The UK government has now confirmed that it is preparing contingency plans for "economic Armageddon", if the eurozone falls apart. This highlights the difficulties currently facing the world economy.
Meanwhile the Eurozone leadership has clearly begun to panic. According to Reuters' Paul Taylor, control of the crisis has passed to the so-called 'Frankfurt Group", comprising:
"The leaders of Germany and France, the presidents of the European Commission and of the European Council of EU leaders, the heads of the European Central Bank and the International Monetary Fund, the chairman of euro zone finance ministers, and the European Commissioner for economic and financial affairs".
Last week, this group effectively imposed two former EU Commissioners as leaders of Italy and Greece, rather than taking the risk of allowing free elections. As Taylor notes, this has led to a sense that "political change is being imposed from abroad in the name of saving the euro". As he adds, "parliamentary control over taxation and public spending is the traditionally the core of national sovereignty".
Some may argue that 'desperate times call for desperate measures'. But the 'desperate times' have been caused by the indecision and economic naivety of the Frankfurt Group, since the crisis began last year. Without elections, it seems unlikely that any national consensus can be formed in either country about the policies that need to be followed.
Meanwhile, petchem markets continue to signal that a major downturn is underway. The falls in China's markets are particularly worrying, as the blog will discuss tomorrow.
ICIS pricing comments this week, and price movements since 29 April for the benchmark products in the IeC Downturn Monitor are below:
Benzene NWE (green), down 32%. "Weakness for key derivative demand is the major factor in the current bearishness".
HDPE USA export (purple), down 24%. "Sales have picked up in Brazil but sales to China slowed."
PTA China (red), down 21%. "Situation at China's downstream polyester and textile industry seems serious (due to) an overall weakening in demand for textiles from home and abroad."
Naphtha Europe (brown dash), down 20%. "Oversupply expected to worsen on subdued demand."
Brent crude oil (blue dash), down 9%.
S&P 500 Index (pink dot), down 7%