The indicator of private consumption in Portugal in July recorded a fall of 3.4% compared to the homologous months of 2010, the lowest since data collection began in 1978.Translation of that last paragraph is a bit choppy, but essentially the 78 billion "bailout" loans coupled with forced austerity measures is to blame for the massive plunge in private consumption.
According to the Bank of Portugal (BOP), this was the eighth consecutive month in which the pointer just in negative territory, which has been deteriorating gradually since December 2010.
The entry into force of some austerity measures that Portugal should apply to return for the loan of 78,000 million euros was granted the EU and the International Monetary Fund (IMF) have affected the contraction in household consumption Lusas.
Expect Rest of Europe to Follow
Contraction in Greece is arguably factored in (although hugely rising deficits are not). More importantly, worsening conditions in Spain and especially Italy are not accounted for.
The ECB forced Italy into various austerity measures in return for providing a backstop to Italian debt. That backstop has worked for now (it won't last), driving 10-year Italian government bond yields down from well over 6% to 5%, still a mighty spread vs. Germany.
Low growth for Italy is penned in. It will not happen. Expect a plunge in Italian GDP and personal consumption.
If Italy, Spain, Greece, and Portugal contract (all but Italy are already), spillover into France and Germany is a given.
Moreover, even France has pledged some budget tightening. Expect more social unrest and a huge recession in Europe because both are on the way. Germany will not be immune.
Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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