In news this morning Spanish retail sales fell by a stunning 10.7% year over year in December. That was worse than the 7.8% drop in November. The all time record for a monthly drop was set at 11% in September. Retail sales in Spain have now dropped for 30 months in a row. The big fall in retail sales certainly suggests that Spain did not make its target to cut the budget deficit in 2012 to 6.3% of GDP
The German economy, the EuroZone’s strongest, contracted by 0.5% in the fourth quarter. That’s not good news for efforts in Italy, Spain, Ireland, and Portugal to hit aggressive budget deficit reduction targets in 2013.
I know all eyes are on Washington today in the run up to the 3 p.m. meeting at the White House, but spare part of an eyeball for Europe where the economic bad news points toward a renewed debt crisis later in 2013.
The euro climbed to $1.324 today. That’s the highest level against the U.S. dollar since May. The euro also hit a 16-month high against the yen today. Last night Standard & Poor’s delivered a six-notch credit upgrade to Greece. And the European Central Bank announced that it would again accept Greek debt as collateral for commercial banks that want to borrow from the central bank.
This morning EuroZone finance ministers sprang into action. First, the group finally agreed to release 49.1 billion euros in rescue funding for Greece that has been held up since June. Second, the finance ministers agreed on a program to make the European Central Bank the sole supervisor for the EuroZone’s biggest banks.
After Mario Monti what? Monti’s decision to resign as Prime Minister of Italy after Parliament approves the new budget has thrown Italian politics and European financial markets into a dither. It now looks like Italy will hold new elections in February–with no clear leader likely to emerge
This morning Greece officially launched its program to buy back Greek government debt from private investors. This offer has to succeed in reducing Greece’s debt burden for the country to be assured of receiving the 44 billion euros of rescue funds promised at last week’s meeting of Europe finance ministers.
