The EU Plan - It's All Greek to Me

I have been saying this for a while - like for nearly six freakin' years already - and I am standing by it; the EU is not going to survive this economic mess in its current form. 

http://financialspiltmilk.blogspot.com/2011/09/eu_25.html

I got a lot of flack from various readers in the EU when I said this six years ago, so let's see how they react to this prediction today with Greece on the precipice.  More on that later . . .

Let me think, what else did I say several years ago?  Oh yeah, I remember, I said Iceland did the right thing in letting its banks fail and getting the pain behind it. 

http://financialspiltmilk.blogspot.com/2011/11/take-your-medicine.html

Now admittedly Iceland was dealing with banks defaulting and Greece is also dealing with government debt woes, but the approach in principle is the same.  Let's see how that worked out.  Hmm, Greece "chose" the austerity package route so it could stay in the EU and Iceland chose the "get it over with" route.  Greece has unemployment around 25%, billions of Euros leaving its banks, is borrowing from public entities to meet its current debts, has no ability to meet debt obligation beyond a few more weeks without kissing Merkel's butt and has absolutely no end in sight.  Iceland is looking at - did I read that right - a 4% unemployment rate!

http://www.bloomberg.com/news/articles/2014-01-27/let-banks-fail-becomes-iceland-mantra-as-2-joblessness-in-sight

Wow, who would have ever seen that coming.  Bloomberg notes the IMF has praised Iceland for what it did.  I guess I missed the IMF announcement praising Greece or the rest of the EU's wonderful handling of this crisis.

And focusing on Greece in particular, I said four years ago it needed to follow Iceland's lead:

http://financialspiltmilk.blogspot.com/2011/11/put-fork-in-it-greece-seems-to-be-done.html

Of course it did not follow my advice.  I think they were too busy eating their yogurt.  I must admit, however, it has managed to survive and flail around a lot longer than I suspected.  Back four years ago I did predict the voters would get tired of austerity and vote in someone who wouldn't take it any more.  Tsipras was supposed to be the guy, but he has not really shown it much yet.  The next week will tell whether he is or not as he has to respond to some ultimatums from the EU.

http://globaleconomicanalysis.blogspot.com/2015/03/screws-tighten-on-greece-ecb-forbids.html

Either way, other countries have voters fed up as well and anti-EU austerity parties are getting a good bit of traction these days.  Time will tell.  I am sticking by my EU prediction.  It is poorly structured union and cannot survive the test of time. 

And while things are better here in the U.S., I would not be throwing any parties just yet to celebrate.  The last several bundles of economic data have been less than uplifting.  So much so that the Atlanta Fed has reduced its GDP Now forecast for Q1 to .2% GDP growth.  That is down from a forecast just two months ago of 1.9%.  The nice thing about the Atlanta Fed's GDP Now site is that it provides updated forecasts frequently with all major data releases and it ties each change to the data in a nice chart.  Kind of a nice roadmap to the economic reports the past couple of months and whether they were the old thumbs up or down in terms of GDP impact.  Pretty much all thumbs down the past few months apparently.  Go here and check out their recent forecast and see what caused the respective decreases. 

https://www.frbatlanta.org/cqer/researchcq/gdpnow.cfm

Won't take but a couple more ticks down before we are in negative territory.  This would be what they call "negative growth,"  an oxymoron if I have ever heard one.  Sounds like something a guy would say to his date "Err, well, that's just a bit of negative growth.  It's really getting bigger but it just does not look like it."