WARNING: the EU Crisis is BACK and Will Be Worsening in the Coming Weeks

As the article hits out, the only thing propping up the European financial system are politicians — likely the same for the U.S., South American and Asian economies as well. This means they are the last line of defense, armed with nothing more than half-truths and artificial propping of the economies via central banks to keep the citizens nice, happy, calm and in the dark. If this is the case, it shouldn’t be long before a collapse comes. One could say a litmus test for the article would be to watch the reaction of the markets when another scandal breaks out among the said politicians, at home or abroad.

I want to issue a major warning to investors: the EU Crisis is going to get worse in the coming months.

I realize that most investors and analysts believe that the EU Crisis is over. Then think that because the S&P 500 is closing in on its all-time highs that things are fine in the system.
They are wrong.

The only item that held Europe together in 2012 was the credibility of EU politicians and ECB President Mario Draghi. Please note that nothing fundamental improved for the EU’s financial system: EU GDP has since re-entered a recession and EU unemployment has a hit a new record.

Indeed, the only reason things even looked better was because various Government engaged in massive interventions. In the case of Spain, this included raiding 90% of their social security fund to buy Spanish bonds so that yields would fall.

So… when you entire financial system is held together by the credibility of the political class… corruption scandals can implode the system.

A regional President, earning less than $80K a year just bought a $1 million penthouse in a country where youth unemployment is above 50%, workers have gone over six months without being paid, and pharmacies are running out of medicine due to having not been paid some €500 million by the government.

The reason this is so important is because politics, not economics, drives everything in Europe. Please note that the entire EU banking system was pulled back from the brink of collapse last summer by Mario Draghi and other EU officials promising to do whatever it takes to end the crisis.

Since that time, the economy has actually worsened in Europe. Unemployment has hit a new record and the vast majority of the EU has re-entered recessionary territory. Thus, it has been the credibility of various EU officials, not any fundamental improvement in things that has made the whole system work.

Full article: WARNING: the EU Crisis is BACK and Will Be Worsening in the Coming Weeks (Zero Hedge)

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