The eurozone has crashed back into double-dip recession. It will contract a further 0.3pc next year, according to a chastened European Central Bank. The ECB omitted mention of its own role in this fiasco by allowing all key measures of the money supply to stall in mid-2012, with the time-honoured consequences six months to a year later.
The North has been engulfed at last by the contractionary holocaust it imposed on the South. French car sales crashed 19pc last month, even before its fiscal shock therapy -- 2pc of GDP next year. The Bundesbank admitted on Friday tore up its forecast on Friday. Germany itself is in recession.
The youth jobless rate has reached 58pc in Greece, 55.8pc in Spain, 39.1pc in Portugal, 36.5pc in Italy, 30.1pc in Slovakia, and 25.5pc in France, with all the known damage this does to the life-trajectory of the victims and the productive dynamism of these economies.
. . . It is true that the ECB has removed the "tail-risk" of sovereign default in Portugal, Spain, and Italy by vowing unlimited bond purchases to cap yields, once those countries surrender fiscal sovereignty. Two-year debt spreads have plummeted. Capital flight from Spain has stopped, after bleeding funds worth 40pc of GDP.
The ECB could have averted much carnage if it had stepped up to its responsibilities as a lender-of-last-resort a long time ago, but EMU politics prevented Mario Draghi from acting until euro break-up was imminent. What a way to run a railroad.
But while Mr Draghi has imposed a beguiling calm on bond markets, the economic crisis grinds deeper. The 20pc currency misalignment between North and South has been disguised by the collapse in demand across Club Med, not closed in any sustainable way.
Spanish companies still have to pay twice as much as German rivals to borrow, with the spread on five-year debt at 250 basis points. Standard & Poor’s said in a report last week that companies across Europe are still winding down exposure to Club Med to protect their credit ratings, entrenching the North-South divide.
S&P’s Jean-Michel Six said EMU has degenerated into a "customs union". The collapse of the interbank market has imposed de facto capital controls. "There are two eurozones, a northern one and a southern one," he said.
The awful risk for Europe is that all these years of EMU pain will achieve nothing, that Euroland has manouvred into a "bad equilibrium" from which it cannot escape under the current dysfunctional system, that policy paralysis will leave the region trapped in permanent depression as the US, China, and the rest of the world moves on.
This is the message in Citigroup’s latest global outlook. Recession will drag on into 2014. "Flawed EMU structures" will hobble the region for years to come. Per capita income in Euroland (and the UK) will remain 3pc-4pc below 2007 levels in 2017. This is much worse than Japan’s Lost Decade.
America will pull further away. The growth gap between the US and EMU is 2.6pc this year, the highest since the 1990s. Citigroup said it will widen to 3.4pc in 2014 and continue at extreme levels through the decade. This will have dramatic compound effects over time. Such is the fruit of Europe’s "policy choices".
Italy faces a slow lingering death. Citigroup says the economy will contract by 1.2pc in 2013, and again by 1.5pc in 2014, with near zero growth thereafter, ending in debt restructuring anyway. France will stagnate until 2016.