Months ago we saw the first signs that Northern Europe was catching a cold, and the latest data suggests that the cold is here and something worse could be on the way. Germany’s economy is almost at a standstill. The Dutch economy actually shrank by more than 1.1 percent in the third quarter—more than Spain or Portugal. Anti-bailout sentiment is sure to rise as the Northern economies fall into recession, which is bad news for the Southern countries relying on a German bailout funds to stay afloat. Meanwhile, countries who don’t use the Euro, like Estonia and Latvia, look healthier, posting gains of nearly 2 percent.The Financial Times warns that it’s likely to get worse in the European core:
Over at Capital Economics, Jennifer McKeown said she expected an even more difficult fourth quarter:
The business surveys point to far worse to come throughout the region in the fourth quarter. With austerity starting to hit French households and German unemployment beginning to rise, the outlook for domestic spending is bleak even in the core.
Guess it’s going to be an austerity Christmas then.
If these numbers don’t change soon, there will be nobody left capable of bailing out the euro, and no political leaders will have the flexibility or the money to move Europe ahead. That’s bad news for China, Japan, and the United States, which all face serious problems of their own. The omens for 2013 at this point are not all that we could wish.