Mark my words: the eurozone’s economic problems are here to stay, and the economic slowdown in the common currency region will get worse as we move forward.
The Netherlands, the fifth-biggest nation in the eurozone, is the new victim. The country, once looked upon as one of the strongest in the eurozone, is experiencing a collapse in its real estate market.
The Dutch economy has the most debt amongst its eurozone peers—banks have 650 billion euros worth of mortgage loans on their books, while consumer debt has hit an alarming 250% of income. (Source: Spiegel, March 4, 2013.) To give you some idea of the magnitude of that consumer debt level, in Spain, the ratio of debt-to-income reached 125% in 2011, the year Spain started to really have financial problems.
The official unemployment rate in the Netherlands just hit 7.7%, and 755 companies in the country declared bankruptcy in February—the highest monthly number of bankruptcies since 1981! The CPB Netherlands Bureau for Economic Policy Analysis now expects a decline of 0.5% in the country’s gross domestic product (GDP) this year.
We already know Greece is in a state of depression, and the economic slowdown in Spain, Italy, and Portugal is accelerating.
France, the second-biggest economic hub in the eurozone, is facing a staggering unemployment rate above 10%.
Similarly, Germany, the largest economy in the eurozone, is experiencing an economic slowdown, as well. The Markit Eurozone Composite Purchasing Managers’ Index (PMI) reports Germany’s all-sector output fell in March for the 19th consecutive month and March saw the largest drop in orders in three months. (Source: Markit, April 4, 2013.)
As I have been writing in these pages for months, the economic difficulties facing the weaker eurozone countries will spread to the stronger countries in that region. The once-stable Netherlands is the first such casualty.
Regardless of the European Central Bank’s (ECB) recent statements to the contrary, the economic slowdown in the eurozone region will intensify. This means the eurozone’s economic problems will continue to send ripple effects into the global economy, eventually reaching U.S. shores.
Where the Market Stands; Where It’s Headed:
We’re dealing with a stock market propped up by artificially low interest rates and paper money printing at the rate of $85.0 billion a month. The market’s “time” is limited. From my analysis, indicators are pointing to a deteriorating stock market advance.
What He Said:
“When property prices start coming down in North America, it won’t be a pretty sight because consumers are too leveraged. When consumers have over-borrowed so much that they have no more room in their credit lines to borrow more, when institutions start to get tight on lending, demand for housing will decline and so will prices. It’s only a matter of logic, reality and time.” Michael Lombardi in Profit Confidential, June 23, 2005. Michael started warning about the crisis coming in the U.S. real estate market right at the peak of the boom, now widely believed to be 2005.