Euro Area

 

The Good, the Bad and the Plain Crazy

The EU Commissariat has just made an announcement that is both good and bad. Let us start with the good: According to European press reports, Chief Commissar Barroso left the commission with an inheritance of 452 legislative initiatives, including the “harmonization of standards of maternity protection”, “uniform energy taxation and environmental protection legislation” and “forcing all nations to implement waste recycling” (if you want to know why waste recycling, which superficially sounds like a great idea, is yet another complete etatiste charade, read this article in which Per Bylund deconstructs the recycling myth using socialist paradise Sweden as an example).

Anyway, the new commissariat under JC Juncker has decided to simply strike 83 of Barroso’s initiatives legacy completely, put a large part of it on hold, and instead concentrate only on a handful – 23 to start with. Also, among the things to be tackled is an endeavor to actually cut red tape (we will believe it when we see it). According to the commissariats own words:

 

“When laws are no longer fit for purpose, or impose too much burden, they will be reviewed and amended to make EU law lighter, simpler and less costly.”

 

So much for the “good”.

However, it is very unfortunate that many of the remaining initiatives they have decided to concentrate on (the bad) mainly consist of bureaucratic nonsense of the finest. Among the top initiatives we find for example: The “€315 billion investment offensive”, an “ambitious digital single market package” (under the leadership of the economically and technologically illiterate digital commissar Mr. Öttinger, whom we have profiled before), and “fair taxation” (the term “fair” in conjunction with the term taxation always means only one thing: higher taxes).

 

We want to once again focus on the bizarre “investment initiative” on this occasion. This project is one we would term both “bad” and “plain crazy”, although the political cronies who stand to be enriched by it would of course disagree.

Passenger stairs are seen in front of the airport in Lodz

The “ghost airport” at Lodz

Photo credit: Reuters

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Weidmann the Strict

BuBa chief Jens Weidmann is complaining about the EU Commission’s decision to eschew confrontation with France over its repeated inability to deliver on its debt and deficit targets, and rightly so.

Some people may argue that the French government’s recent willingness to implement some long-overdue, if halfhearted reforms, should be taken into account as a sign of goodwill. Perhaps, but it was precisely the “original Maastricht sin” of 2002-2003, when neither France nor Germany were taken to task for violating the treaty with their deficit overshoots that created the preconditions that later made it seem normal for many others to violate these limits as well (admittedly, this has to be brought into context with the artificial boom of 2002-2007 and the subsequent bust).

Nevertheless, the fiscal compact strikes as one of the more sensible EU regulations (although it is obviously difficult to enforce it against a big member nation). Not only because the euro’s survival essentially depends on it, but also because keeping government spending under control is good for the economy at large in any event.

If we have a gripe in this context, it is mainly that European governments are often inclined to raise taxes rather than cutting their spending. Both France and Italy currently stand as monuments to the folly of this approach.

 

weidmannJens Weidmann shortly after learning that France’s government will get away with a slap on the wrist.

Photo credit: Eric Piermont / AFP 

 

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Juncker Backtracks on EU’s South Stream Ban

How do you get €300 billion in (probably largely useless) “infrastructure investment” in Europe? Banning a $40 billion project from going forward is probably not going to help, not to mention that this one would actually have been useful. After Gazprom announced last week that it has had enough and is ditching the South Stream pipeline project (see “South Stream Dies” for details) after having invested $5 billion and run into countless politically motivated obstacles, EU commissariat president Juncker engaged in a back-tracking exercise, garnished with some nonsense about “Russia holding Bulgaria to ransom”. Very likely he got an earful from Bulgarian prime minister Boiko Borisov about the EU’s sabotage of the project:

 

“European Commission President Jean-Claude Juncker has insisted the $40 billion South Stream natural gas pipeline can still go ahead and accused Russia of holding EU-member Bulgaria to ransom when it said it had abandoned the project.

Speaking after talks with Bulgarian Prime Minister Boiko Borisov, whose country South Stream would traverse making it a major beneficiary, Juncker rebutted Russia’s statement that EU competition rules had killed it. He told reporters issues relating to the pipeline were not insurmountable and he was working with Bulgaria to address them.

Russia said on Monday it had abandoned the pipeline, which would have bypassed Ukraine, Gazprom’s traditional transit route for Russian gas, citing EU competition requirements for a pipeline’s ownership to be divorced from its cargo. It said it was working on an alternative route via Turkey.

Juncker accused Moscow of blackmailing Bulgaria, which retains strong political and economic ties with Moscow and is almost entirely dependent on Russia for its gas. “I am not accepting the simple easy idea that Bulgaria can be blackmailed as far as these energy relations are concerned,” Juncker said.

“We’ll take … all the necessary steps to make sure that our relations with Russia will be improved, but it doesn’t depend only on the willingness of the EU, of the European Commission. To dance a tango … you need two dancers.”

Borisov also said South Stream could be built and agreed it had to comply with EU rules, including legislation known as the third energy package, which limits how much of a pipeline a company can own if it also controls its contents. Further efforts to bring the project in line will be made on Tuesday, when EU energy ministers meet for regular talks. “I hope that all these technical details will be solved at this meeting including the third energy package,” Borisov said. He added he had not received any official notice from Russia that South Stream was not going ahead.

EU sources, speaking on condition of anonymity, said Russia’s calculation could have been that its announcement of South Stream’s demise would place the Commission under pressure from some member states to soften its regulatory stance. At the same time, Russia has a struggle [sic, ed.] to find the cash for South Stream, given a falling oil price and economic sanctions.”

 

(emphasis added)

A few remarks to the above: yes, the Bulgarians are understandably up in arms, but had it been up to them, the construction activities would never have been interrupted in the first place. As things stand, the previous Bulgarian government was badgered by the EU and visited by John McCain, whose primary mission was apparently to stop the pipeline from being built. The government announced that all construction on the pipeline would be stopped two hours after McCain left.

 

Boiko and JCBoiko Borisovich, here pictured shortly before jumping down JC Juncker’s throat. We would recommend not angering him too much: he’s a former bodyguard with a black belt in karate. His nickname is “Batman” (no kidding!).

Photo by BGNES

 

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Sometimes It Doesn’t Pay to Catch a Falling Knife …

We like to think that a contrarian investment approach works best in the long term. Contrarian does not necessarily mean that one simply tries to fight every trend. It is more about attempting to recognize when a trend has gone too far. In practice this is often more difficult than in theory. The theory is simple enough: buy low, sell high. However, it is nigh impossible to recognize turning points with precision. So a contrarian style often forces one to be patient, and to accept that one will frequently both buy and sell too early.

One way of dealing with this problem is to spread one’s purchases and sales out over time. We did this with Japan, to name an example. In “Reconsidering Japan”, which turned out to be a well-timed post, we made the case for Japanese stocks (warning: we have our share of decidedly less well-timed posts). We didn’t know at the time that a bull market would be set into motion by what we ultimately consider a catastrophic economic policy, we only knew that the market was cheap. Our own approach was to buy in small sizes over a long time period. It took a lot of patience, as the market simply sat and sat there – the rallies never amounted to much. We felt though that the market represented a contrarian opportunity. We have occasionally mentioned similar opportunities in the past, such as e.g. Greece and even China. As we have pointed out a few times, economic fundamentals and stock market performance are often two different cups of tea. Usually we tend to be “early”, but this doesn’t matter if an idea ultimately pans out (gold investors take heart).

There is however one market that has defied contrarians to such an extent that one wonders what the hell happened. Shortly after the bail-out, when we first wrote about the enormous decline in the Cyprus General Index, we did so because at the time it represented the greatest stock market crash in history by far (see: “The Greatest Collapse in History” for details). We also noted that Cyprus was in a very bad position, referring to it as “Iceland without the fish” and a “disaster zone” (which it was/is). The 98% decline in its stock market at the time might have led one to suspect that the place had been hit by an asteroid. Instead it had been hit by the EU, which turned out to be almost as bad, at least financially. We later posted a brief update on the Cypriot disaster area and noted that the market had apparently simply perished (see: “Cyprus – A Stock Market Dies”).

Believe it or not, Cyprus as such still seems to be standing. Here is a recent photograph of the Limassol sea front in Southern Cyprus:

 

Limassol seaside

Limassol – nope, no signs of an asteroid strike or a nuclear explosion visible.

Photo credit: P. Matanski

 

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If You Can’t Beat Them, Outlaw Them …

We have previously reported on the French obsession with stifling competition to the vast detriment of the consumer, so as to protect established businesses with all sorts of legal restrictions. A prime example of this nonsense is that the French have made free shipping by Amazon illegal in France (as discussed by Mish here). Mercantilism has never died in France, and today it is imposed under the guise of the so-called “cultural exception”, which ostensibly aims to “protect French culture” (see “France Threatens Trade Talks Over Cultural Exception” for details on this). There is much about French culture that is indeed admirable and admired the world over – and it obviously doesn’t require bureaucratic “protection”. That is a turn-off at best.

So we are not surprised to learn that the French government is in ever greater hysterics over the success of US based internet companies. “There ought to be a law”, and very likely there will be a law – French consumers and their preferences be damned. A recent article at Yahoo reports on “One country’s desperate battle to erase Google, Netflix and Uber from existence”:

 

“The French don’t play. Ever since Minitel bit dust, the continental power has been hopping mad about American domination of Internet services. And over the past weeks, attacks on U.S. giants have escalated from Paris to Lille.

Netflix is right now in the middle of an ambitious European expansion drive that started in Scandinavia and is fanning out south. Sure enough, France’s Association for the Protection of Consumers and Users has now sued Netflix for “malicious and illegal clauses.” These include changing the terms of contract without informing consumers, not offering information of guaranteed minimum quality and writing contract clauses in English.

No doubt this is only the opening salvo against Netflix in France, which guards its cultural heritage jealously. The U.S. streaming service tried to preempt Gallic criticism by financing a political drama series called Marseilles, but this appears to have been ineffective.

Uber’s French launch has been, if anything, more controversial than the Netflix debut. Infuriated taxi drivers in Lille have attacked a student for trying to enter an Uber car, first attempting to block her from opening the car door, then allegedly throwing a bottle at her head. The Uber POP service is about 20% cheaper than French taxis.

The French legal attacks on Google are too numerous to list here but the latest one actually has an entirely novel twist. France is now threatening Google with a hefty, €1,000 penalty for every defamatory link the company fails to remove from its global network of Google subsidiaries.

Google agreed earlier this year in Europe to remove links to articles that may be considered “outdated and inflammatory” — in other words, Europeans can demand removal of old search results that they consider embarrassing. But the new penalty scheme essentially holds the French subsidiary of Google responsible for the actions of its sister and parent entities. This in turn means that the French are attempting to make their legislative decisions global.

What to make of all these recent moves against some of America’s most successful corporations? They seem to indicate that France has no intention of trying to emulate the American model and foster growth of its own IT industry — instead, the country seems to be sliding towards perpetual guerrilla war against foreign tech powers. It is hard to overemphasize just how futile this bitter battle against the future looks to foreign observers.”

 

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A Fount of Bad Ideas

We have previously reported on the EU’s new digital commissar Mr. Oettinger, who has recently announced he wants to make an EU case against Google a “model case” for the EU’s approach to large companies serving the inter-tubes. Naturally, the entire convocation of busybodies in Brussels is all for this bizarre idea.

The today still widely accepted theory of monopoly has been throroughly refuted in its entirety by Murray Rothbard’s contribution in “Man, Economy and State” (pdf; see chapter 10: “Monopoly and Competition”). Naturally, this contribution has been widely ignored in spite of its originality and importance, mainly because it implies that there is no cause for government intervention to “rein in monopolies” whatsoever. In other words, the EU’s “competition commission” is really superfluous.

The idea to break up Google is moreover based on the utterly absurd notion that EU companies that don’t even exist need to be “protected”.

 

google_breakup-home

 

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Money Supply Growth Accelerates, Credit to Private Sector Still in Decline

While money supply growth is slowing down in the US, it has recently continued to accelerate somewhat in the euro area. The effects of the ECB’s “QE”-type debt monetization activities in the form of covered bond and ABS purchases have not yet impacted aggregate money supply data much as of yet, but the 12-month growth rate of the narrow money supply aggregate M1 (currency and demand deposits, essentially equivalent to money TMS-1) has nevertheless continued to increase:

 

1-M1, euro area,annThe 12-month growth rate of the euro area’s money supply supply has recently accelerated from an interim low of 5% to approx. 6.5% – click to enlarge.

 

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The Press Takes Notice of a Small Problem

We have previously discussed the plans announced by EU commission president JC Juncker to “rescue” the euro area economy by means of € 300 billion of state-directed spending (see Juncker’s Solution for details). Now the mainstream press is also beginning to wonder where the money for this ambitious spending plan is supposed to be coming from.

A report by Reuters contains a few points worth commenting on:

 

“New European Commission President Jean-Claude Juncker is preparing a 300 billion euro ($375 billion) investment plan he will present as a cornerstone of efforts to revive an ailing economy. But history suggests the program risks becoming an exercise in financial engineering rather than a conduit for the new money the region needs to help boost output and create jobs.

A flagship project of the new European Union executive, the investment scheme is due to be unveiled before Christmas. It is still being finalized and few details have been made public. If all the money it promises is raised and spent, it could provide the 28-nation EU with roughly an additional 0.7 percent of GDP in investment per year over three years.

“It is significant,” said Carsten Brzeski, economist at ING bank in Frankfurt. “You would expect some kind of a multiplier effect from investment on jobs and purchasing power and it would increase the growth potential. The downside is that public investment can take years before it gets started.”

But even more than “when?”, the big question hanging over the plan is “how much?”. The 300 billion euros is an overall target for both the public and private money that the Commission hopes to mobilize. The Commission itself does not have any money and is funded through annual EU budgets that must be balanced. Of the region’s 28 governments, only Germany seems to have public finances strong enough to significantly increase investment. But in its drive to have a balanced budget, Berlin is not keen to spend more.

So the Commission plans to use what little public money is available to lure bigger private funds into projects that would otherwise seem too risky or with too low a rate of return.

“Our aim is to ‘crowd in’ private money for big infrastructure projects in the energy sector, transport, broadband or research and development. The private sector cannot take all the risks,” Commission Vice President Jyrki Katainen told Reuters.

 

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The Tax Loophole “Scandal”

It seems that for once, Mr. Juncker actually did something right: during his time as the prime minister of Luxembourg, he allowed, to paraphrase Mises, “capitalism to breathe”, by making it possible for companies to save on their tax bills. These tax loopholes (which the establishment press propaganda refers to as “tax avoidance”, or even worse, “tax evasion” schemes, even though they are perfectly legal) are a subject that plays into the hands of statists like few other. Only protectionism may be a fallacy that enjoys even greater populist appeal.

It should be perfectly clear that consumers can only benefit when companies manage to escape the avarice of governments to some extent. But envy is a powerful political motivator, and the fact that the average citizen as a rule cannot arrange his affairs to enjoy the same tax advantages is cunningly employed by etatistes to create a populist outcry over the “unfairness” of it all.

Let’s be serious though. The average citizen, resp. consumer cannot expect any advantages whatsoever from an increase in corporate taxation. What it will mean to the average citizen is only this: the prices consumers pay will rise, fewer jobs will be created, and the returns of pension funds (which invest in the shares of these companies) will decline. There will be zero offsetting benefits from the fact that the State will enlarge its loot. On the contrary, that enlargement will only benefit political cronies and will lead to even greater waste of scarce capital.

Surely no-one seriously believes that everybody else’s taxes would be lowered if these tax loopholes were closed? There’s not even a sliver of a chance of that happening. One would have to be quite naïve to actually believe that. And yet, judging from the reader comment sections of articles about these loopholes in the mainstream press, there is a hue and cry as if these companies were snatching the milk from the mouths of hungry babies.

 

juncker_2140199bWe dislike almost everything about JC Juncker – except the stuff he is now attacked for.

(Photo via DPA)

 

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Arrogance Waiting for Comeuppance

Bloomberg informs us that there is a “Yellen Message to Europeans Divided on QE: Do Whatever It Takes”. The belief that central bank bureaucrats can “rescue” the economy by printing more money evidently remains as firmly ingrained as ever. As Paul Singer, the head of Elliott Management, remarked on this in a recent letter to investors (note that Mr. Singer has an excellent track record as an investor spanning four decades):

 

“Central bank manipulation of prices and risk taking has become the norm over the last six years, because it is so hard for investors to see the downside. QE and ZIRP have been ‘free,’ as far as most people are concerned, in terms of stability, asset price and economic growth, and economic recovery. ‘Free’ in this context means devoid of future countervailing negative consequences. Unfortunately, this particular magic bullet is illusory — the negative consequences are only in their early stages of unveiling…

“Central bankers do not understand that it was their tinkering, manipulation, bailouts and false confidence that encouraged and enabled the insanity that led to the fragility and collapse. Partially as a result of that misunderstanding, the developed world has doubled down on the same policies, feeding the central bankers’ supreme self-confidence. Political leaders have been content to stand aside and watch the central bankers do their seemingly magical and magnificent work.

The believers in the wisdom of this central-banker-centric economic world have been crowing and gloating that those (like us) who have raised concerns about the risks posed by the post-crisis, monetary-dominated policy mix (inflation, distortions, growing inequality, lower growth) are just ‘wrong’ and should apologize for a ‘massive error.’ This, shall we say, ‘Krugmanization’ of a substantial portion of the economics profession and punditocracy is in its triumphalist phase, and whether its smug non-stop ‘victory lap’ ultimately represents an embarrassing high-water mark is for subsequent events to reveal.”

 

(emphasis added)

 

paul singerPaul Singer of Elliott Management – his warnings will of course be ignored.

(Screenshot by FOCUS Online/Wochit)

 

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Anne-Elisabeth Moutet on France’s Sclerosis

French “refugee” Anne-Elisabeth Moutet – one of the many French citizens who have fled the economic paralysis of France for the welcoming shores of Albion and made London the sixth-largest French city in the process – has written another very interesting article on the situation in France. She compares the current environment in France to that in Britain in the late 1970s. The main difference is of course that no equivalent to Margaret Thatcher who could pull the cart out of the mud is in sight anywhere. Instead, France has Marine Le Pen waiting in the wings, whose mercantilist, statist economic philosophy is mainly characterized by being just as bad as the socialism of Francois “Welfare State Incarnate” Hollande.

Hollande, who as we previously noted, has nothing to lose anymore given his record low 13% approval rating, has recently replaced the catastrophic crypto-Marxist “economy minister” Arnaud Montebourg with his polar opposite Emmanuel Macron (for details on this, see: “Reform in France – Mission Impossible?”). The latter apparently at least appears to know a thing or two about the laws of economics. He is also not afraid to voice uncomfortable truths in this context, to the chagrin of France’s left, which is howling with righteous indignation. As Ms. Moutet writes:

 

“France’s new economy minister, 36-year-old Emmanuel Macron, who has been tasked with tackling long-delayed reforms to reverse the country’s decline, is having a hard time. Every statement of his, it seems, provokes a storm of abuse from the politicians to the public.

Mr Macron, a former investment banker who was given his cabinet job less than two months ago, almost immediately suggested that the 35-hour working week – introduced by the Socialist government in 2000 with the aim of reducing unemployment by “sharing” the available work – could be done away with. He was roundly insulted.

Shortly afterward, he mentioned that 20 per cent of a Breton pork abattoir workforce, laid off because of a plant closure, would find it difficult to get new jobs because they were illiterate and couldn’t, for instance, pass a driver’s license exam, barring them from a number of available jobs. The reactions were so venomous that he was nearly punched in the face on the floor of the House by an MP from his own party, Olivier Dussopt. “You’ve grievously insulted my mother! She’s a laborer, she’s got no degree, she’s been laid off twice already!” Mr Macron had to issue a lengthy public apology.

Mr Macron favors workfare over the current long-term benefits handed out to France’s 3.5 million unemployed and suggested in a recent interview that recipients had “duties” as well as “rights”. Cue more outrage, with L’Humanité, the Communist daily, howling that he was hand in hand with the employers’ federation to “guilt” the jobless.

Mr Macron seems to specialize in straight-talking: in identifying core problems of the French economy and naming them. This is making him one of the most unpopular people in France, because saying blunt truths is seen here as an unforgivable act of aggression.

“The banker Macron? We don’t know him, he’s never said or done anything that was remotely of the Left,” the maverick Socialist defector, Jean-Luc Mélenchon, said in a radio interview. “He’s not one of us,” a columnist in the left-leaning Le Nouvel Observateur thundered. “He’s not just from any bank: he’s from Rothschild’s.”

 

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A Little Bit of Zwangswirtschaft Won’t Hurt

The EU commissariat in Brussels seems largely a tax-payer funded sinecure for political has-beens from EU member countries. We suspect it represents a kind of extra-expensive pensioning off of people who could, were they to remain in their countries of origin, still do significant damage there.

This wouldn’t be a big problem if they were really out of everybody’s hair as a result, sadly that is not the case though. One of the new EU commissars appears to be feeling an urge that he “must do something”. This automatically means that economic liberty and the wallets of consumers and tax payers are in grave danger, so it would be a lot better if the good man had remained idea-less.

We are referring to the EU’s new digital commissar, Mr. Günther Oettinger. We honestly have no idea where they have found this guy. He has some residual entertainment value on the occasions when he decides to rape the English language, but other than that, he seems to be genuinely dangerous.

According to a recent report in the Austrian press, “EU Commissar Oettinger wants to restrict people from changing internet providers”.

 

“EU Digital Commissioner Günther Oettinger wants to restrict the way in which customers can change their Internet provider. In an interview with the Stuttgarter Zeitung he said that the profitability of the investments of providers in network expansion will thereby be increased.

“I’m not talking about monopolies lasting forever, but for several years, during which you one will have planning security as an investor. Similar exemptions also exist for energy networks,” said Oettinger. Providers often shy away from investments because customers might switch to another provider. Companies that meet the requirements with respect to yardsticks such as data security, speed and capacity are to receive EU funding.

 

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EU Disharmony on the Upswing

The bureaucracy in Brussels finds itself more and more often in rows with prominent European politicians. This decline in political harmony is actually fairly typical for a period of secular economic decline. It is indirect confirmation that said decline is far from over.

It can be observed throughout history that common projects involving large disparate communities tend to splinter when economic boom times are giving way to sizable busts. As people tend to become more and more exclusionary in hard times, entire empires can break apart. Large, diverse groups and their common undertakings increasingly lose support, as it is “every man for himself”.

This is a socionomic observation, which can be confirmed empirically. There are both advantages and disadvantages to this kind of development. Among the worst potential disadvantages is a rising probability of all sorts of war, from trade wars to “cold wars” and ultimately “hot” wars.

Nowadays, a few noteworthy potential advantages must be considered as well. For instance, the trend to introduce economically extremely damaging “anti climate change” legislation should be expected to be on the retreat in future. Since climate change is a non-problem that is barely influenced by human conduct, the costly fight against it is apt to produce sizable setbacks in terms of economic progress, while producing zero net benefit for society at large. This is not to say that no-one is benefiting of course. Sufficient closeness to government’s climate gravy train ensures quite sizable benefits for a number of people – alas, to the detriment of everybody else.

Similarly, the perverted modern-day idea of the EU, the goal of which seems to be to create a socialistic super-state is likely to be challenged more and more often. Note that the EU’s founders were actually mainly concerned with bringing back the liberal Europe of pre-war times, restoring free trade and free movement of capital and people, combined with strong subsidiarity. They had no interest in creating a kind of “USSR light” (for more details on this see “The European Idea”).

 

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Spain’s Electorate Movies Sharply to the Left

Prime minister Rajoy has only himself and his own party to blame. Spain’s electorate may well have agreed to some extent with the necessity of austerity measures, but the ruling party has been involved in way too many scandals. Rajoy and his closest political allies have all been tainted by these scandals, as they have done their level best to cover them up. The slush fund scandal was especially egregious (for details on this particular event, see our previous article “The Fish Rots from the Head). Recently yet another major scandal has emerged, and as the FT reports, Spain’s voters now see political corruption as one of the country’s biggest problems.

Recent political polls reveal that Spain is now experiencing a political shift that is every bit as dramatic as the one that has occurred in Greece. According to a recent survey published by El Pais, the new far-left party Podemos (which means “we can”), which received 8% of the vote in the recent European parliament elections, would get the majority of votes if a general election were held in Spain today. The next general election is scheduled for December 2015.

 

Spain PollA recent survey of Spanish voters by El Pais: Podemos has 27.7% support, the Socialist Party 26.2% and prime minister Rajoy’s conservative People’s Party has slipped into third place with only 20.7% – down from 44.6% in 2011. This is quite a meltdown. Chart by: El Pais

 

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Non-Confirmations Still Persist

The S&P 500 has recently made a new high, in short the rebound from the mid October low has not failed at a lower high. Therefore, the clock has so to speak been reset. However, as our updated comparison chart between SPX and the major euro-land indexes shows, there is now a third divergence in place between them, and this one is even more glaring than the first two. Keep in mind that there such divergences have not always been meaningful in the past. However, when global markets are drifting apart, it is a sign that the global economy is no longer well-synchronized. Given that the Fed’s “QE inf.” is in relative pause mode (we hesitate to say it has ended), the situation is certainly worth keeping an eye on.

 

1-Euroland vs. SPXA third divergence between the SPX and the major continental European stock markets is now in place – click to enlarge.

 

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