Tuesday, February 14, 2012
European industrial production was down again in December - by 1.1% compared to November. The graph from Eurostat is above.
It continues to look like the early stages of a a recession in Europe. The obvious question now is how deep and how long that will last. My current best guess is that we will not see an abrupt rupture (as the ECB appears committed to avoiding catastrophic financial institution failure), but in the absence of that, the underlying imbalances of current account deficits in the periphery that cannot be resolved by exchange rate shifts will take a long time (years) to work out. I hold this opinion pretty lightly though.