By Delusional Economics, who is determined to cleanse the daily flow of vested interests propaganda to produce a balanced counterpoint. Cross posted from http://www.macrobusiness.com.au/2013/01/imf-admits-more-mistakes/“>MacroBusiness.
Another day, another round of atrocious data out of the Eurozone:
Spain’s unemployment rate soared to a new record of 27.2% of the workforce in the first quarter of 2013, according to official figures. The total number of unemployed people in Spain has now passed the six million figure, although the rate of the increase has slowed.
The figures underline Spain’s struggle to emerge from an economic crisis which began five years ago. A big demonstration in Madrid is being planned against the austerity measures. On Friday, Prime Minister Mariano Rajoy will unveil fiscal and policy measures aimed at halting recession in the eurozone’s fourth-largest economy.
“These figures are worse than expected and highlight the serious situation of the Spanish economy as well as the shocking decoupling between the real and the financial economy,” said Jose Luis Martinez, strategist at Citi.
Last week, the International Monetary Fund cut its 2013 forecast for Spain’s growth to a 1.6% contraction from 1.5% and said the unemployment rate would peak at 27% this year.
Youth unemployment is reported at 57.2%, which is a number so large its almost impossible to comprehend. The IMF claims it will peak this year, but you only have to look at their track record on economic forecasting to know you should take that with a pinch of salt. The latest PMIs still show contraction, industrial production is down 6.5% from a year ago, and bad loans are still over 10% even after the implementation of a bad bank in an attempt to clean out the banking system.
With dour data like that it is little wonder that Spain is ahead of the pack when it comes to lack of confidence in the EU:
Public confidence in the European Union has fallen to historically low levels in the six biggest EU countries, raising fundamental questions about its democratic legitimacy more than three years into the union’s worst ever crisis, new data shows.
After financial, currency and debt crises, wrenching budget and spending cuts, rich nations’ bailouts of the poor, and surrenders of sovereign powers over policymaking to international technocrats, Euroscepticism is soaring to a degree that is likely to feed populist anti-EU politics and frustrate European leaders’ efforts to arrest the collapse in support for their project.
Figures from Eurobarometer, the EU’s polling organisation, analysed by the European Council on Foreign Relations (ECFR), a thinktank, show a vertiginous decline in trust in the EU in countries such as Spain, Germany and Italy that are historically very pro-European.
In Spain, trust in the EU fell from 65% to 20% over the five-year period while mistrust soared to 72% from 23%.
And with Spanish house prices accelerating downwards last month according to Tinsa, and the corresponding loss in private sector wealth it really isn’t a surprise that employment continues to fall while anger levels rise.
But as we know, a rise in unemployment means a fall in government revenues which, under the current line of thinking, again means a call for greater public sector cuts and around the mad merry-go-round goes. Over the last few years we’ve seen this picture play out in the European periphery but as I’ve been warning for over 18 months both France and The Netherlands are ‘core’ economies that are highly susceptible to go the way of the periphery due to the macroeconomic structure of their economies.
Unsurprisingly in the last few weeks both countries have acknowledged that they will miss their 3 percent deficit targets this year, while we’ve already seen a number of other countries receive concessions on their existing bailout programs due to worse than “expected” economic metrics.
Earlier this week the European Commission President, Jose Manuel Barroso, stated that there were signs that the current policy framework was reaching its political limits suggesting that it has now become evident, even to the Eurocrats in Brussels, that the austerity experiment is failing.
So as I said back in December of 2011:
My assumption is that, if Europe does ratify this framework …, after 12-24 months of trying the effect will be so disastrous that they will eventually give up. But until then my base case for Europe is a significantly worse economic outcome.
We’re not there yet, but I’ve still got another 8 months under my belt.