EUROZONE: MORE OF THE SAME

This past Friday, ECB President Christine Lagarde warned of a sluggish economy, and she stepped up her call for the ECB to inject fiscal stimulus to boost the bloc’s growth. “We have a unique possibility to respond to a changing and challenging world by investing in our future, strengthening our common institutions, and empowering the world’s second largest economy.”

Interestingly, she has echoed Gerald Celente’s call for nations to create self-sustaining economies. Lagarde said that governments should rebalance their economies, from exports to domestic demand.

“This was the most encouraging speech I have heard for several years in Europe,” exclaimed Christian Sewing, the CEO of Deutsche Bank, which is racking up historic losses and whose stocks have plummeted to all-time lows.

Moody’s, the New York-based rating agency, reduced its outlook for the German banking system from neutral to negative.

In the first three quarters of 2019, Deutsche Bank reported losses of €4.1 billion. Over the same period, profits for Commerzbank dropped to €684 million, a 9 percent drop. Commerzbank’s stocks have also hit an all-time low.

An analyst at Moody’s predicted that “banks’ weak profitability will decline further as net interest income falls.”

Claidia Buch, a Bundesbank executive, said, “Banks are now increasingly financing the very enterprises that would be the first to encounter problems in the event of an unexpected economic deterioration.”

Compounding the risk are inflated real estate prices, as housing prices in cites are 15 to 30 percent higher than their values.

Also playing the fiscal stimulation card, OECD blames the global slowdown on governments which leave their economies in the hands of central banks instead of investing in structural problems. They advised “urgent action,” forecasting that stimulus measures would increase GDP growth by 1 percent over the next three years for the G20 economies.

For the eurozone, the OECD predicts 1.2 percent growth in 2019, 1.1 percent in 2020, and 1.2 percent in 2021.

For the UK, OECD forecast 1.0 percent growth in 2020 and 1.2 percent in 2021. 

And for the U.S., they forecast 2.3 percent growth for 2019 and 2.0 percent for both 2020 and 2021. 

The OECD reports that “the global outlook is fragile, with increasing signs that the cyclical downturn is becoming entrenched.”