Tag Archives: Europe

Germany Stalls and Europe Craters, by Alastair Crooke

Will Europe lead the world into an economic depression? From Alastair Crooke at strategic-culture.org:

The influential economic commentator on Europe, Ambrose Pritchard Evans, writes:

“German industry is in the deepest slump since the global financial crisis, and threatens to push Europe’s powerhouse economy into full-blown recession. The darkening outlook is forcing the European Central Bank to contemplate ever more perilous measures.

“The influential Ifo Institute in Munich said its business climate indicator for manufacturing went into “free fall” in July, as the delayed damage from global trade conflict takes its toll and confidence wilts. It goes far beyond the woes of the car industry. More than 80pc of Germany’s factories are in outright contraction.”

Why? What is going on here? It seems that, though other European member-states used to be Germany’s largest market, Germany’s first and third largest export destinations are now the US and China, respectively. Together, they account for more than 15% of all outbound German trade activity. More than 18% of Germany’s export goods ended up somewhere in Asia. Therefore, Germany’s industrial struggles in 2019 point the finger in the direction of its external focus, which means the US, China, and Asia – i.e. its largest marginal trade partners. And the principal assailants in today’s trade and tech wars.

Clemens Fuest, the Ifo president, says: “All the problems are coming together: It’s China, it’s increasing protectionism across the board, it’s disruption to global supply chains”.

But if Germany’s manufacturing woes were not sufficient in and of themselves, then combined with the threat of trade war with Trump, the prospect indeed is bleak for Europe: And the likelihood is that any of that ECB stimulus – promised for this autumn, as Mario Draghi warns that the European picture is getting “worse and worse” – will be very likely to meet with an angry response from Trump – castigated as blatant currency manipulation by the EU and its ECB. EU Relations with Washington seem set to sour (in more ways than one).

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Europe is Dying on a Cross of Gold, by Tom Luongo

Are investors and speculators edging towards the exits on Europe? From Tom Luongo at tomluongo.me:

Gold is calling out the insanity of the European Union. It is also calling out the insanity of the global economy. But really it’s all about the euro at this point.

Since breaking through the post-Brexit high of $1375 per ounce, gold has pushed higher. Yes, it’s been volatile. Yes, the forces of control keep trying to stuff gold back inside the box, as it were.

And they keep failing.

Last week’s price action was impressive, even if the close was less than stellar. In the world of financial commentary everyone is looking for proximate causes for spikes and dips.

But most of that is simply noise. I don’t care why gold touched $1450 last week, only that it did.

Because a bull market that shakes off a number of big intra-week corrections to then blast to a new near-term high is a healthy one; one climbing the proverbial wall of worry.

And what’s important here is that this is not an anti-dollar trade. It is an anti-euro one. The U.S. Dollar Index has fully shaken off all attempts by the Fed to talk it down, trading at 97.6, and threatening a back-to-back monthly reversal at 97.8.

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Trump To Unleash Hell On Europe: EU Announces Channel To Circumvent SWIFT And Iran Sanctions Is Now Operational, by Tyler Durden

Trump doesn’t take to uppity Europeans. From Tyler Durden at zerohedge.com:

With the world waiting for the first headlines from the Trump-Xi meeting, the most important and unexpected news of the day hit moments ago, when Europe announced that the special trade channel, Instex, that will allow European firms to avoid SWIFT and bypass American sanctions on Iran, is now operational.

Following a meeting between the countries who singed the Iran nuclear deal, also known as the Joint Comprehensive Plan of Action (JCPOA), which was ditched by US, French, British and German officials said the trade mechanism which was proposed last summer and called Instex, is now operational.

As a reminder, last September, in order to maintain a financial relationship with Iran that can not be vetoed by the US, Europe unveiled a “Special Purpose Vehicle” to bypass SWIFT. The mechanism would facilitate transactions between European and Iranian companies, while preventing the US from vetoing the transactions and pursuing punitive measures on those companies and states that defied Trump. The payment balancing system will allow companies in Europe to buy Iranian goods, and vice-versa, without actual money-transfers between European and Iranian banks.

The statement came after the remaining signatures of JCPOA gathered in Vienna for a meeting that Iranian ministry spokesman Abbas Mousavi called  “the last chance for the remaining parties…to gather and see how they can meet their commitments towards Iran.”

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The slow return of Eurosclerosis, by Thomas Kirchner and Paul Hoffmeister

Eurosclerosis, the slow or no growth disease caused by overtaxation, overregulation, too much government, and rigid labor markets, is creeping up on Europe once again. From Thomas Kirchner and Paul Hoffmeister at camelotportfolios.com:

With protests by yellow vests in France approaching their six month anniversary and the European economy showing signs of not a temporary dip, but prolonged weakening, it is a good moment to take a step back and analyze the current situation as well as its implications for the medium to long-term outlook for Europe.As we see it, European economies have been weakening significantly, and even worse, Germany, the European Union’s largest economy comprising almost 21% of the area’s GDP in 2018[i], is on the verge of recession. With Germany the economic locomotive of the euro area, there may not be much reason to be optimistic. The country’s economic problems appear to be structural, due to high taxes, excessive government spending, failed energy policies and other regulatory constraints. Thinking about the years ahead, we aren’t optimistic that the policy response from the German government — as well as other European governments such as in France, Italy and Greece — will be strong enough to avoid a prolonged economic malaise for the continent. As a result, we believe that the global economy will suffer from Eurosclerosis in the coming years.

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Figure 1: GDP of EU Member States and Share of Total. Source: Statistics Times.

Far from quiet on the US vs Russia-China front, by Pepe Escobar

Much of Eurasia is working to free itself from the US orbit, by either gravitating towards the China-Russia axis, or staying officially nonaligned. From Pepe Escobar at thesaker.is:

Let’s start in mid-May, when Nur-Sultan, formerly Astana, hosted the third Russia-Kazakhstan Expert Forum, jointly organized by premier think tank Valdai Club and the Kazakhstan Council on International Relations.

The ongoing, laborious and crucial interconnection of the New Silk Roads, or Belt and Road Initiative and the Eurasia Economic Union was at the center of the debates. Kazakhstan is a pivotal member of both the BRI and EAEU.

As Valdai Club top analyst Yaroslav Lissovolik told me, there was much discussion “on the state of play in emerging markets in light of the developments associated with the US-China trade stand-off.” What emerged was the necessity of embracing “open regionalism” as a factor to neutralize “the negative protectionist trends in the global economy.”

This translates as regional blocks along a vast South-South axis harnessing their huge potential “to counter protections pressures”, with “different forms of economic integration other than trade liberalization” having preeminence. Enter “connectivity” – BRI’s premier focus.

The EAEU, celebrating its fifth anniversary this year, is fully into the open regionalism paradigm, according to Lissovolik, with memoranda of understanding signed with Mercosur, ASEAN, and more free-trade agreements coming up later this year, including Serbia and Singapore.

Sessions at the Russia-Kazakhstan forum produced wonderful insights on the triangular Russia-China-Central Asia relationship and further South-South collaboration. Special attention should focus on the concept of the Non-Aligned Movement (NAM) 2.0. If a new bipolarity is emerging, pitting the US against China, NAM 2.0 rules that vast sectors of the Global South should profit by remaining neutral.

On the complex Russia-China strategic partnership, featuring myriad layers, by now it’s established that Beijing considers Moscow a sort of strategic rearguard in its ascent to superpower status. Yet doubts persist across sectors of “pivot to the East” Moscow elites on how to handle Beijing.

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What Does It Mean to Live in a Multipolar World? We May Be About to Find Out, by Marshall Auerback

Many people talk about the emergent multipolar world order, but few try to define what that will mean. from Marshall Auerback at nakedcapitalism.com:

The breakdown in the Sino-U.S. trade talks has led a number of commentatorsto suggest that America’s “unipolar moment” of post-Cold War preeminence is over, as Washington lashes out against a rising China, whose economic rise threatens America’s historic dominance. Direct military violence is highly unlikely, given the inherent fragility of high-tech civilization. We therefore may see Cold War–style conflict between the two superpowers, as relations in trade or national security matters become increasingly poisoned.

So what happens to the rest of us? Will a hitherto globalized world increasingly retreat into bifurcated competing blocs, much as occurred under the original Cold War? Or can the rest of the world develop a more muted and stable form of multilateralism?

After all, we are well past the point where parts of the globe are increasingly carved up via competing ideologies (e.g., capitalism vs. communism), given today’s broad embrace of various permutations of capitalism, or divided via proxy wars, or the “great game” of colonial expansion. Today, most nations focus on maximizing the relative productivity of their own respective economies, as opposed to establishing their ideological bona fides as quasi-colonial client states for either the United States or the former Soviet Union. Another important dimension to recognize is that what we understand to be global or international is, for the most part, owned and controlled by industrialized countries: 93 percent of foreign-owned production is controlled by Organization for Economic Cooperation (OECD) economies. Even the historic tendency to focus on state power should be questioned in this moment. In 2016, 69 of the world’s largest 100 economies were corporations, with their own range of interests and methods of functioning.

One of the (self-serving) fears governing the end of American hegemony is that in its absence, the world will inevitably revert to some sort of brutal Hobbesian “state of nature” characterized by a balance of power clashes, in which the strong dictate to the weak.

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The Limits of American Destructiveness, by Dmitry Orlov

The main limit on American destructiveness is that the rest of the world is getting tired of destruction. From Dmitry Orlov at cluborlov.blogspot.com:

US foreign policy has always been directed at wrecking anything that wasn’t deemed sufficiently American and replacing it with something more acceptable—especially if that something allowed wealth to flow into the US from the outside. Compromises were reserved for the USSR, but even there the Americans constantly tried to cheat. For everyone else there was just submission, which was usually tactfully disguised as a positive—a seat at the big table which offered better chances for peace, prosperity and economic and social development.

Of course, it was a simple enough matter to pierce this veil of hypocritical politeness and to point out that the US, living far beyond its means, has only managed to survive by looting the rest of the world, but anyone who dared to do so would be ostracized, sanctioned, regime-changed, invaded and destroyed—whatever it took.

The US establishment has lavished its wrath on anyone who dared to oppose it ideologically, but it reserved its most extreme forms of malice for those who dared commit the cardinal sin of attempting to sell oil for anything other than US dollars. Iraq was destroyed for this very reason, then Libya. With Syria the juggernaut bogged down and stalled out; with Iran it is unlikely to ever get started.

Even the spineless European politicians are now forced to admit that US policies are designed to enrich certain American interests at the expense of their constituents; they understand by now that further denial would cause them further harm at the polls. Most insultingly to the American ego, US attempts at making Russia and China submit are being greeted with shrugs, titters and eye rolls. And now anybody who wants to can openly criticize the US and scheme behind its back.

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