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Economy in Brief

Exports and Imports Plunge in the Euro Area as Deficit Contracts 
by Robert Brusca February 17, 2009

Recession has hit the Euro Area trade flows hard as exports already lower by 6.8% lower in November fell by another 0.9% in December. But imports that fell by 4.8% on November fell by a further-chilling 3.9% in December. The confluence of these trends shrank the EMU trade deficit in December to Eur 257mln from Eur 4.0 Bln in November. Yr/Yr exports are lower by 5.4% compared to imports which are down by 6.6%. Over three months the annual rates of decline are -35% for exports and -43% for imports. Over the last six months the pace of decline has accelerated sharply. Yr/yr numbers do not begin to show the depth of the problem.

German finance minister Steinbrueck warned that Euro-region countries may be forced to bail out other members of the 16-nation bloc that face problems refinancing their debt. “Some countries are slowly getting into difficulties with their payments,” Steinbrueck said late yesterday in a speech in Dusseldorf. “The euro-region treaties don’t foresee any help for insolvent countries, but in reality the other states would have to rescue those running into difficulty.” This underscores the degree of difficulty of economic times in Europe. Also underlining that tough sledding is the warning by the rating agency Moody’s today. Moody’s cautions that banks with substantial lending exposure to Eastern Europe could be downgraded. Thus another class of assets (Eastern European loans) has gone bad. Of course the banks with the most of this type of lending are European. Emerging Europe is being called the ‘sub-prime’ of Europe.

Euro Area 13 - Trade trends for goods
  m/m% % Saar
  Dec-08 Nov-08 3M 6M 12M
Balance* €€ (257) €€ (4,005) €€ (1,922) €€ (3,760) €€ (2,235)
All Exp -0.9% -6.8% -35.3% -17.1% -5.4%
Food and Drinks -- -3.0% -7.1% -3.3% 1.6%
Raw materials -- -13.0% -60.4% -34.9% -12.2%
MFG -- -4.0% -24.7% -10.8% -6.6%
All IMP -3.9% -4.8% -43.4% -21.0% -6.6%
Food and Drinks -- -2.9% -15.1% -7.8% -3.7%
Raw materials -- -0.4% 4.5% 4.8% 8.3%
MFG -- -0.5% -8.2% -1.8% -1.3%
*Eur mlns; mo or period average; Gray shaded areas lag one month
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