We've been so caught up in the U.S. elections over the past month that we've forgotten to check up on the never-ending debt crisis in Europe. But there have been a couple of worrisome developments that seem to be rattling financial markets this week. Let's see:
1) The European economy is likely grinding through yet another recession. Its GDP shrunk 0.2 percent in the second quarter of the year, and the third-quarter numbers are expected to be weak. Even mighty Germany is no longer immune to the slowdown, as new data showed that the country's exports and industrial production have been dropping faster than anyone expected.
2) For now, the European Central Bank isn't planning on doing anything to boost growth in the euro zone. On Thursday, policymakers announced that they'd keep interest rates unchanged.
3) Greece still needs to enact a new austerity package in order to get further aid from the rest of Europe. So, this Sunday, the parliament is expected to vote on a budget for next year that contains "sharp cuts to pensions, salaries and social services, as well as tax increases and increases in the retirement age to 67 from 65." Those measures are triggering protests and riots across the country, but hey, at least Greece will get its aid and avoid defaulting on its debts, right?
Actually, maybe not. Officials in the rest of Europe are now saying they'll still need to scrutinize Greece's finances more closely before they hand out that promised $40 billion in aid. It's not hard to see why. As Ambrose Evans-Pritchard writes, Greece is in a "death spiral" — its economy keeps contracting, unemployment is at 29 percent, sharp austerity measures are expected to make things worse, and its debt levels keep rising, not shrinking. Either the rest of Europe will eventually have to forgive some of Greece's debts, writes Evans-Pritchard, or let the country fall apart entirely.
4) Oh yeah, Spain is still a mess too, as its having trouble shrinking its deficits — tax hikes and spending cuts keep hurting growth, and unemployment is expected to increase to 27 percent next year. So Prime Minister Mariano Rajoy has been cautiously talking with the European Central Bank about a bailout to avoid letting its borrowing costs soar. But, as Tim Duy explains, Spanish officials want to make sure they don't get caught in a situation like Greece, in which they keep enacting unpopular austerity measures in exchange for aid that may not materialize.
5) On the bright side, as Paul Murphy reports, the new euro bank notes look like they were painted by that old lady who restored the 120-year-old Spanish fresco:
So at least there's that...