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The Second Phase of Europe's Second Great Depression Is Underway

Matthew Zeitlin reads the IMF:

Twitter / @MattZeitlin: Shorter IMF: If all this stuff happens that won't happen, we'll, at best, get a eurozone recession.


Eurozone unemployment rate at 10 7  Mar 1 2012

What factors are supposed to halt the rise in European unemployment now? What factors are supposed to reverse it?

Claire Jones and Brooke Masters:

IMF sees banks deleveraging by $2.6tn: A drastic contraction of European bank balance sheets during the next 18 months could jeopardise financial stability and economic growth in Europe and beyond, according to forecasts from the International Monetary Fund.

In its Global Financial Stability Report, published on Wednesday, the fund warned that European banks looked set to shrink their balance sheets by $2.6tn (€2tn) over that period. Unless officials improved their policy response, the IMF said, European banks would dump almost 7 per cent of their assets by the end of next year.

After examining the efforts of the continent’s 58 largest banks to boost their capital ratios, shed unprofitable businesses and cut their reliance on wholesale funding, the fund’s analysts predicted the deleveraging process would be more severe than previously anticipated…