Chancellor Angela Merkel.
In recent conversations as well we have been highlighting the growth differential between the US and Europe ("Shipping is a leading deflationary indicator"):
In our March "Shipping" conversation we indicated as well:
"LTRO 1 and LTRO 2 will not enable Europe to escape a slower growth, credit crunch and a recession. Maersk is in fact shifting its business away from Europe as indicated by Christian Wienberg in Bloomberg in his article - Maersk Bets Against European Recovery as Recession Kills Trade:
“We think there will be negative growth in Europe this year and that is affecting our view of Asia-Europe trade,” Trond O. Westlie, chief financial officer of A.P. Moeller-Maersk A/S, the owner of Maersk Line, said yesterday in an interview in Copenhagen. “The solution that Europe is trying to take is different from the solution that the U.S. is taking. We believe that general growth will be higher in the U.S.”
"Lack of funding means that bank will have no choice but to shrink their loan books. If it happens, you will have another credit crunch in weaker European economies, meaning a huge drag on their economic recovery and therefore major challenges for our already struggling politicians."
The divergence between US and European PMI indexes - source Bloomberg:
The divergence between VIX and its European equivalent V2X - Source Bloomberg:
It is all about Stocks versus Flows:
"We mentioned the problem of stocks and flows and the difference between the ECB and the Fed in our conversation "The European issue of circularity", given that while the Fed has been financing "stocks" (mortgages), while the ECB is financing "flows" (deficits). We do not know when European deficits will end, until a clear reduction of the deficits is seen, therefore the ECB liabilities will have to depreciate."
As our friends at Rcube Global Macro Research indicated, for tracking credit availability, you need to use the central banks’ credit surveys. As a reminder, for the Eurozone, the % of banks tightening their lending standards spiked to 35% in Q4:
"Since early February, one of the catalysts behind our bearish view has been based on the tightening of lending standards across the world, and more particularly in Europe.
Over the last month, apart from the BoE credit survey, data has indicated that the risk of a credit crunch has somehow receded."
"The main factor behind the improvement is the very substantial improvement in funding conditions." - source Rcube Global Macro Research:
Hence the importance of tracking the ECB lending surveys. As Bloomberg indicates on the 2nd of May, the ECB Loan survey recovery is key positive for EU Growth Prospects:
But unfortunately as Spain is concerned, Corporate lending has been cut by 19 billion euro:
The European Banking Association requirement of reaching a Core Tier 1 Capital of 9% by June 2012, has been for some countries akin to shooting oneself in the foot, as it has been for Portugal - source Bloomberg:
Moving on to the US, the recently released Quarterly Senior Loan Officer Survey shows that the US credit channel has eased further - source Rcube Global Macro Research:
On another note CreditSights in their review of the April Loan Officers Survey indicated the following:
"As was the case in January and October 2011, the April survey included questions about lending to European banks and "euro-exposed" firms. Banks reported tightening standards (but to a lesser degree than in January) and domestic respondents reported increased demand owing to reduced competition from European banks."