Today Naked Capitalism features a bit by Delusional Economics on the current state of the Eurozone, or to be precise, the widening gap between Germany and the rest of the Eurozone. It is a pity that Finland is not included in Markit’s PMI measurements, because that could be interesting. The piece focuses mostly on France, as it is arguably the most dramatic case at the moment, but the Netherlands also gets a mention:
The other ‘core’ country that I have expressed concern over in the last few months is the Netherlands. On Tuesday Fitch adjusted the country’s outlook to negative (full text here):
Rating agency Fitch cut its outlook on the Netherlands’ AAA credit rating to negative on Tuesday, citing worries about falling house prices, the banking system and the high state debt burden.
The other major rating agencies, Moody’s and Standard & Poor’s, have already put their Netherlands’ ratings on a negative outlook. The country is one of just four in the 17-nation euro zone to have kept a full set of top ratings.
“The leveraged Dutch economy has suffered a number of shocks,” Fitch said in a statement.
It pointed to a sharp fall in house prices which it said was worse than it had previously expected. Fitch recently revised its projected peak-to-trough decline to 25 percent from 18 percent, and said this will continue to depress household spending.
to the article Delusional Economics mentions and recently I have written a few short bits
on the nationalization of SNS Reaal and the state of the housing market and indebtedness. It is worth the time to read the reasoning by Fitch on the negative outlook, as it says something which seems a bit of an understatement. Fitch states that the following will influence a decision to consider a downgrade:
– Prolonged economic stagnation and rising unemployment
Although the Dutch labour market is quite flexible and at the moment unemployment is not very high, the issue of economic stagnation is a real threat, given how dependent the Dutch economy is on the economic well-being of other countries. But on the other hand, as this article argues
(in Dutch), at the local level there are all kinds of activities to build a sustainable economy. But given that the (until recently) growth of the German economy has not benefited the Dutch economy, it would be good to keep an eye on this little big country.