Companies in Europe are already scaling back spending, as evidenced by a dramatic drop in the Baltic Dry Index (the Baltic Exchange’s main sea freight index, which tracks rates to ship dry commodities). It has fallen almost 50% so far this month, nearing a three-year low as slow Chinese demand compounded fleet growth troubles.

“The freight market is completely oversupplied because shippers put in orders for new vessels two years ago in expectation of a firm recovery by now,” one freight paper trader said, and added: “They clearly did not expect the crisis to reignite as it has.”

Analyst Lou Basenese declares:

The Baltic Dry Index tracks the cost of shipping major raw materials (iron ore, coal, grain, cement, copper, sand and gravel, fertilizer and even plastic granules). Or, more simply, it tracks the precursors of economic output. As such, the Index provides a measurement of the volume of global trade at the earliest possible stage.

When I last reported on the Baltic Dry Index in October 2011, it was coming off an impressive two-month, 50% rally. That rally’s come to an end. As you can see in the chart above, the Index is down 48.4% in the last month, and 54.4% in the last three months.

The culprit is Europe, of course. You’ll recall that European sovereign debt fears spiked (again) last October. And that’s precisely when the Baltic Dry Index also began its descent. Coincidence? I think not. And the World Bank and International Monetary Fund (IMF) have my back. On Wednesday, the World Bank cut its world economic growth forecast explicitly because of Europe’s never-ending debt crisis. Meanwhile, as Europe’s debt crisis persists, Bloomberg reports that the IMF plans to cut its global growth forecasts, too.

Another bit of bad news is that Spain has come out and admitted that it will not be able to meet the agreed-to target deficit of 4.4% go GDP, as projected GDP growth is now weaker than previously thought. James Kostohryz says that the unfolding of a global fiasco is upon us:

In various articles I have said that the endgame in Europe will probably take the form of PIIGS economies shrinking more than expected, their revenues shrinking more than expected and fiscal deficits ballooning more than expected. All of this will cause fiscal targets and commitments to be violated on the part of PIIGS. This in turn will lead to a showdown with Germany centered on how such shortfalls will be handled.

Spain has now begun the process of acknowledging publicly that it will violate its commitments under recent accords; it is preparing the way for confrontation. According to various reports, Budget Minister Cristobol Montoro has warned that Spain will not meet its target deficit of 4.4% of GDP in 2012. Montoro said that this target was based on an outdated forecast of 2.3% economic growth for Spain in 2012 made by the previous government.

In my view, the absolute best-case scenario for Spain’s GDP growth in 2012 will be a contraction of -2.0%. My own base case estimate is for a contraction of -3.5%. A contraction that exceeds -5.0% is entirely plausible.

Exactly.

And the Food Stamp President will continue to embrace the same failed policies that are destroying Europe.

As Greek banks have become more and more risky, we have learned that Greek citizens have been moving more and more of their hard-earned cash to the safe haven of Switzerland. Makes sense, why keep your money in a financial system tettering on the edge?

Financial blogger Bruce Krasting picked up on possible new regulations the EU is considering as part of the effort to save Greece from default:

[The Greeks have] moved billions of Euros to Swiss banks in an effort to preserve their wealth. In the process they have crippled the Greek banks and have added to the downward spiral in Greece and the rest of the EU.

There was (IMHO) a very significant development on this front last week. A move is being made in Brussels to “force” the Swiss government/banks to transfer all of the assets of Greek citizens back to the Greek banks. For a Greek this means that your money is hostage. It has been functionally expropriated. It will be transferred into a banking system that is fraught with risk. Some portion of the money that goes back to Greece will certainly be lost.

I have talked with some who I know in Athens. They are out of their minds with this development.

Read it all, as Bruce analyzes the possible consequences should the regulations become law. I agree with all he foresees, but am also concerned with the horrible precedent such legislation would create. Precedent that may, one day, be seen as perfectly acceptable by our own elected servants.

And that would be a very bad thing indeed.

German Chancellor Angela Merkel is backing away from the proposed EU bailout of Greece:

Despite a show of Franco-German unity on the crisis and the first statement from EU leaders pledging to safeguard the currency’s stability, hopes on the markets of a German-led rescue plan to shore up Greece’s critical public finances were dashed by Merkel, who repeatedly emphasised that Athens would need to put its own house in order and brushed aside all questions of financial support.

“Germany is stepping totally on the brakes on financial assistance,” said a senior EU diplomat. “On legal grounds, on constitutional grounds and on principle.” Another senior diplomat said of the Germans: “They’re not waving their chequebooks.”

Watch for the DOW to take another dive tomorrow.

And to show that some things never change:

Merkel and Sarkozy held a joint press conference after the summit to demonstrate Franco-German unity, but that masked fundamental differences over how to proceed.

“France and Germany cannot agree on anything,” said a Brussels official. “They are not always on the same page.”

Technorati Tags: Europe, Euro Dollar, Greece, Greek Bailout, Germany, France, Merkel, Sarkozy

The Standard & Poor’s Rating Services has downgraded the New York Times corporate credit rating to junk status.

S&P says it downgraded the rating because it believes that a "likely" economic recession in the United States would worsen ad revenues for at least a year.

S&P says a recession would prolong, possibly until 2010, the time it would take for ad revenues to reach "more manageable rates of decline."

Also on Thursday, the company reported a 51.4% decline in third-quarter profit.

I’d like to think that this is a just reward for skewed, poorly edited "news" reporting, but it’s just a sign of the times.

A EuroRocket got to the moon yesterday:

“That’s it – we are in the Lake of Excellence,” said Octavio Camino, chief of spacecraft operations, as applause broke out in the European Space Agency’s mission control center in Darmstadt. “We have landed.”

Well . . . yeah . . . if by “landing” you mean smacking into something at 7,200 kilometers an hour, then they landed.

So ends a 3-year test of ion propulsion. Now that they’ve figured out how to get something up there, maybe they’ll start working on the brakes.

Technorati tags: European Union, EU, Space Program, Landing on the Moon, Pelting Luna with Eurotrash.

The Brussels Journal reports:

Nationalist parties from seven European countries convened in Vienna last weekend to join forces. The “patriotic and nationalist parties and movements” signed a so-called “Vienna Declaration” calling for a stop to immigration in the entire European Union and the defence of Europe against “terrorism, aggressive islamism, superpower imperialism and economic aggression by low-wage countries.” The parties also reject the European Constitution and demand that “geographically, culturally, religiously and ethnically non-European territories in Asia and Africa” will be excluded from joining the European Union.

There’s more.

Theorem: Corruption is a way of life outside of English-speaking countries:

Europe’s official financial watchdog has refused to approve the EU’s accounts for the 11th year in a row because they are so full of fraud and errors.

The European Court of Auditors refused to give a statement of assurance on the EU’s E100billion ($160.3 billion) budget for 2004. “The vast majority of the payment budget was again materially affected by errors of legality and regularity,” it said. …

The repeated failure of the EU budget to be approved leads to annual buck-passing, with the commission blaming national governments for not taking responsibility for EU expenditure in their countries, and national governments blaming the commission for not improving the financial controls.

TCS tells us why the European economy is much more important to the United States than that of China:

The economy of the single-currency eurozone is five times larger than China’s and per capita income is more than 20 times higher. U.S. exports to the larger European Union (EU) region, at $193 billion in 2004, were more than five times greater than to China but have grown a measly 3 percent since 2000. Imports from the European Union last year, $321 billion, were more than 60 percent higher than from China. U.S. foreign direct investment into Europe last year was $97 billion compared to just $4.2 billion into China. By virtually any measure, Western Europe is the most important trading partner, investment partner and strategic partner in the world for the United States. And the European economy is floundering.

I boycott China to the greatest extent possible because of human rights violations and their military threat. And I will continue to boycott France and Germany because of their leader’s and media anti-American rhetoric. However, I will continue to buy U.K., Italian, Polish and “new Europe” goods whenever possible — they are good allies.

BTW, Donald Rumsfeld has boycotted China for the last four years as well.

Update: American Thinker outlines Bill Clinton’s abetting of the Chinese military program:

China is fighting a new Cold War, borne up by trade surplus dollars, which it fully intends to win. This time however, the administration of President Bill Clinton played the same role as did the Rosenbergs in the last one. Just as the infamous couple delivered critical nuclear technology to the Soviets in the late 1940’s, the Clintons allowed the sale of critical missile technology to the Communist Chinese in return for campaign contributions, the dubious nature of which vastly eclipses any accusation against Delay from even his most wild-eyed critics.

Counting on the technical ignorance of the X-Box generation, Clinton dismissed the strategic technology transfers as merely benefiting “commercial satellite technology.” But as any marginally savvy space enthusiast knows, the technology required to orbit a satellite is identical to that necessary to hurl a Chinese nuclear warhead into the American heartland.

If you think the moonbats in America are bad, take a look at what Davids Medienkritik finds in the German press. Hint: journalist Philipp Mausshardt, while sad for the Democrats that are suffering, is “joyful” — yes, joyful — that it was America that got hit by Katrina and wishes it had destroyed the houses of “Bush voters and members of the Army “.

I am quite pleased that we are pulling our bases out of Germany in our global realignment.

While you are out and about, take a look at The Brussels Journal entry How Katrina Will Affect Europe. Excellent entry with a great money quote at the end that I won’t give away by posting here. Go, read, add to blogroll.

A new report on the textbooks being printed by the Palestinian Authority says that textbooks teach that “The Protocols of the Elders of Zion” are an “integral part” of Zionist history that was approved in “a confidential resolution of the First Zionist Congress.”

The “Protocols”, of course, is the foundation of whacko conspiracy theorists who say that the Jews are trying to control the world. But wait, there’s more!

The description of the Protocols is one of many anti-Zionist and anti-Semitic statements made in PA textbooks, according to a report issued by the Center for Monitoring the Impact of Peace (CMIP) on Monday, a watchdog group.

The 122-page report notes that Israel is omitted from all maps of the Middle East, and that Palestinian martyrs are portrayed as “heroic” strugglers against the “occupying force.”

so how do the Belgians respond?

“We do not find [the textbooks] anti-Semitic in any way,” said a spokesman from the Belgian government press office, speaking to The Jerusalem Post by telephone. “We have a screening process that goes through and reads the books. There has been some controversy about it in the past, but we have had people look into it.”

However, other countries may be having second thoughts. While Finland, Italy and the Netherlands have also provided aid for PA textbooks in the past, this year’s books only credit Belgium and “Arab nations” as providing aid.

When you are the only Western nation to stand with Jew-hating Arabs, then you should be doing some serious soul searching.