EU update

More possible hints that deficits may be large enough to support stability

A little better than expected:

Euro-Area Manufacturing Contracted for 11th Month in June

By Mark Deen

July 2 (Bloomberg) — Euro-area manufacturing output contracted for an 11th straight month in June as Europe’s debt crisis sapped demand across the continent.

A gauge of euro-region manufacturing held at 45.1 in May, London-based Markit Economics said today in a final estimate. That compares with an initial estimate of 44.8 on June 21. A reading below 50 indicates contraction.

A little better than expected:

Italian May Unemployment Rate Declines for First Time in a Year

By Chiara Vasarri

July 2 (Bloomberg) — Italy’s jobless rate unexpectedly fell from a 12-year high in May, the first decline in more than a year.

The unemployment rate decreased to a seasonally-adjusted 10.1 percent, from 10.2 percent in April, Rome-based national statistics office Istat said in a preliminary report today. It was the first decline in the jobless rate since February of last year. Economists forecast an increase to 10.3 percent, the median of eight estimates in a Bloomberg News survey showed.

Joblessness among people aged 15 to 24 rose to 36.2 percent, from 35.3 percent, Istat said.

Better than expected improvement here:

U.K. CIPS Manufacturing Shrank for Second Month in June

By Jennifer Ryan

July 2 (Bloomberg) — U.K. manufacturing shrank for a second month in June as demand “remained weak,” Markit Economics said.

A gauge of factory output was at 48.6 from 45.9 in May, Markit said on its website today. The median estimate in a Bloomberg News survey of 25 economists was 46.5. A reading below 50 indicates contraction.

Some ok Swiss news as well.

Also, sufficient progress at the EU level to give the ECB cover to write checks as needed to get from here to any of the prospective EU measures.

This includes taking forever to get from here to there.

They all seem to understand that the ECB is at least one answer to the solvency issue, and seem to be willing to allow the ECB to provide bank liquidity while they try to finalize an alternative solution. Indirectly that means, at least for now, the member governments will be able to make their payments for the immediate future.

So as previously discussed, they solved the solvency issue, and markets have responded, which leaves them with a bad economy to focus on.

With deficits now perhaps large enough for stability, and maybe a bit of modest GDP growth, I’d at best expect a ‘wait and see’ attitude from an EU that has found it highly problematic to act even in an emergency.