The roses are not as brightly blooming as some had claimed. Wherever you look things remain dire.
In some respects the eurozone lags behind Britain and America as the crisis did not hit them as soon.
Christina
TELEGRAPH 28.8.09
Eurozone recovery under threat as credit contracts again
Credit to households and business in the eurozone continued to contract in July while the broad money supply has ground to a halt.
By Ambrose Evans-Pritchard
The European Central Bank said private sector loans fell by €38bn (£33bn) from a month earlier. Lending to non-financial corporations has shrunk by €116bn (to €4,759bn) since February, although it is still up 1.6pc from a year ago due to lag effects.
"The credit squeeze continues," said Carsten Brzeski from ING. "Today's monetary numbers illustrate how fragile the ongoing recovery still is."
M3 money supply growth has slowed to a record low of 3pc. Monetarists watch the M3 figures closely as a early warning gauge for the economy a year or so later.
The ominous figures help explain why several ECB governors have stepped forward in recent days to cool euphoria. Yves Mersch, the Luxembourg member, said "very low capacity use" in industry would crimp recovery for a long time and warned of a second banking crisis as lenders set aside further provisions for rising defaults. "You can't cover it up with some good half-year balance sheets. Above all, small banks could get into difficulty. The systemically relevant banks are through the worst," he said.
"We should not succumb to optimism that everything has been overcome. The whole world is in recession together and nobody alone can export their way out of the downturn. The recovery cannot last unless there is rise in global demand, and jobs are created, and there is no sign of that," he told the Luxemburger Wort.
"The rebound in Germany and France is not sustainable. The state has stepped in to compensate for the private sector. As long as economic growth relies on the state, you cannot talk about durable recovery," he said.
Similar warnings have come from Spain's Jose Gonzalez-Paramo and from the Bundesbank's arch-hawk, Axel Weber, who fears a second wave of credit stress in coming months.
While M1 'narrow money' growth looks robust at 12.2pc, this has been distorted by flight to safety into euro cash in Eastern Europe. The ECB has tended to view the credit contraction as a sign of falling demand for loans, but German officials say key sectors such as chemicals, machine tools, and engineering cannot roll of over their debts or raise fresh finance.
Stephen Lewis from Monument Securities said the ECB fears trouble when car scrappage schemes expire and the effects of state stimulus begin to fade. The risk is that companies will slash jobs in earnest just as governments start to rein their fiscal deficits.
"As central bankers reflect on the short-term nature of policies underpinning growth, they have good reason to doubt whether the upturn will be sustainable."
Mr Lewis said we may have slipped into a "21st Century" slump even if it feels nothing like the 1930s because of a greater cushion of wealth.
"The feature of depression is that governments are almost powerless because the transmission mechanism breaks down for structural reasons. If we find ourselves slipping back as the stimulus fades, it will not be a `W-shaped' recession but a depression
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