The Globe and Mail had a rather disheartening report to offer this morning. According to the newspaper, economies in Europe and Asia are seriously faltering after a new wave of uncertainty hit the Eurozone:
“HSBC’s Flash China PMI (purchasing managers index, a combination of the services and manufacturing sectors and seen as a guide to growth), the earliest indicator of China’s industrial sector, retreated to 48.7 in May from a final reading of 49.3 in April. It marked the seventh straight month that the index has been below 50.
The figures signal that the sluggish economic conditions of the first quarter are set to continue throughout the first half of the year in China’s longest slowdown since the global financial crisis.
“The series of highly disappointing April activity data – exports, imports, industrial production and retail sales indicators all fell short of even the most pessimistic forecasts – the first gauge for economic activity in the current month is a further signal that internal and external headwinds are still biting into economic momentum,” said Nikolaus Keis at UniCredit.
The HSBC PMI has provided a contrast to the Chinese government’s official PMI. The government PMI hit a 13-month high of 53.3 in April as exports ticked higher, although domestic orders showed signs of weakness.”
This came after the Eurozone composite PMI fell to fell to 45.9 this month from April’s 46.7, its lowest reading since June 2009 and its ninth month below the 50-mark that divides growth from contraction. Causing it is the fact that Eurozone leaders are now being asked to make a contigency plan in the event that Greece exits the Eurozone and drops the euro as its currency. We’ll know more about it June 17, when Greece votes again.
Yipes. What to do?
Well, IMF leader Christine Lagarde is sending a warning to those crazy Greeks. The Economic Times reports:
“The trouble with a Greek departure is ‘the risk of contamination, from one isolated member that would be carved out, to other members within the zone that want to stay within the zone, who are wanted by their partners and who are doing all the right things,’ the former French finance minister said.
Asked what would happen if Greek voters rejected austerity in their second general election in the space of weeks on June 17, she said: ‘If the Greek people don’t want to pay the price, somebody has to pay the price.’
Lagarde said other eurozone countries might see the integrity of the 17-country bloc as worthwhile enough to keep supporting Greece with more money.
‘It may well be that members of the eurozone will be prepared to support financially more and maybe longer the Greek country and population to stay within the zone,’ she said.
She said Greece had made ‘huge efforts but they have more to do’ to sort their finances out.
Lagarde said there was an ‘inconsistency’ in Greek voters rejecting political parties that supported “belonging to the eurozone and being sensible about it” and saying they want to remain in the euro, as doing so ‘has a price’.”
What do you think? Is there any hope for the Eurozone?
Read more about the Eurozone crisis in the latest edition of Carnet Atlantique!