Euro Declines as Greece and Germany Play "Chicken"
Hey…this is fun! The European Roller Derby.
Smash! Crash! Crunch! Whack!
Fenders banged up. Radiators steaming. Tires flattened. Whee!
But here’s the most exciting scene in the whole show. Greece and Germany are playing chicken!
Greece presses down the accelerator and heads for Germany. “If you force us out of the euro, all of Europe will go up in flames,” say the Greeks.
“Oh yeah?” say the Germans, turning on the speed in their Mercedes, “ve’ll see about that. Ve haf airbags!”
And we watch. Wonder. Which one will lose his nerve? Or will they crash head-on?
Nobody knows for sure.
But nobody wants to have money in Greek banks…in Europe’s periphery banks…or even in euros…when they find out.
Yesterday, more money leaked out of Greece…and out of the euro. The euro fell to its lowest level in two years as “Europe braced for turmoil…”
One headline said Greece was making plans to withdraw from the euro. The Greeks promptly denied it…which reminded us of what they used to say in Soviet Russia: no rumor is confirmed until it is officially denied…
De La Rue, an English company that prints most of the world’s currencies, would not say whether an order for drachma had come through or not.
Meanwhile, all these wrecks and smash-ups are damaging Europe’s economy. The New York Times is on the story:
Economic reports Thursday showed Europe’s prospects dimming as the long battle to defend the euro zone continued to undermine confidence and raised the prospect of a renewed cycle of demands for austerity.
The relentlessly bleak data, reflecting weakness across the Continent and in Britain, came a day after political leaders again failed to break the deadlock over how to resolve the European debt crisis.
A Markit Economics index that tracks the European services and manufacturing sectors fell in May to 45.9 from 46.7, worse than economists surveyed by Reuters and Bloomberg had expected. An index reading below 50 suggests the economy is contracting. In the first quarter, the euro zone economy grew just 0.1 percent.
Perhaps even more worryingly, German data released Thursday showed signs of a slowdown in an economy that until now had been a bright spot for the Continent. A Markit index based on surveys of purchasing managers of German manufacturing companies fell to 45.0 in May from 46.2 in April.
And Britain’s is worse. New data show the slump is worse than previously thought. The NYT again:
The Office for National Statistics revised the decline in gross domestic product in the first three months of this year to 0.3 percent, up from the 0.2 percent it estimated last month, because of a deeper slump in the construction industry. Construction output dropped 4.8 percent from a year earlier, the agency said, not 3 percent, as it had estimated earlier.
The revised figures were “bad news for UK policy makers as it shows the economy faring even more badly than initially thought,” said Scott Corfe, senior economist at the Center for Economics and Business Research in London. “Indeed, the latest data show the UK economy performing worse than the euro zone economy, which saw zero growth at the start of the year — meaning the UK’s woes cannot even be fully attributable to the debt crisis embroiling the Continent.”
So, stay tuned…let’s see what happens tomorrow…