Macro Commentary

Very slowly…..then all at once.  That is how bankruptcy occurs, so says an old adage.  That description certainly fits the continuing Greek saga.  Week after week, month after month, year after year the headlines say that Greece is nearing the end of its rope, that finally circumstances have reached the point where the end is nigh.  Somehow, imminent crisis is averted and politicians continue to fire verbal warning shots at each other over this issue or that.  It has happened so much that the public seems no longer interested.  We wonder if people even read a news article after seeing a Greek headline.  It’s possible you stopped reading this paragraph after seeing the word “Greek” in the third sentence.  So it is not surprising that few people took notice that the most recent Greek payment to the IMF for 750mm EUR was funded primarily through emergency reserve funds Greece holds at the IMF itself.  Ploy or not, that is not a good sign.

Meanwhile, like most good magic shows, distraction is used to leave you with a sense of wonder of just how a feat was accomplished.  The preliminary estimate for Euro area GDP growth in Q1 was +0.4% – higher than the +0.2% estimated growth in the US over the same period.  It has been some time since we could say that Europe was growing more quickly than the US.  Further, expectations for full year economic growth in Europe are increasing while they are falling in the US.  There is still a gap between the two but it is closing.  Personal consumption appears to be the driver.  Accounting for half of last year’s expansion, initial data suggests that the trend continues.  Looking towards the future, we are still waiting on a larger positive effect on exports from the euro’s decline over the past 12 months.  In the recent report, the stalwart Germany is slowing a bit and the slack is being picked up most notably by Spain.  That makes the upcoming Spanish election all the more important.  After a strong rise to prominence shown clearly by the March regional election in Andalusia, the anti-austerity/anti-euro political group Podemos seems to have stalled a bit in polls.  Part of the reason is attributed to the party moving towards the center in their policies in an effort to mainstream and gather broader power from more voters.  From our perspective, Spain is on a path to work through their high levels of unemployment and we would like to see them maintain their economic progress regardless of politics.

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