The media and statistical agencies have been bursting at the seams with stories about the eurozone's increasingly healthy economy. Government budgets remain a mess. But no one really cares as long as bond markets are willing to fund these deficits and roll over the debt at record-low yields even of bailed-out countries with over 20% unemployment and spreading misery.
The European economy has simply been on a roll since 2012, according to the stock indices which have been soaring for two years. Politicians and Eurocrats have taken credit, and a whirlwind of backslapping has ensued.
But there have been indications that things are still a little rough. Despite soaring stock markets, ceaseless hype, and analysts' estimates of double-digit earnings growth in the future, corporate earnings in Europe peaked in July 2011 and have been declining ever since [read.... Selling Your European Stocks Before Everyone Sees This Chart?].
But that was just me pointing it out a few days ago. Now comes the Centre for Economic Policy Research, a network of over 800 of the top economists conducting research on the European economy. Ever since the creation of the Eurozone, CEPR dates recessions for the Eurozone - though not for individual countries. Similar to the National Bureau of Economic Research in the U.S., it defines recessions not mechanically as two quarters in a row of declining GDP, but considers other factors, such as unemployment and the strength of the recovery. And it just released a report, following its Committee meeting, that supports what corporate earnings have been clamoring about for a while: the eurozone recession that started in the fourth quarter of 2011 still isn't over.
The Committee placed the end of the prior recession in Q1 of 2009 - things can fall off a cliff for only so long before they hit bottom. Then economic activity took off and peaked in Q3 of 2011. After 10 quarters of expansion, the economy for all eurozone countries combined had grown 4%. It was a start, but it wasn't enough; output remained 2% below the pre-recession peak. By that time, the debt crisis was spreading to core countries. Banks toppled and were bailed out even in Belgium. And in Q4 2011, the next recession started.
But in 2012, the entire debt-crisis fiasco was solved with a few elegant words - ECB President Mario Draghi's "whatever it takes" - backed by the ECB's printing press. Markets loved it. Even beaten-down, haircut-decorated Greek debt soared.
So in 2013, all sorts of organizations and political figures came out to declare an end to the recession, first country by country, then for the eurozone overall. Hope was in the official air. It was the time to get people, even the still growing masses of the unemployed in France, to believe that things were on the right track, that Eurocrats in Brussels and local politicians, even the most despised President in the history of France's 5th Republic, François Hollande, were somehow doing the right thing, and that soon, there'd be an uptick of some sort, even if people couldn't notice it just yet, or maybe ever.
So in October 2013, under pressure from various political directions, and bombarded by news about the budding recovery from the European Commission, statistical agencies, forecasting institutions, international organizations, and the daily media circus, the CEPR Committee decided to meet in Paris to determine if there was indeed enough evidence to call an end to the recession. But on October 19, the Committee released its findings: "while it is possible that the recession ended, neither the length nor the strength of the recovery is sufficient, as of 9 October 2013, to declare that the euro area has come out of recession."
That was bad enough. But it left room for hope. Maybe more evidence would soon tip the scales and allow eurozone politicians and Eurocrats to move forward with a self-satisfied grin that confidently speaks of how they'd conquered the crisis. Alas, after meeting once again, this time in London, the Committee slashed those hopes (and even used bold print to do it):
The Committee observed that since early 2013 the euro area has witnessed a prolonged episode of extremely weak growth in economic activity: Euro area GDP has risen by less than 1% from 2013Q1 to 2014Q1 and labour markets have shown little change over that period. Had the improvement in economic activity been more significant, it is likely that the Committee would have declared a trough in the euro area business cycle in early 2013, most likely in 2013Q1. The lack of evidence of sustained improvement of economic activity in the euro area does, however, preclude calling an end to the recession that started after 2011Q3.
Then the Committee came up with a new twist to express the mysteriously eternal nature of the eurozone recession, once again in bold: "the euro area may be experiencing since early 2013 a prolonged pause in the recession that started after 2011Q3."
This was unwelcome news to Eurocrats and the crisis solvers of the eurozone. But it was not news to the unemployed in France, Spain, Greece, Portugal, and many other countries. They've been seeing first-hand that much of the recovery hype was just hype. It's another piece of evidence, as if more were needed, that doing "whatever it takes" to bail out bondholders and stockholders of banks and big corporations - and then suffocating workers by cutting their wages and benefits and raising their taxes - isn't conducive to the real economy.
I was interviewed on that topic by Jorge Nascimento Rodrigues for "Janela na web" (a Portuguese site) and the printed edition of Expresso. But after what I said, he might never interview me again. Read..... This Debt Is Explosive, And it Sits on the Shelf Everywhere, Waiting to go off.