And you are here why?

Eurostat's report from 5/15 shows that the European continues to suck.  From the NY Times The 17-nation euro zone contracted by 0.2 percent from the last three months of 2012, Eurostat, the statistical agency of the  European Union , reported  from Luxembourg, less than the 0.6 percent dec line recorded in the fourth quarter, but more than economists’ expectations of a 0.1 percent fall. Of particular interest, Greece's economy shrank by 5.3%.  ( We're no. 1! We're no. 1! ) Cyprus by 4.1% ( We're better than Greece! ) Portugal's shrank by 3.9% ( We're better than Cyprus! And Greece! ) Ireland stayed flat ( Yay! We're not cratering! (ignore the fact that we're not growing please...)) Seriously, this  is good news? That Austerity Now! Austerity Forever!  is working? I guess the EU/Germany is going to continue to bleed the patient till, well, whatever.

I'll let CEPR just say this That's the question millions will be asking when they see the new paper   by my friends at the University of Massachusetts, Thomas Herndon, Michael Ash, and Robert Pollin. Herndon, Ash, and Pollin (HAP) corrected the spreadsheets of Carmen Reinhart and Ken Rogoff. They show the correct numbers tell a very different story about the relationship between debt and GDP growth than the one that Reinhart and Rogoff have been hawking. Just to remind folks, Reinhart and Rogoff (R&R) are the authors of the widely acclaimed book on the history of financial crises,   This Time is Different . They have also done several papers derived from this research, the main conclusion of which is that high ratios of debt to GDP lead to a long periods of slow growth. Their story line is that 90 percent is a cutoff line, with countries with debt-to-GDP ratios above this level seeing markedly slower growth than countries that have debt-to-GDP ratios below this lev...

Well, you could see this coming up 5th Avenue.  Oliver Blanchard, chief economist at the IMF (motto Austerity Will Cure What Ails Ya! ) has a new paper out - Growth Forecast Errors and Fiscal Multiplier s - which basically sez. "We Wuz Wrong" . Huh? Well, if you recall the serious suffering going on in Europe over the last few years (Ireland, Greece, Spain, Portugal), the main thrust has been something along the lines of "Your economy is slowing down, so you need to enact serious budget cuts" .  In the immortal words of Dalton, Pain Don't Hurt . (You have seen Road House, right? Greatest movie ever ?) The problem with this math as virtually everyone not in Germany, Britain, or the IMF has been pointing out is that If    - Your economy is shrinking, and    - You cut government spending, and    - You raise taxes then    - Your economy shrinks even more, and    - More people end up out of jobs, and   ...

Guess when ECB head Draghi made his big speech? More importantly, guess how much substantive information there was in it?

Holy F**k! Seriously. 7.5+%!!! Commentary is pretty redundant at this point, suffice to say that this is not the picture of a country able to borrow in the markets at reasonable rates. I guess this can can't really be kicked much further down the road...

Today's news - Fitch just downgraded Cyprus from BB+ to BBB- . And that, my friends, is what is officially called junk bond status . The reason is pretty obvious - Cyprus has massive exposure to Greek Banks and the Greek Economy.  As the put it While most of the increase in losses is associated with Cypriot banks’ Greek exposure, the reported non-performing loan ratio for domestic Cypriot loans has also risen notably over the past year as the Cypriot economy has contracted and unemployment has risen. Even assuming that Greece remains in the eurozone, Cypriot banks will have to bear significant further loan losses as the Greek economy continues to contract over the medium term as well as the deterioration in domestic asset quality So why, apart from Schadenfreude, is this interesting?  I'm glad you asked! Guess which country is taking on the Presidency of the EU Council? As of July 1st? Yup! You got it!  Cyprus ! This, I guess, has got to be the least pleasa...

"Kicking the can down the road', sadly, says almost everything that needs to be said about the EuroCrisis, and the way its been dealt with over the last few years.  Barry Ritholz takes it one step further though ... Yeah! The Greeks Voted! For the X n-th   time, important events took place in Europe that either did or did not resolve an impending crisis that is either imminent or not. This was absolutely and unequivocally crucial, unless it didn’t matter at all. Either of which was equally likely. Indeed, this past week was absolutely critical, except that it wasn’t. The Greek elections determining their future relationship to the EuroZone was simply of the utmost importance, unless not. Yes, they didn’t matter; No it was quite important. Unless it was the other way around. The ‘ mother of all central bank interventions ’ is going to save Europe, unless it doesn’t, in case its back to square one. Everything has changed, except nothing is different. Indeed, nothin...

Moody's cut Spain's bond rating - from Ba1 to Ba3 (next stop - junk !).  The reaction from the market?  The magic chart sez. it all. Note that the yield maxed not at 7%, but at 6.998 which means, technically ,  Spain is still OK :-) Just kidding - at these rates, there is no way that Spain can go to the markets...

Well, that didn't take long. The Spanish Bank bailout got announced , and the markets opened relatively well, and lasted for, well, two hours. Thats it. Two Hours! I mean, this was the Big Gun ™ ! Ok, maybe not the Big Gun ™, but certainly a Big Gun ™ . And it lasted two hours. Sigh. We're doomed, I tell you, doomed .  In David Einhorn's now infamous chart (below), the cycles are getting shorter and shorter.  They didn't even get to the Champagne Party this time... Also, it looks like now everyone is looking at Italy and (ominously) saying "Well?".  From Bloomberg Italy’s 10-year bonds reversed early gains today in the first trading after the Spanish bailout and fell for a fourth day, sending the yield up 20 basis points to 5.98 percent. Doomed...

Michael Belkin, via Barry Ritholz, on how to resolve the Crisis in Europe : The Uncollateralized Trillion Euro Perpetual Zero Coupon . Read it, and pay attention to the fine print. (click to embiggen wildly)

I have the solution! It came to me as an epiphany! It is brilliant, sheer brilliance I tell you! Huh? What? Oh, right, its the solution to the EuroCrisis, the chaos going on in Europe / Greece / Spain / Italy / etc. Its really simple - what they need is a central banking authority that can print Euros!  See, you print up a bunch of Euros, and that deals with the short-term balance of payments issue, banking issues, solvency issues, etc., and you agree on a long-term fiscal compact to prevent chaos from occurring again.  But in the short term, all you need is a central bank that can print Euros. Simple, no? Huh? What? There is already something called the ECB? Really? Dammit....

From Dealbreaker .  Not The Onion.  Who knew they had it in them? Speaking of news, have you seen the latest from Pew Research ?  It turns out that Americans really, really don't care about the shit-fest going down in Europe. Check it out, pretty much everything polls higher than "European economies", including Yet Another Plan Bomb Plot (who cares?  really?). I mean, its not like the world is going to go into a depression or anything, right? Sigh.  We are so turning into a nation of navel-gazers  

Per the Beeb , Spain's jobless rate has hit 4.75 Million, which might not sound so bad, except that the population of Spain is 46 Million. Translate that into percentages - the unemployment rate in Spain is almost 24%.  24% ! And the youth unemployment is now at, wait for it, 50% . And in the face of this, the government just presented their 2012 budget which includes, get this $27 Billion Euros of spending cuts and tax increases. "We are convinced that this budget will meet the challenge of recovering the confidence of our European partners," (Budget Minister Cristobal Montoro) Yes! Its the Confidence Fairy again!  Austerity in the face of a recession and deep un-employment will, somehow, magically, with Confidence-Fairy-Dust ™, create growth! I guess the point here is that Kicking The Can Down The Road is always a good idea (as, apparently, is Pointless Austerity)

FT alphaville asks the same question , and as usual, has an answer too.  Its all based on something called TARGET - not The House Of Cheap Plastic, the Trans European Automated Real-Time Gross Settlement Express Transfer . (ed: Who names these things?  Wackos, one and all).  To quote One of the mysteries, to me, of the Greek crisis has been why there should be any deposits left in the local banks. All those with more euros than they need in order to eat and stay warm and dry should have moved their savings to, say, Deutsche Bank in Frankfurt, while they still can. The answer, of course, is that they have. The Greek system has only survived this slow-motion bank run thanks to the German banks sending it right back to them, via the Bundesbank, through the  Trans-European Automated Real-Time Gross Settlement Express Transfer. What, never heard of TARGET? Do keep up. It’s an international version of the transmission system which allows money deposited in Barclays...

via @yvessmith

Why they persist on calling it a Bailout is utterly beyond me, its the biggest non-default Default ever, from what I can tell.  Felix Salmon has all the gory details ... The document gives us most — but not all — of the information that bondholders will need in order to be able to decide whether or not they’re going to tender their bonds into the exchange. It’s written in very dense legalese — the first sentence is 70 words long, with only one comma — so let me try to pull out the important bits. This is complicated, as you might imagine. It makes a significant difference (a) what bonds you hold, whether they’re Greek law or English law, and also (b) where you live, whether it’s in Europe or in the US. (There are also, it turns out, Swiss-law bonds as well, which have their own very special treatment.) But at the end of the day, most bondholders are going to get pretty much the same things when they tender their bonds; you’ll forgive me for ignoring some of the more niggl...

That is all...

Pictures from the Atlantic with the people's reaction to the votes in Parliament . Go check the rest out - I, literally, have nothing else to say...

From Alphaville - it looks like the fine folks at Citi are coming around to acceptance vis-a-vis a Greek Exit from the Eurozone, pegging the likelihood at 50% over the next 18 months This is up from their previous estimate of 25 - 30%. They're calling this the Grexit… Note:  Nothing to do with " Smart Shared Folder for your Google Apps email "

The BBC points out that unemployment is almost 23% in Spain.  Mind you, thats the good news.  If you're under 25, the unemployment rate is almost 50% (yeah, thats not a typo). How exactly d'you think that austerity is going to help out here? Somehow cause the magical employment fairy to show up?  I smell a deflationary spiral coming up... Note : Do remember that before the crisis, Spain was one of the good guys, with a budget surplus, a AAA rating, and a lot of envy from others...