William L. Watts is a writer for MarketWatch, a division of The Wall Street Journal that posts a robust and highly informative website for avid readers of the economic tea leaves (like me). What’s interesting is that I can’t find out anything about Mr. Watts: no Wiki page, no bio, nothing. Perhaps that’s why he is able to tell people: Europe is going into a Depression. No one uses the “D” word in polite company. It’s just not done. Recession, yes. Extended deep recession, yes. Depression, no.
Economists generally agree that depressions last two or more years and are accompanied by a big jump in unemployment, falling credit, and a massive slump in economic output. That’s certainly been the case for parts if not all of Europe.
The Greek unemployment rate hit a once unfathomable 27.2% in January. In Spain, 26% of workers are jobless. Across the euro area as a whole, more than 19 million people are out of work while the unemployment rate stands at a record 12%.
I can confirm this. I’ve been working for the last two days on an article for The New American about the myth of Germany and how it’s a “model” of economic performance that everyone should follow. What I’ve found instead is that, at the very least, that “model” is flawed. More accurately it is fatally flawed. The outlook for Germany is decisively poor, no matter how it is viewed. And it’s the strongest economy in Europe and the 4th largest in the world. Watts wrote:
Euro-zone GDP is widely expected to have contracted for a sixth consecutive quarter in the first three months of 2013, and forecasters are penciling in another year of modest contraction for the euro zone as a whole in 2013.
The Bundesbank (Germany’s Federal Reserve) has just cut its forecast for 2013 another tenth of a percentage point to -0.4%. I think they’ll be lucky to get that.
Watts agrees with what I’ve found:
Depression is the right word, characterized by abnormally high unemployment, declines in banking and manufacturing activity, shrinking output, consumer malaise and increases in bankruptcies, often followed by sovereign defaults (read: municipalities defaulting on pension obligations and debt). Watts is right. No wonder no one can find him. He may be a pariah, but he’s right.