The European economy sinks

I discussed yesterday that the success of last week’s EU summit needed to be measured on a political scale not an economic one. There were obviously economic ramifications from the outcome, but the ratification of whatever they eventually turn out to be is likely to take many months of further politicking.
In the meantime the downward pressure on the economy due to implementation of government sector austerity against de-leveraging private sectors continues to show in the statistics. As I said yesterday:

Do I somehow think that this summit means that Europe is fixed? No. The problems of Greece, Spain, Italy, Portugal, Cyprus and Ireland exist today as they did on Thursday. The outcome of this summit has further solidified the implementation of the fiscal compact which is guaranteed to slow the economy of Europe further …

During the conference there were two announcements that were a under-reported due to the timing. Firstly there was some announcements out of France:

The French economy posted zero growth in the first quarter of this year following a weak 0.1% expansion in the fourth quarter of 2011.
INSEE had forecast earlier this week that the French economy would grow only 0.4% in 2012, slightly less than the 0.5% previously forecast and budgeted by the government.
“France will suffer from a contraction in internal demand from its euro zone partners, which will hurt exports, and its efforts to consolidate its budget,” INSEE’s research director Eric Dubois had said.

Read more: http://www.macrobusiness.com.au/2012/07/the-european-economy-sinks/