Europe Has Proven Economic Data Is a Political Tool…Not Reality

February 5, 2014

Let’s start with Europe.

It’s now clear that the spate of positive economic data coming out of Europe prior to the German Federal Election in September 2013 was just political gaming to get Angela Merkel back into office.

The reasoning here is obvious: Merkel has walked a tightrope act between appearing to play “hardball” with bankrupt EU nations while effectively writing every check needed to keep the EU project together.

Consider that the alternative to Merkel was a completely anti-Euro party that wanted Germany out of the Euro, it’s fairly obvious who EU-leaders would be supporting during this election.

Germany's exceptionalism is obvious. Whereas electorates across the European Union have punished their governments for the Great Recession and the euro crisis, Germans re-elected Chancellor Angela Merkel and displayed strong support for her party, the Christian Democratic Union (CDU), in the recent election

Elsewhere, populist anti-European parties of the right have been gaining ground with campaigns directed against immigrants and minorities, especially Muslims….   Germany, by contrast, has no anti-European party with any serious support. Even the newly formed Alternative for Germany – which did unexpectedly well in the recent election, finishing just short of the 5% threshold needed to enter the Bundestag – insists that its anti-euro agenda is not anti-Europe. They want to end the common currency, because, in their view, it is undermining the European ideal. 

Against this background, Germany's neighbours have been showing their love – or at least admiration. At the end of 2011, Polish Foreign Minister Radosław Sikorski called upon Germany to take a stronger leadership role in Europe..

Likewise, as France slides into a governance crisis and its leaders' credibility rapidly erodes, the leading French intellectual Alain Minc has published Vive l'Allemagne (“Long live Germany”), in which he argues that Germany is Europe's healthiest and most democratic country.  

In Italy, the bourgeoisie of Milan and Rome have made a point of spending winter days dressed in characteristically German Loden overcoats.

Even in the habitually Eurosceptical United Kingdom, Prime Minister David Cameron has sought to boost his international credibility by highlighting his close ties with Merkel, rather than by emphasising the UK's ‘special relationship' with the United States.

Merkel’s Germany is effectively the glue holding the whole EU mess together. And it is not surprising that those EU-political leaders (PMs in Spain, Greece, Portugal, etc) in danger of being ousted by anti-Euro parties in their home countries are exceedingly “pro-Merkel.” No Merkel= no Euro = no more political career for most of this crowd.

Note in the below article how the improvement in unemployment for August was revised down after Germany’s elections.

The unemployment rate across the 17-country eurozone hit a record 12.2 percent in September, with about 19.5 million people classed as jobless by EU data agency Eurostat.

Thursday's figures showed the August rate had been revised up from 12.0 percent to 12.2 percent…

Analysts said the "revising away" in August of previous falls dented hopes of the labour market having bottomed out.

Economic data can be and is commonly used as a political tool. The EU is just the latest example of this. Indeed, if we look at the market, we’re getting clear signals that the next round of the EU crisis is beckoning. Indeed, the EU just announced record unemployment. And the biggest issue remains youth unemployment, which remains north of 50% for most of the southern periphery.

The market, which can be gamed for political purposes in the short-term, has a way of predicting turning points. And with that in mind, I want to note that the markets are indicating that the next round of the crisis is here.


For a free report on how to prepare for it… swing by…

Phoenix Capital Research

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