third phase of the credit crunch” is underway that matches the shocks in 2008-2009 and again in 2011.
In a research report the group said the economy was caught in a “vicious circle” where banks are too frightened to lend, driving more companies over the edge. A thousand are going bankrupt every day.
Franco Bernabè, the head of Telecom Italia, echoed the warnings, lamenting that firms are literally “dying from lack of liquidity”. He called on the Bank of Italy to take bolder action to head off disaster. “The Italian economy is being suffocated. The country must intervene rapidly to reinject funds into the economy”, he said.
Fulvio Conti, head of the energy group Enel, exhorted Rome to give the economy an immediate shot in the arm by paying €48bn in state arrears to companies, arguing that this can be done without breaching EU deficit rules. This would amount to fiscal stimulus of 1.5pc of GDP.
Late payments have become a chronic problem across the board in Italy, with 47,000 official complaints last year. The research group CGIA di Mestre said half of small companies cannot pay their staff on time.
Is the financial collapse of Italy going to be the final blow that breaks the back of Europe financially? Most people don’t realize this, but Italy is actually the third largest debtor in the entire world after the United States and Japan. Italy currently has a debt to GDP ratio of more than 120 percent, and Italy has a bigger national debt than anyone else in Europe does. That is why it is such a big deal that Italian voters have just overwhelmingly rejected austerity. The political parties led by anti-austerity candidates Silvio Berlusconi and Beppe Grillo did far better than anticipated. When you combine their totals, they got more than 50 percent of the vote. Italian voters have seen what austerity has done to Greece and Spain and they want no part of it. Unfortunately for Italian voters, it has been the promise of austerity that has kept the Italian financial system stable in recent months. Now that Italian voters have clearly rejected austerity, investors are fearing that austerity programs all over Europe may start falling apart. This is creating quite a bit of panic in European financial markets right now. On Tuesday, Italian stocks had their worst day in 10 months, Italian bond yields rose by the most that we have seen in 19 months, and the stocks of the two largest banks in Italy both fell by more than 8 percent. Italy is already experiencing its fourth recession since 2001, and unemployment has been steadily rising. If Italy is now “ungovernable”, as many are saying, then what does that mean for the future of Italy? Will Italy be the spark that sets off financial armageddon in Europe?
Political uncertainty may push Italy’s borrowing costs higher. Draghi’s ‘miracle’ was only temporary..
Basing economies on credit doesn’t look to be such a good idea after all. The bankers’ ponzi-scheme is unraveling.