As months go on and the eurozone sovereign debt crisis increases, weakening economies like Germany paves the way for a possible breaking of the EU. True, Sarkozy and Merkel danced around the idea of a stronger fiscal union, but that is for consumption not reality. The great idea, the eurozone is on its way out. Ideas often times are not reality and whether we like it or not the Euro is going under. In a few months we may see Unicredit one of the largest banks in Europe and based in Italy go under.
According to Federico Ghizzoni head of UniCredit Bank, it may be forced to dispose of assets to offset higher funding costs if fears of eurozone contagion fail to abate over the next months, its chief executive said. If that goes it will be the final nail in the Euro’s coffin. But this coffin may bring most of the Western economy down with it. The thought was that a strong Germany could save the Euro by backing up the rest of the zone, but Germany’s economy has ground to a halt and Germany that is stalling economically is dangerous and can draw the continent into a steep recession.
According to Matt Lynn: Tuesday’s GDP figures merely confirmed a trend that has been evident for the last few weeks. In June, German exports, adjusted for work days and seasonal changes, fell by 1.2%, compared with a rise of 4.4% in May, according to the country’s statistical office. The IFO business climate index for July fell sharply to its lowest level in nine months, and analysts predict it is likely to keep dropping. The ZEW investor sentiment index recorded its weakest results since back in January 2009.
What About Estonia?
Estonia seems to be the one bright spot in the EU. The Estonian economy grew at a 1.8% pace from the first quarter, towering over the anemic 0.2% euro-zone average and the S&P upgraded its debt to A-. The Prime Minister of Estonia Andrus Ansip was quoted saying, “Of course I am very proud that Standard & Poor’s says Estonia is a double A-country now,” Mr. Ansip said. “I am proud that state finances are in good shape.” Yet Estonia’s growth maybe short lived if the EU Debt crisis continues along the current trajectory.
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