EU Summit Off to Rocky Start
- Dec 09, 2011
By Dees Stribling, Contributing Editor
With the world watching, and much talk of do-or-die, rabbits from hats and, just maybe, silver bullets, the panjandrums of the brave new European economy met on Thursday and immediately started quarreling with each other. Or maybe they were merely at temporary cross purposes about how, exactly, the euro-zone members and the rest of the EU should proceed to either save the euro or at least see to it that European sovereign debt problems don’t blow a large hole in the world’s economy.
Still, as of Thursday evening, the attendees in Brussels did agree on “automatic” sanctions against member states who ignore limits on how much sovereign debt they can rack up, unless a three-quarters majority of the other states give the offending country a pass. The attendees also specified that debt limits be written into national constitutions. Germany had its way on matters such as limiting the European Stability Mechanism (the permanent bailout fund) to 500 billion euros ($775 billion) and prohibiting the fund from drawing on European Central Bank funds.
The summit attendees could not, however, agree on how to make treaty changes to enshrine these new rules into the fabric of the EU. The treaty that currently governs the EU, the Treaty of Lisbon, took about nine years to create, and changing it in such a fundamental way would also likely be a drawn-out process, not something that would fix debt problems in short order. Also complicating matters is that member states who do not use the euro—10 out of 27, but especially the U.K.—aren’t too keen to give the Germans everything they want.
U.S. household wealth on the skids
The Federal Reserve reported on Thursday that U.S. household wealth dropped again during the third quarter of 2011. The net aggregate wealth for households and nonprofit organizations combined was down $2.45 trillion to $57.4 trillion quarter-over-quarter, the central bank said in its latest flow of funds report.
Some of the decline was due to the continuing woes in the residential real estate market. The Fed noted that the value of household real estate was down by $98.3 billion during the third quarter, which represented an acceleration when compared with the second quarter, when “only” $37 billion in household real estate value evaporated.
Another depressive factor for household wealth was the lousy quarter that the equities markets had from June to September, when it looked like the broader recovery might turn into a double-dip recession, and the sky might fall in the form of a default by the federal government. The S&P 500 alone lost 14 percent of its value during the three months, turning in its worst quarter since the dark days of late 2008, though much of that decline was reversed early in the fourth quarter, so possibly net household worth won’t have such a bad 4Q11.
Weekly unemployment claims slow
There was a bit more good news in employment on Thursday. In the week ending Dec. 3, according to the Census Bureau, initial unemployment claims were 381,000, a healthy decrease of 23,000 from the previous week’s revised figure of 404,000. The four-week moving average, thought to be less volatile than one-week figures, was 393,250, a decrease of 3,000 from the previous week’s revised average of 396,250.
But that didn’t keep Wall Street from a case of the willies on Thursday, with all the indexes experiencing their largest losses in weeks. The Dow Jones Industrial Average was down 198.67 points, or 1.63 percent, while the S&P 500 declined 2.11 percent and the Nasdaq dropped 1.99 percent.