As the euro continues to gain against the dollar, the claim that Europe’s worst problems are behind them made by Europe Central Bank’s Mario Draghi, and other European blowhards, alway seem to be fresh in my mind. Nearly every week, Europe’s economic data remains lackluster. There is little, if any, evidence that Europe is regaining any economic competitiveness. Last Friday, June 14th, data showed that CPI and unemployment data ticked up, which can be a tricky combination for the nearly 20 million Europeans that currently have no work. The latest GDP figure came in a -.2 percent – the GDP has not reached positive territory since January 11, 2012 and has been in contraction since February after flatlining. Draghi and Co. seem to be content with Europe’s standing as long as there is not another 2012 Greece episode, but will Spain be next on the table for economic catastrophe?
Reports out of the Associative Press, Spain’s central bank reports that the nation’s debt escalated to a record of 88.2 percent of the gross domestic product in Q1 of 2013. Even more troubling, this climb has been the fasted on record, and it is estimated that the debt-to-GDP can rise to 90.5 percent by the end of 2013. Ending in March, the total debt on Spain’s books climbed to €922.8 billion, up nearly 19.1 percent respectively. In April, unemployment in Spain rose to 6 million, or 27.2 percent of the population. Youth unemployment has been estimated to be over double those figures, 57.2 percent. Now in it’s forth year of recession, Spain has doubled it’s debt-to-GDP in the last five years. Spain as avoided a bailout but those days of refusal and arrogance by it’s leaders may come to an end. The world’s forth-largest economy, with nearly a third of it’s workers unemployed and debt exponentially rising, may not have a choice in the matter or it could face repercussions for not acting – too little, too late.
The problem with Spain and the European region, in general, is there is no clear direction. Draghi is infamous for telling the world what help could do to help spur growth but the followthrough is less than ideal. Europe’s leaders (I have no sympathy for U.S. counterparts) are like fire fighters that try to contain the fire from spreading rather than putting out the fire upon arrival. While Europeans across the region suffer, the hope is that the fire will burn out on its own.