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Attention, attention! It is hereby proclaimed\u00a0from the rooftops<\/a>\u00a0that the Spanish risk premium has already performed slightly better than Italy\u2019s. The Government and its political allies can now add this figure to their \u00ablong\u00bb list of green shoots, which our economy seems to be enjoying of late. This will undoubtedly be the more or less caricatured narrative we\u2019ll be hearing over the next few days. But do we really have grounds to be pleased with the economic figures? Here are a couple of examples \u2013 or rather, a couple of harsh realities. Take a look at this simple table from JPMorgan:<\/p>\n Spain\u2019s debt-to-GDP ratio now stands at 91.8%, but what is truly worrying is that the deficit continues to spiral out of control (and we must not believe the moderate forecast for 2013, as it is proving to be unrealistic so far this year), as is job losses. Italy is starting from a higher debt-to-GDP ratio, it is true, but it has always been much closer to balancing its books than Spain, and has also been improving its deficit in recent years. Furthermore, job losses in Italy, whilst not improving, are clearly less severe than the figures for Spain.<\/p>\n So what is the market pricing in? First and foremost, let us remember that Mr Market is essentially inefficient \u2013 not to say schizophrenic. We must also understand that whilst in Spain Prime Minister Rajoy governs with an absolute majority, the Italian parliament is an ungovernable free-for-all. And that is the sole reason why an investor might prefer Spanish debt to Italian debt, though we mustn\u2019t forget that Spain\u2019s governability could also face serious setbacks due to Catalonia\u2019s aspirations for independence, and a general election on the horizon in a couple of years\u2019 time, in which anything could happen.<\/p>\n Another glaring inefficiency we can observe in the market is the yield on French government bonds, which remains at levels typical of a strong, solvent and prosperous Europe, when in reality its economic figures continue to deteriorate year on year. It is inconceivable that the 10-year US Treasury bond should be trading at a significantly worse level than the French government bond, yet this is the case. In fact, some analysts, such as Mauldin\u00a0They are predicting a very bleak future for France<\/a>, which they are forcing into the dreary outskirts.<\/p>\n Ultimately, one need only look at the stubborn economic fundamentals to realise that political rhetoric and uninformed optimism are one thing, whilst the harsh reality is quite another. The European periphery, with notable new additions such as Fran\u00e7ois Hollande\u2019s France, is all but doomed. And yet, political rhetoric and that of the\u00a0establishment<\/em>, those who have no interest in facing up to reality seem to be able to attract enough money from institutional investors to keep prices afloat and avert a European disaster. The rest \u2013 that is to say, those beyond the reach of the\u00a0the mediocrity of the institutions<\/strong><\/a>\u00a0Nor does the ECB manipulate Mr Market\u2019s views. It does so behind the scenes, away from the spotlight and without any record being kept. That is the advantage of having a multinational financial regulatory system manipulated by various European governments, none of whom have any interest in the market reflecting the hardships faced in the periphery.<\/p>\n![\"\"](\"https:\/\/clusterfamilyoffice.com\/blog\/wp-content\/uploads\/2013\/09\/Captura-de-pantalla-2013-09-10-a-las-10.04.32-e1378813450571.png\")
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