Finance

Morning Market Roundup — EU Edition: Here’s What You Need to Know

Here’s what’s important in the eurozone right now:

Did EU Avoid Recession? Europe narrowly dodged a bullet Tuesday after the economy of the 17-nation eurozone avoided a recession in the first quarter of the year despite a raging debt crisis that’s raising the specter of the breakup of the currency union.

There was one reason why the eurozone avoided an overall recession — officially defined as two consecutive quarters of negative growth. Germany, Europe’s biggest economy, was behind the better-than-expected performance as strong export figures helped it grow by 0.5 percent.

The figures are subject to change as Eurostat continues to collect figures. Several countries, including Ireland and Slovenia, have yet to release quarterly figures and for Greece there are only year-on-year comparisons.

Merkel Undeterred: Chancellor Angela Merkel is insisting that a heavy state election defeat for her party in Germany‘s most populous region won’t weaken her as she grapples with a deepening European debt crisis.

Merkel also said Monday that she is “very relaxed” about national elections due in late 2013.

On Sunday, Merkel’s conservative Christian Democrats slumped to their worst election result in North Rhine-Westphalia state since World War II, while voters strengthened a regional government that the party had portrayed as irresponsibly spendthrift. The outcome gave new confidence to Germany’s center-left opposition.

But Merkel — insisting the election results were not about her record — said that her “work in Europe is not affected” by what she conceded was “a bitter, painful defeat.”

Austerity vs. Gov’t Spending: New French president Francois Hollande has demanded that the fiscal treaty that brought an uneasy calm to markets by cracking down on overspending be renegotiated to include growth measures. German Chancellor Angela Merkel is cool to the idea. The fate of the eurozone may rest on whether he and Chancellor Merkel can find a compromise.

A senior lawmaker with Merkel’s party said Tuesday that Germany is willing to discuss growth-promoting measures with France – so long as a European budget-discipline pact stands.

Peter Altmaier, chief parliamentary whip of Merkel’s conservative bloc, spoke shortly after new French President Francois Hollande took office. Hollande, who has criticized Germany’s austerity-led crisis management, is to meet Merkel in Berlin later in the day.

Altmaier stressed the importance of sticking to the so-called fiscal compact championed by Merkel. But, he said, “we have an interest in the economy everywhere in the eurozone picking up and growing as it did in Germany in the first quarter.”

Bundesbank Wants Greece Out: The head of Germany’s central bank is warning that there would be no basis for further financial aid to keep Greece afloat if the country backs off agreements with international creditors.

The comments by Bundesbank chief Jens Weidmann came as Greek politicians, deeply divided over the value of austerity and reform measures that creditors demanded in exchange for rescue loans, flounder in efforts to form a new government.

“If Athens doesn’t stand by its word, that is a democratic decision – but that means the basis for further financial aid falls away,” Weidmann was quoted Saturday as telling the German daily Sueddeutsche Zeitung. “The donor countries also have to justify themselves to their population.”

What a Greek Default Could Mean For The U.S.: The short-term financial consequences of Greece defaulting may be limited across the Atlantic. American banks already have sharply reduced their exposure to Greece by more than 40 percent to $5.8 billion, according to the government.

But the concern is that market speculation would then fall on the far larger economies of Spain and Italy. Both are deep in the red and heavily dependent on credit markets to stay afloat. And their debts are held by Europe’s big banks.

Each round of bad news from Europe raises uncertainty. No one knows how a Greek exit from the euro would work and the financial swings have added to the stress on Europe’s economy. And every time stocks plunge and the borrowing costs for troubled countries rise, businesses and consumers grow more cautious. This makes them more reluctant to expand companies or buy more property.

Economists call this threat contagion. Scared investors sell off their assets in Europe’s most troubled economies and the governments struggle to access credit while falling into deeper recession. A crisis as bad as Greece’s in a bigger nation would have severe global implications.

The Associated Press contributed to this report.

Comments (13)

  • Jaycen
    Posted on May 15, 2012 at 12:45pm

    A senior lawmaker with Merkel’s party said Tuesday that Germany is willing to discuss growth-promoting measures with France – so long as a European budget-discipline pact stands.
    ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

    “Growth Promoting Measures” is Progressive Socialist code for “over-spending taxpayer dollars”.

    Report Post » Jaycen  
    • AmericanFightingMan1
      Posted on May 15, 2012 at 1:33pm

      There is no avoiding “paying the piper”. It will come due. The question remains, however, what/who takes over once “TSHTF”. Desperate people turning to government for protection? Most likely. Mooooo.

      Report Post » AmericanFightingMan1  
    • lketchum
      Posted on May 16, 2012 at 2:07am

      They will never learn that replacing consumer spending with government spending that is sourced from tax increases, has always resulted in a deepening of economic trouble. The same is true if governments simply print the money they need. Governments can do things like lease government lands, or issue mineral rights. The U.S. government, for example, could make billions more by simply leasing and permitting energy companies to recover oil and gas in the western states, of which nearly all land in those states is still owned by the federal government. They could even sell some of that land to private citizens.

      Report Post » lketchum  
  • Detroit paperboy
    Posted on May 15, 2012 at 12:24pm

    Drop Greece in the Grease…….screw em !

    Report Post »  
  • Thinking Man
    Posted on May 15, 2012 at 12:10pm

    This is what happens to federations when times are not good. Lucky for us, we figured this out back in the 1700s.
    The problem with these countries isn’t just so much debt, it’s the socialist structure of the system. The government taking so much control of the money flow, that government austerity slams the brakes on the economy. This type of economic/government structure limits the government to only have control that slows economies. They are forced to borrow money to accelerate the economy. Since they are so fearsom of slow downs, they constantly borrowing money to keep things going.

    These economies lack the feedback loop of lower prices during down times; which leads to economic acceleration. This is why captilism is so superior to socialism.

    Report Post »  
  • megarobryder
    Posted on May 15, 2012 at 10:32am

    Meanwhile “The Big O ” gives away 7 oil rich Islands in Alaska,,,,,to the Russians…………….

    Report Post »  
  • toomuchgovt
    Posted on May 15, 2012 at 10:28am

    I’m a little tired of this story. How long can they draaaaaag out the inevitable? Until after the US Election, when obummer will have full control. He already has made Congress worthless. Tzars babies. Their is NO Austerity. for goodness sake.

    I am more concerned with the 2 million JP Morgan Chase “lost” and let us not forget Jon Corzine 2.1 BILLION “simply don’t know where the money is”, I do, right into the DNC coffers. Both Dimon and Corzine are financial “wizards according the Obama.

    Report Post » toomuchgovt  
  • lel2007
    Posted on May 15, 2012 at 10:22am

    Here in America we’d be told the “recovery” is progressing.

    Report Post » lel2007  
  • DAYWATCHER
    Posted on May 15, 2012 at 10:15am

    The Germans will once again be the bad guys for simply looking out for their nation. It is simply a matter of time before the entire system comes crashing down and a new global currency is thrust upon us.

    I have several questions:

    1. How long will the chaos last once the system fails?
    2. A week, a month or longer?
    3. Will Americans bow down to a new economic system without suffering for an extended period of time?

    These are but a few things that each of us should consider before the chaos starts.

    I’m just saying…

    Report Post » DAYWATCHER  
  • jakartaman
    Posted on May 15, 2012 at 9:47am

    @SNOW
    You would be absolutely correct.
    The demise of the Euro is inevitable.
    We are on the brink of a WORLD wide depression that will make grand dad’s depression pale in comparison.
    Just too much spending and not enough working! – Now we all will pay the piper! – the good with the lazy and bad

    Report Post »  
  • shogun459
    Posted on May 15, 2012 at 9:46am

    How much you want to bet that the “secret Deal” Obama is working out with China is for them to get America’s Oil, gas and coal that Obama has been putting off limits to Americans?

    If you think the Chinese will use American labor your a bigger Fool than someone Voting for Obama in 2012.

    Report Post » shogun459  
  • shogun459
    Posted on May 15, 2012 at 9:43am

    GLENN BECK SHOULD SAY “I TOLD YOU SO!”
    He has warned for the last several years that this was comming. He pegged it as far as the order in which these dominos are falling.
    What did he get for his trouble? Scorn, and attacks from the very people in the media that are now acting so surprised and confused.

    Report Post » shogun459  
  • Snowleopard {gallery of cat folks}
    Posted on May 15, 2012 at 9:41am

    Face it people, the EU is going down and will do so with rapidity soon; then due to the treasonous actions of Obama in the Dollars:Euros madness we will follow all too soon.

    Report Post » Snowleopard {gallery of cat folks}  

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