Germany and The Whole Europe on the verge of a Disastrous Economic Cliff Edge
Germany and The Whole Europe on the verge of a Disastrous Economic Cliff Edge. The eurozone economy will drop deeper into recession this year. Germany, the single largest and strongest economy in Europe and the world's fourth-largest economy, is already feeling the pinch. The impact of the coronavirus has seen Germany suffer its widest fall in production and output since the financial crisis a decade ago. The German economy will shrink by 6.3 percent this year. German Exports contracted by 3.1 percent. The Rest of Europe is not in any better shape. In fact, the French GDP is shrinking by 5.8 percent, Spain's GDP by 5.2 percent, Italy's GDP by 4.7 percent, and The Netherlands GDP by 1.7 percent. For the 27 countries that comprise the EU, a downturn of 8.3% is expected in 2020. The coronavirus crisis will push Europe into a deeper recession than originally thought. Europe’s coronavirus outbreak will be the biggest peacetime economic shock on record. And don't expect the European banks to help. Banks may face a tsunami of problems as three factors collide: rise in non-performing loans, deflationary pressures from a prolonged crisis, and central bank keeping negative rates that destroy banking profitability. The Euro-Zone was already in deep trouble before CoVid-19 hit, the weakness that started in 2017 never ended. The region simply isn't competitive. In the fourth quarter, even Germany entered a recession. France, Spain, and Italy are looking at continued large unemployment levels. Add to this the fact the EU lacks technological and intellectual property and is falling further behind China and the US. Recently they started promoting a huge stimulus package. To fund the €750BN package, the EU would borrow on financial markets and put in place a suite of proposed new EU taxes and levies to pay back the debt over the coming decades. Characterizing the current debacle as a deep recession is actually optimistic. The ongoing debasement of fiat, coupled with raging deflation, ensures a very entertaining near future of the deflation/inflation tango. The ongoing destruction of currency is provoking flights of funds into precious metals and crypto. The banking class in the EU is a cabal of lizards. They have been hiding risk for decades, and it has only gotten worse since the introduction of the Euro. In the Mediterranean countries, vast overvaluation of dodgy investments in property means that most of the Med banks are technically insolvent. One day the sacred cows will come home to roost. Welcome back to The Atlantis Report. You are here for your daily dose of the truth, the whole truth, and nothing but the truth. Please take a second to smash that like button. And as You know friends, I rely totally on your donations to keep this channel functional, as you know, it takes a crazy amount of research and time to bring you this content on a daily basis, so I hope you consider helping with whatever donation you can afford. Thank You. The EU economy is expected to experience a deeper recession this year than previously thought,... as the lifting of COVID-19 lockdown measures is proceeding at a slower pace than assumed in its Spring Forecast. According to the Summer 2020, Economic Forecast released on Tuesday. The EU economy will contract 8-point-7 percent in 2020. The contraction is significantly greater than the 7-point-4 percent projected in the previous forecast. Experts cite the far longer period of disruption and lockdown taking place in the second quarter of 2020. The challenge of unwinding stimulus is a lesson that’s long been apparent to central banks. More than a decade after the financial crisis, many had barely moved policy off emergency settings. Their efforts to get back to a more normal stance were on various occasions, scuppered by sluggish growth, weak inflation, or market volatility. European Governments have already pumped billions into support schemes and blown out their budgets in the process. Chancellor Angela Merkel’s government has vowed to spend whatever it takes to get the country growing again, including extending its renowned Kurzarbeit wage-support program. After years of German budget surpluses, that’s been welcomed by other nations, but the country is a rare exception in Europe. Most of its peers face stressed finances. Across Europe, many economies will suffer double-digit slumps in output in 2020. The big hit will be this quarter, the peak of lockdown restrictions. That’s almost certain to be followed by a steep rebound, but rocketing GDP numbers don’t necessarily translate into a sustainable recovery. The 19-nation euro region is set to shrink more than 8% this year, and European Central Bank President Christine Lagarde has warned that the pandemic will change parts of the economy permanently. Hundreds of thousands of workers are already facing unemployment, with companies from Deutsche Lufthansa AG -- Germany’s severely battered airline that just secured a government bailout -- to plane maker Airbus SE preparing to cut jobs. Furthermore, the two main private banks in Germany, Deutsche Bank, and Commerzbank would be on the verge of bankruptcy. The fourth regional bank, NordLB, was bailed out with state aid, which essentially ignored the current bail-in rules (instead applied everywhere else in Europe). And last November, the rating agency Moody revised its outlook on the German banking system downwards (from stable to negative). German cars are now only German in name only. They are designed in Germany by foreign nationals; the parts are built predominately in China or Eastern Europe and either: 1) The foreign parts are shipped to Germany, where the final assembly occurs. "Made in Germany" - or - 2) The whole car is made abroad, "Designed in Germany." If you want a real German car, Get an early 80s BMW. This is all the endpoint of the wonderful Globalization process. It's all driven by profit margins and tax "efficiency." To the benefit of their respective shareholders AND to the detriment of the average German worker. For those who hold equity in German OEMs, this outsourcing has been great, if you are a Handwerker who relies on domestic manufacturing for your job - you're materially disadvantaged. This current system is designed for the preservation of wealth for the top 5% of society - not the bottom 95%. When worker X makes €15 and hour and worker Y makes €3 an hour, shifting manufacturing from X to Y doesn't create efficiencies or improve anything - it just reduces cost, which isn't an efficiency in and of itself. A customs union only works with similarly situated populations, in the absence thereof (whereby a customs union with a very wealthy country and a very poor one) you have manufacturing develop in the poorer countries with services in the wealthier, something that if left unchecked leads to absurd realities. It's a complex problem which is manifesting itself in a multitude of horrible ways, but allowing good-paying blue-collar jobs to flee Germany to other nations benefits no one except the shareholders of the large OEMs, which is a small fraction of the population. In France, figures from Insee's statistics office, show activity in Europe’s second-largest economy still more than 10% below normal. The U.K. economy instantly shrank by a fifth in April alone. In Italy, even with the debt ratio set to top 150% of GDP this year, it’s extended tax breaks for companies and lengthened its furlough program for workers to 18 weeks from an initial 14 weeks. European governments are fast learning that they’ll have to live with aid programs to save jobs and businesses longer than thought to keep the economy from falling off a cliff. Across the continent, furlough programs that shielded close to 50 million jobs at the height of lockdowns, as well as tax deferrals and loan moratoriums, are being extended even as restrictions on movement are lifted. That’s because the sustainability of the economic bounce-back is uncertain, with many businesses still closed or serving fewer customers than before. The economy was already slowing for three years prior to COVID. An economic recession was expected. The whole world is going into recession at the same time. There will be no place to hide. Let's get real. The downturn in GDP for the developed world is closer to 25% despite the bloated response of governments pouring massive amounts of unsecured funds into supporting zombie companies and unemployed workers. Now with efforts to support social distancing being abandoned, there is a dark shadow on the horizon investors may ignore at their own risk. The GDP has turned into a circus of money rotating in circles without actual relation to average prosperity and productivity. Anyone with the intelligence of that surpassing a St. Bernard dog knows that the world has entered the early phase of a global economic depression. There will be NO "V" nor "W" recovery folks. No matter to what degree the Fed juices the S&P on the Market, there will be no actual recovery. It is all smoke and mirrors with many people at home, behind a computer, due to the COVID virus, mere amateurs, "buying low," whereas, the seasoned investors are on the sidelines. Many of these amateurs are "buying low" into already bankrupt companies. October and November will be the real telling point on the Markets. I've been expecting the quasi collapse of the Eurozone, and especially Italy, Greece, and Spain, for about ten years now. The perplexing thing, however, is that no matter how bad their economic and financial situation is, they still manage to limp along. Their solution so far is to just borrow the money, and if interest rates get too high, have your central bank create money and come in as a major buyer of your debt to get those pesky rates down. Several European countries have had even imposed negative rates to coerce people to spend rather than save the money to prevent deflation. How much longer do you think Europe can get away with this and keep it all going? The issue here is the European recession. But The US will be close behind. And we could be talking a Depression, not just a recession. "The virus" was just the pin, not the bubble, and the real bubble was caused by coordinated Central bank Policy. The U.S. will beat Europe to the cliff and be on the bottom before Europe even jumps off in November of 2020. This was The Atlantis Report. Please Like. Share. Leave me a comment. Subscribe. And please take some time to subscribe to my back up channels, I do upload videos there too. You'll find the links in the description box. You will also find a PayPal link if you want to make a donation. Thank you wholeheartedly to all those of you who have already donated. Stay safe and healthy friends!
Contrarian Investor Dr.Marc Faber is an international investor known for his uncanny predictions of the stock market and futures markets around the world.
