Germany And Greece Play Chicken In Demolition Derby, Euro Smashed

English: Miniature sheet containing 4 stamps, ...It’s the European Demolition Derby. Smash! Crash! Crunch! Whack! Fenders banged up. Radiators steaming. Tires flattened. Greece and Germany are playing chicken. Greece presses down the accelerator and heads for Germany.

“If you force us out of the euro, all of Europe will go up in flames,” say the Greeks.

“Oh, Ja?” say the Germans, turning on the speed in their Mercedes, and we wonder which one will lose his nerve? Or will they crash head-on? Nobody knows for sure, but nobody wants to have money in Greek banks, in European periphery banks–or even in euros–when they find out.

This past week more money leaked out of Greece and out of the euro, which fell to its lowest level in two years as “Europe braced for turmoil.” One headline said Greece was making plans to withdraw from the euro. The Greeks promptly denied it. You know what they used to say in Soviet Russia: no rumor is confirmed until it is officially denied.

De La Rue, an English company that prints most of the world’s currencies, would not say whether an order for drachma had come through or not.

The big beneficiary of all this capital flight from European smash-ups has been the good ol’ greenback. How about these May flowers: just this month, the U.S. Dollar Bullish (UUP) ETF has ticked up 4.6%. The Currency Shares Euro (FXE) have tanked 5.5%.

Commodities from top to bottom have been slayed, too. The US Oil Fund (USO), which tracks the price of crude, has been hammered 13.8% lower in May. Crude spilled below $90 last week but bubbled back at week’s end with the West Texas Intermediate flavor fetching $90.72 per barrel.

Metals have been mauled. For the month, the SPDR Gold Trust (GLD) is down 5.7% and iShares Silver (SLV) has been whacked -8.3%.

Are things getting better in Europe? Don’t count on it any time soon. The New York Times is on the story:

Economic reports Thursday showed Europe’s prospects dimming as the long battle to defend the euro zone continued to undermine confidence and raised the prospect of a renewed cycle of demands for austerity.

The relentlessly bleak data, reflecting weakness across the Continent and in Britain, came a day after political leaders again failed to break the deadlock over how to resolve the European debt crisis.

A Markit Economics index that tracks the European services and manufacturing sectors fell in May to 45.9 from 46.7, worse than economists surveyed by Reuters and Bloomberg had expected. An index reading below 50 suggests the economy is contracting. In the first quarter, the euro zone economy grew just 0.1 percent.

Perhaps even more worryingly, German data released Thursday showed signs of a slowdown in an economy that until now had been a bright spot for the Continent. A Markit index based on surveys of purchasing managers of German manufacturing companies fell to 45.0 in May from 46.2 in April.

And Britain’s is worse. New data show the slump is worse than previously thought. The NYT again:

The Office for National Statistics revised the decline in gross domestic product in the first three months of this year to 0.3 percent, up from the 0.2 percent it estimated last month, because of a deeper slump in the construction industry. Construction output dropped 4.8 percent from a year earlier, the agency said, not 3 percent, as it had estimated earlier.

The revised figures were “bad news for UK policy makers as it shows the economy faring even more badly than initially thought,” said Scott Corfe, senior economist at the Center for Economics and Business Research in London. “Indeed, the latest data show the UK economy performing worse than the euro zone economy, which saw zero growth at the start of the year — meaning the UK’s woes cannot even be fully attributable to the debt crisis embroiling the Continent.”

Stay tuned and get ready for some more wrecks.

Bill Bonner
for The Daily Reckoning

Euro Declines as Greece and Germany Play “Chicken” originally appeared in the Daily Reckoning.

Turmoil weighs on Greek tourist industry

Fri May 25, 2012 11:15am EDT

ATHENS (Reuters) – Significantly fewer German and British tourists visited Greece in the early months of 2012, the central bank said on Friday, kept away by the political turmoil that prompted one foreign holiday operator to delay payments on hotel bookings.

In further bad news for an economy mired in its fifth year of recession and struggling with record unemployment, visitor receipts fell 15.1 percent year on year in the first quarter.

Tourism is a key sector for Greece’s 215-billion-euro economy with visits to the country’s sun-drenched islands and ancient ruins accounting for about 15 percent of total output and one in five jobs.

A hoped-for upsurge in arrivals would help offset the economic gloom, but strikes and sporadic riots in central Athens have spooked visitors, and an inconclusive general election earlier this month prompted others to put off travel plans due to fears Greece might be pushed out of the euro zone.

Italian tour operator Veratour said on Friday that, pending the outcome of a second election scheduled for June 17, it was seeking to delay payments on summer bookings with its Greek hotel partners.

“We’ve asked for some time, a bit of patience, until the situation is clear,” Stefano Pompili, marketing chief at the Italian company told Reuters.

He said Veratour had put down an advance of up to 40 percent on its contracts, but wanted to hold off on further payments because of the political and economic uncertainty.

The head of Greece’s main hotel association, the Hellenic Chamber of Hotels, said Veratour’s decision was the first by a tour operator this year. He did not expect others to follow.

“I believe our long-term partners will honour their agreements and will not try to benefit at the expense of so many Greek tourist companies and their clients who look forward to spending their holidays in Greece,” George Tsakiris said.


The Bank of Greece said receipts from Russian and German visitors were down by 41 and 7.9 percent respectively in the first quarter, while those from British travellers – the country’s second-biggest tourism market after Germany – fell 11 percent.

“The data confirms that it will be a difficult year for the tourism sector. Recession in the euro zone and high uncertainty in Greece are having a negative impact,” said National Bank economist Nikos Magginas.

“The trend will probably worsen in the second quarter, so hopes for stabilisation are pushed back for after July,” he said.

Overall, the sector’s balance of payments showed a deficit of 28.5 million euros in the first quarter, down by 35.4 million year-on-year as Greeks also cut down on travel abroad.

The Bank of Greece said total travel receipts declined to 396 million euros with visitors spending an average of 405 euros per trip, down 3.8 percent from the same period in 2011.

The number of travellers visiting Greece, which remains at the centre of the euro zone’s debt crisis despite two bailouts, fell 11.7 percent in the first three months of the year to 978,600.

Tourism receipts from European Union visitors fell 28 percent year-on-year, while revenue from non-EU travellers was down 9.5 percent.

The Bank of Greece said revenue from Russian visitors fell 41 percent from the same period a year earlier.

(Reporting by George Georgiopoulos, Maria Paravantes and Deepa Babington; Editing by John Stonestreet)