Wednesday, September 26, 2012

Taking It to the Streets: European Style

La Nouvelle Grande Illusion de l'Europe remains in full swing.  (apologies to Jean Renoir)  Columnists are arguing about whether or not the European Stability Mechanism's "decision" to allow direct recapitalization of national banks from ESM funds is retroactive.  Mario Draghi must be talking to himself as he discusses budgetary union among EU members.  Chancellor Merkel has finally been advised to always agree, since it is never clear what she agreed to and on what terms.  She always reserves the right to be overturned by her courts, regulators, or coalition members.  None of this falderol may matter because of what is unfolding in the economy, and worse, in the streets.

Meanwhile, the economic news from the emergency room is not good:
  • Ireland, which seemingly took early action on bank resolutions and fiscal austerity, has just seen its 2012 and 2013 GDP growth forecasts downgraded.  Domestic final demand and net exports are weaker than expected.  Significant emigration is taking away business owners, entrepreneurs and technical workers. The property market is in shambles.  Debt/GDP will finish 2012 above 100% and will trend higher in 2013, according to the IMF.
  • Spanish and Italian bond yields are rising today, despite the "unlimited firepower" of the ECB bond buying program.
  • Spain still doesn't know how much money it will take to recapitalize its banks until the new austerity budget is submitted. 
What's more important than this political and economic foolishness?  Here's a picture:
                                                New York Times

No, this is not a picture of Bane in Gotham City from "The Dark Knight Rises."  It is a real life street picture from Greece, where the riot police are risking injury from rocks and Molotov cocktails.  The Greek government has to start asking itself: what do we, as elected officials, really have to gain by the current Euro status quo, continued dithering, and by the ultimate medicine we'll have to take? 

In Spain, protests have moved beyond displaced workers to scenes of genuine urban hunger and deprivation.  Here's another New York Times photo,
                                                       Sam Aranda for New York Times
Even the patrician Spanish Prime Minister will have to realize that "dumpster diving" among his young constituents may require coming down from his throne to actually do something besides turning up his nose at a bailout.  Even if he were to get the terms of a bailout, he too may have to reconsider what it means for Spanish sovereign governance. 

The most important leading indicators for the euro crisis unfolding may be in financial rates, but better indicators may be from the streets, as captured by the photographers' eyes. 

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