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The Recession That Won't End


The world's major economies are experiencing a concurrent slowdown -- and until debt issues are addressed, slow or no growth will be the norm.


The Road to Ruin in Europe

Greece is near the end of its tenure in the European Monetary Union (EMU). Deposits continue to flee the country. Worse, 20% of Greek bank loans are now non-performing (that number is only 9.5% in Spain, a record high there and causing increased concern). The non-performing loans in Greece are bound to get worse, as the government does not have enough cash to return VAT tax refunds to small businesses which depend on such rebates for survival. So, it is highly likely that the non-performing assets in Greek banks will rise as small businesses fail.

With its economy continuing to contract (6.2% this past quarter) and the EMU's insistence that it implement more austerity in return for emergency funding, Greece has to be near the end of the road with the euro.

Meanwhile, the party continues in Italy. Despite the threat that they could be cut off from any capital funding, and despite the talk of it, there is no austerity here. According to the Zerohedge blog of August 13, Italy's fiscal deficit continues to balloon. The table below shows that Italy's monthly deficit is rapidly expanding from €2 billion/month in 1999 (prior to joining the EMU), to €9.5 billion/month over the last nine months. This is what you get when you hire an unelected bureaucrat (Mario Monti) to run your government.
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