Things aren’t looking too great in Europe right now. Every bit of confidence gained in Greece seems to be borrowed from Portugal. But that’s just the beginning. Here are a smattering of stories.

ECB President Jean-Claude Trichet is confident Greece can control their deficit. At the same time, he feels the economic problems in Greece are a more pressing concern than inflation, and suggests they will not raise their target rate above 1%.

There are some concerns as to where these budget cuts will come from. Greece’s biggest union just approved a mass strike. The strike will effect roughly 2 million workers, a significant chunk for a country with an estimated labor force of 5 million people. The government tax collectors are participating in their own two-day walkout.

Speaking of tax collectors, Spain is having some troubles in that department. Landlords paid in cash are hiding 2.5 billion euros in taxable earnings annually. It’s interesting that cash rent is the focus of the article, because it is a drop in the bucket compared to Spain’s total tax cheat problem. Decreasing the income tax cheating to 13% would generate an additional 25 billion euros in taxes annually.

The lack of tax revenues are going to be costing Spain more in the future. Spain’s borrowing costs just shot up after a tepid three-year note auction.

Both Spain and Portugal’s stock markets took a hit today, dropping the most in 15 months. Ok, we can identify capital flight. Where is the money going? The dollar is at 7 month highs, but if it is the result of capital flight, the foreign money certainly didn’t jump into our stock market today.

Backing up a bit to bond auctions, Lithuania decided to offer their biggest bond offer while their EU friends get hammered. $2 billion in bonds, with 10-year notes expected to go for as much as 7.625%. Ouch.

German bonds are doing well. Unfortunately, German factory orders fell more than anticipated in December. This took out the majority of November’s gain. Incidentally, this still represents a year-over-year improvement.

The troubles in the EU are being noticed, even among the political elite (and they’re always the last to know). European Monetary Affairs Commissioner Joaquin Almunia sees problems in the union (emphasis mine):

Greece, Portugal, Spain, these economies and others in the euro area share some features. In those countries we can observe a permanent loss of competitiveness since they are members of the Economic and Monetary Union.

Wait… What? I thought Almunia was supposed to be a cheerleader, not a realist.