In the latest Spectator, Liam Halligan takes a sobering look at European markets bearing the brunt of sanctions against Russia.
'The western economy that’s suffered most, by far, is the largest one in the eurozone. Germany’s manufacturing thoroughbreds have sunk tens of billions of euros into Russian production facilities in recent years. . . .
'This helps explain why, having grown 0.8 per cent during the first three months of 2014, German GDP shrank 0.2 per cent in the second quarter. The eurozone’s powerhouse is now on the brink of recession. Industrial production dropped 4 per cent in August, the biggest monthly fall since early 2009. Exports were down 5.8 per cent — again, the steepest drop since the Lehman collapse in 2008.'
The dismal news will come as little surprise to regular readers, who would have caught Halligan's cover story in July, in which he neatly summed up the consequences of the US Federal Reserve's 'money-printing machine':
'Since ‘quantitative easing’ began in response to the late-2008 collapse of Lehman Brothers, the Fed has created thousands of billions of virtual dollars, with the Bank of England chipping in hundreds of billions of similarly computer-generated pounds. Much of this has found its way into global stock markets, sending equity prices sky-high. Designed as an emergency measure, QE has since become a lifestyle choice, the financial and political equivalent of crack cocaine. . . .
'That’s driven the absurd ‘bad news is good news’ mantra that still dominates the thinking of investors on Wall Street and other major stock markets.'
Reality has finally started to break through. Beyond Germany, Halligan writes this week:
'Unrealistic IMF forecasts unravelled in Greece, resulting in a very disruptive €200 billion debt restructuring, made much worse by earlier delays and denial. That’s why IMF supremo Christine Lagarde has just admitted ‘additional funding’ is needed for Ukraine, while adding it would be ‘rather far-fetched’ to assume the IMF can stump up.'
Moscow, meanwhile, continues to boast 'a fiscal surplus, minuscule government debt and vast stashed sovereign wealth.' All of which leaves the prospect of future Western support for Ukraine increasingly unlikely. 'For the reality,' Halligan writes, 'is that the West - or at least Europe - wants sanctions to end much more badly than Moscow.'
For Halligan's full analysis, see his piece in this week's magazine.