Andlittlewonder。

Afteryearsofinactionfollowingthecreditcrisis,Europe’sbanksremainthemostbankruptintheworld。

IfbanksintheUKandtheUSarestillhavingtroublemakingloans,youcanforgetabouttheireurozonepeerssuddenlypumpingoutcash。

Inshort,thisisn’tgoingtowork。

Soonerorlater,ifitdoesn’twanttoseetheeurozonecollapseentirely,theECBisgoingtobepushedtofollowtheBankofEnglandandtheFederalReserveintoprintingmoney。

TheECBwillhavetoprintmoneyeventually

Here’stheproblem。

ThelatestdatashowsthateurozoneM3,thebroadestmonetarymeasure,isgrowingatonly2。

5%。

Thisiswellbelowthelevelneedforstronggrowth。

Whileincreasedbanklendingwouldboostthis,thisisunlikelytohappen。

Theneedtoraisemorecapital,andtheongoingfearsoverSpanishandItaliandebt,aren’tsuddenlygoingtovanishbecausetheECBisoffering33bpslessondeposits。

Inanycase,evenifbankswerehappytolend,theresimplyisn’tthedemandinthewidereconomyforcredit。

EvenBrusselsexpectstheeurozonetoslipbackintorecession。

Sodespitelastweek’sdeal,thesovereigndebtcrisiscontinues。

Supportingthebanksdirectlyviatheeurozonebail-outfund(theEFSF),ratherthannationalgovernments,isclearlygoodnewsfortheSpanish,ItaliansandGreeks。

ItisalsogoodnewsforDublinifitisallowedtoretrospectivelytakepart。

However,itisvitaltorememberthattheburdenofthebail-outshasnowsimplybeenspreadamongallnationalgovernments,noteliminated。

Andtheyhaven’tyetallagreedtocommitwholeheartedlytothismove。

TheideahasledtoangerincountriessuchasGermanyandFinland。

Indeed,ChancellorAngelaMerkelhasalsobeentoldbytheleaderofhersisterpartythatanyfurtherconcessionswilldestroyhercoalition。

Meanwhile,eveniftheeurozonecanagreetorecapitaliseitsbankingsystembetweenitself,thatwon’tsolvethemoneysupplyproblem。

Remember–BritainandtheUShavebeenabletobypassallthisarguingthattheEuropeanshavebeenstuckwith。

Yetthey’vestillneededtoprintmoneysimplytooffsetthedeflationaryimpactofthebankingcrisis(MoneyWeekregularJamesFergusonexplainsthesituationwellhere。

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Thefactremainsthatboostingthemoneysupplythroughquantitativeeasing(QE)istheonlywaytogettheeconomygrowingfasterthandebt。

Itmighttakeafewmorecrisestoreachthatpoint,butonbalance,iffacedwiththechoicebetweeneurozonemeltdownortakingtheleashofftheECB,wereckonthey’llendupoptingforthelatter。

ThisItalianstocklooksgoodvalue

SohowshouldyouplayaboutofmoneyprintingbytheECB?

Theeurohasalreadyplungedfollowingyesterday’sratecut。

Butmoneyprintingwouldweakenitevenfurther。

NancyCurtin,thechiefinvestmentofficerofCloseBrothersAssetManagement,hassomesuggestionsforwaystoprofit。

WhilesheisnotafanofEuropeanfirmsthatrelyondomesticdemand,shelikesthosethatsellabroad。

Theirexternalfocusmakesthemlessvulnerabletotheongoingdownturn。

Moreimportantly,aweakereurowillalsomakeexportsalotmorecompetitive。

OnesuchfirmistheItaliantyremanufacturerPirelli(MI:PC)。

AlthoughitemploysalargenumberofstaffinEurope,nearlytwo-thirdsofitssalesareoutsidetheEU。

Salesinthefirstquartersawdouble-digitgrowthinNorthAmerica,theMiddleEastandAsia,comparedwiththesametimelastyear。

Althoughexpectationsaremoremodestforotherregions,thetyrecompanyisstillexpectedtodowelleverywhereotherthanEurope。

ItrecentlyincreaseditsinvestmentinMexico,whichshouldhelpaccesstotheNAFTA(NorthAmericanFreeTradeAgreement)region。

Despitealltheseadvantages,itisstillverycheap:itcurrentlytradesatlessthanninetimestrailingearnings,and7。

5timesexpectedprofits。

Incontrast,rivalsBridgestone(BE:BGT)andGoodyear(NYSE:GT)haveprice/earningratiosof12。

7and13。

6respectively。

Also,atthemostrecentroundtable,ourexpertstippedacoupleofotherItalianmanufacturersthatshouldcontinuetodowellevenamidtheeurozonechaos。

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