SOUTHERN EUROPE IS SCREWED
Europe's debt-crisis strategy is near collapse. The long-awaited recovery has failed to take wing. Debt ratios across southern Europe are rising at an accelerating pace. Political consent for extreme austerity is breaking down in almost every EMU crisis state. And now the US Federal Reserve has inflicted a full-blown credit shock for good measure.
A leaked report from the European Commission confirms that Greece will miss its austerity targets yet again by a wide margin. The Greek think-tank IOBE expects GDP to fall 5% this year. It has told journalists privately that the final figure may be -7%. The Greek stabilization is a mirage.
Italy's slow crisis is again flaring up. Its debt trajectory has punched through the danger line over the past two years. The country's €2.1 trillion ($2.7 trillion) debt - 129% of GDP - may already be beyond the point of no return for a country without its own currency.
Standard & Poor's did not say this outright when it downgraded the country to near-junk BBB on Tuesday (7/09). But if you read between the lines, it is close to saying the game is up for Italy. The game is up for all of Southern Europe.