Just to follow up on the last post, which was relatively optimistic about the eurozone, I want to show you this chart of non-performing loans in the periphery. I believe it tells a story of debt deflation and explain why the contraction in GDP has been so sharp.
I believe the improving second derivative numbers will put a halt to this and turn these numbers around. We are already seeing some signs of this in Spain. In Portugal, the bad loans keep rising though. Italy is where the rubber meets the road because it is the third largest eurozone economy. Arresting incipient debt deflation in Italy has to be a primary concern for Europe.
Taking the foot off the austerity brake, even somewhat, is going to be a big change for Italy, especially since it is no longer in the excessive deficit ca...
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Edward Harrison is the founder of Credit Writedowns and a former career diplomat, investment banker and technology executive with over twenty five years of business experience. He has also been a regular economic and financial commentator in print and on television for the past decade. He speaks six languages and reads another five, skills he uses to provide a more global perspective. Edward holds an MBA in Finance from Columbia University and a BA in Economics from Dartmouth College.