The European Union released figures for Q4 2012 GDP today and they were awful. GDP fell by 0.6% in the euro zone and 0.5% in the entire EU, with only Estonia and Slovakia growing inside the euro zone in Q4. Stock markets are getting clobbered on the news and the euro is selling off. This is not unexpected for me as I have been writing a number of articles about different euro zone countries economies underperforming and their governments missing deficit targets. To wit, I am looking more to Europe sovereign bond markets to converge to the downbeat economic reality than to currency or stock markets. The markets to focus on here are Spain, Portugal and France because this is where I see problems for Europe.
Looking at the overall figures, the 0.6% contraction in the fourth quarter in the euro zone is the worst economic contraction in Europe since the beginning of 2009. And so it marks an acceleration of economic decline that should signal to European policymakers that their economic policies are not working. That said, I don’t anticipate this will be the message the data send European leaders.
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