While Lagarde and Juncker go at it in the policymaker equivalent of hammer and tongs over timetables, there’s a risk here of people forgetting the numbers involved. Because they don’t add up.
Consider these two tables from David Mackie at JP Morgan. Click to enlarge. Read more
It might look a little underwhelming but that’s US prime money market funds increasing their exposure to eurozone banks for the third month in a row. At the end of September they were 16 per cent more expoosed on a dollar basis compared to the month before, according to Fitch. Read more
It’s Eurozone flash PMI time again. It’s a sad time. From Markit:
The Eurozone sank further into decline at the start of the fourth quarter, with the combined output of the manufacturing and service sectors dropping at the fastest rate since June 2009.
Germany’s IFO survey didn’t help much either.
Or peripheral pain in terms of growth/shrinkage in compensation per employee. It offers a striking illustration of why both Greeks and Germans have reason to feel peeved… Read more
Compare:
And we have some very small bits of progress. And, naturally, plenty of kinks. Here’s a handy run down from JP Morgan’s Alex White: Read more
Let’s go back to May 2005, to a lecture delivered by Bank of England governor Mervyn King at the Cass Business School… Read more
We just had to highlight this excellent cut-out-and-keep guide, from today’s print FT, to the tussle over banking union, fiscal union, and debt mutualisation:
Clearly, the sense that Greece has stepped away from the brink of getting kicked out of the eurozone is the key driver, coupled with expectations that Brussels will give Athens a loan repayment extension.
Recent comments by eurozone officials quoted by Reuters that Athens could use funds from privatisations of state-owned assets to retire debt also don’t hurt:
“The privatisation process is finally kicking in, the structure is ready,” the official said. “You could expect a few billion euros from privatisation to buy back debt. This could happen relatively quickly.”
The debt swap plan seems to be working, then, but we wonder for how much longer… Read more
Non-german speakers should be able to guess the meaning, especially if we add the words ‘Greece’ and ‘Wolfgang Schaeuble’ by way of context.
Yes, Staatsbankrott = ‘state bankruptcy.’
Not that it’s going to happen in the case of Greece, of course — at least not according to the German finance minister. Read more
Greek unemployment hit a new record high of 25.1 per cent in July, having climbed for 35 straight months. It’s now more than double the eurozone average of 11.4 per cent and youth unemployment — between 15 and 24 years old — has hit 54.2 per cent. That’s scary and pretty hard to argue with but there is always a bit of context available.
A read for the train home from Buchheit (who helped mastermind the Greek restructuring at Cleary Gottlieb) and Gulati on the options now facing the eurozone’s sovereign debtors and those holding the purse strings.
Not too surprisingly:
[Their paper] concludes that there are no painless or riskless options. In the end, the question may come down to this — to what extent will the official sector sponsors of peripheral Europe be prepared to take on their own shoulders (and off of the shoulders of private sector lenders) a significant portion of the debt stocks of these countries during this period of fiscal adjustment?
Here’s the running order for Angela Merkel’s last? visit to Athens. Graphic courtesy of Bild.
The IMF’s latest global growth forecasts are, unsurprisingly, lower than their last set of forecasts. Which were in turn lower than their previous set of forecasts. And that’s as far as we want to go back, thankyouverymuch. And even with the reduced forecasts, there are caveats. Big, ugly caveats… Read more
Serious question.
What’s the justification for creating a three-ring security circus in the Greek capital, a general strike and quite possibly a major riot? Read more
Herman van Rompuy has quite a proposal to kick off discussions to get some kind of eurozone economic union concept bedded down by the end of the year. The FT’s Alex Barker and Peter Spiegel had the scoop, and FT AV can reveal a bit more of the detail of what is essentially another step towards fiscal union.
Here are some of the points that van Rompuy suggests, in a draft proposal, might be considered at the next EU summit, later this month (our emphasis): Read more
It’s eurozone composite PMI time.
Headline: Predictably poor. Read more
Fact du jour on collateral accepted at European Central Bank liquidity ops, via Benoît Cœuré, ECB executive board member:
...non-marketable assets and above all, credit claims (i.e. normal bank loans) have become the largest single asset class in our collateral portfolio. Read more
US money market funds are still cautious about building up exposure to European banks.
However, according to Fitch’s latest Macro Credit Research report on Friday, they seem much more confident about building up exposure on secured terms. As a result, repos as a percentage of exposure to European banks is on the rise to new post-crisis levels: Read more
That’s the FTSE 100 down 1.2 per cent:
Oh dear. Terrible pun.
Anyway — debt management trial balloon du jour? Read more
Charts, charts, charts, from Credit Suisse at the end of last week.
Well, this is good news… Reuters have corrected their copy on what had sounded like confusing remarks made on Monday by Luc Coene, Belgian central bank governor, about the maturities of the debt the OMT will buy. (It had certainly confused us, in an earlier version of this post – sorry.)
He also said parts of the new programme’s design meant there were built-in limits to how much it could spend. Read more
Charts on a certain broken transmission mechanism are popping up everywhere.
First, a chart from Exotix — ECB data from March show that 42 per cent of small businesses in Greece couldn’t get the loans they asked for: Read more
Hard to believe it was six months ago.
If you think the fat lady hasn’t yet belted it out on the possibility of future sovereign debt restructuring in the eurozone… (and who’d rule it out, ECB actions notwithstanding) Read more
Would you like three long, dense paragraphs of German legal rumination on a idea that’s already DOA? That’d be the ESM funding itself through European Central Bank liquidity.
Of course you would (and if not, you can always skip to the analysis below): Read more
How much longer does this go on?
Spanish 2-year bond yields at 2.9 per cent – down from 6.6 per cent when we first said there was something to what Draghi was saying about convertibility risk. The Italian 2-year’s at 2.3 per cent. Longer-maturity debt has also rallied, despite falling outside the remit of the European Central Bank’s OMT purchases. Read more
German finance minister Wolfgang Schaeuble was addressing the Bundestag on Tuesday…
BFW 09/11 08:28 Schaeuble Says Greece Has Undertaken ‘Impressive’ Steps
BFW 09/11 08:26 Schaeuble Says ECB’s Independence Must Be Defended, Respected
BFW 09/11 08:18 Schaeuble Says Euro Crisis ‘Not Over,’ Be Around for Months
BN 09/11 09:08 *SCHAEUBLE SAYS GERMANY AGAINST `DEBT UNION, EURO BONDS’
BN 09/11 09:07 *SCHAEUBLE: GERMANY SHOWS GROWTH, CONSOLIDATION NO CONTRADICTION
BN 09/11 09:05 *SCHAEUBLE SAYS GERMANY UNLIKELY TO BEAT 1.6% GROWTH 2013
BN 09/11 09:04 *SCHAEUBLE SAYS GERMANY TO AT LEAST MEET 2012 BORROWING TARGET
BN 09/11 08:36 *SCHAEUBLE: GERMANY WILL EXCEED DEBT BRAKE REQUIREMENTS BY FAR
BN 09/11 08:35 *SCHAEUBLE SAYS GERMANY DETERMINED TO CUT NEW BORROWING
BN 09/11 08:33 *SCHAEUBLE SAYS GERMAN 2012 0.7% GROWTH FORECAST WELL SUPPORTED
BN 09/11 08:31 *SCHAEUBLE: FUTURE ESM BANK RECAPS MUST BE REQUESTED BY STATES
BN 09/11 08:31 *SCHAEUBLE: UNREALISTIC TO HAVE SUPERVISION OF 6,000 BANKS SOON
BN 09/11 08:26 *SCHAEUBLE SAYS EUROPE HAS LEARNED FROM ITS CRISIS
BN 09/11 08:25 *SCHAEUBLE SAYS STABILITY AND GROWTH PACT HAS `MORE TEETH’ NOW
BN 09/11 08:25 *SCHAEUBLE SAYS `WE’RE ON THE RIGHT TRACK’ IN THE EURO REGION
BN 09/11 08:25 *SCHAEUBLE SAYS ITALY, SPAIN HAVE MADE CONSIDERABLE PROGRESS
BN 09/11 08:24 *SCHAEUBLE SAYS GREECE PROGRAM CONDITIONS CAN’T BE RENEGOTIATED
BN 09/11 08:24 *SCHAEUBLE SAYS GREECE MUST MEET ALL PROGRAM CONDITIONS
BN 09/11 08:24 *SCHAEUBLE SAYS PORTUGAL FIGURES SHOW REFORMS TAKING HOLD
BN 09/11 08:23 *SCHAEUBLE SAYS GERMAN PARLIAMENT MUST BACK NEW AID PROGRAMS
BN 09/11 08:21 *SCHAEUBLE SAYS ECB’S INDEPENDENCE MUST BE DEFENDED, RESPECTED
BN 09/11 08:21 *SCHAEUBLE: SHARED LIABILITY, PRINTING PRESS WON’T SOLVE WOES
BN 09/11 08:21 *SCHAEUBLE SAYS THERE WON’T BE ONE BIG BANG TO SOLVE CRISIS
BN 09/11 08:20 *SCHAEUBLE SAYS GERMANY UNLIKELY TO SEE STRONG UNEMPLOYEMNT GAIN
BN 09/11 08:17 *SCHAEUBLE: GERMANY BETTER ADJUSTED TO GLOBALIZATION THAN OTHERS
BN 09/11 08:16 *SCHAEUBLE SAYS GERMANY HAS BECOME MORE RESILIENT TO SHOCKS
BN 09/11 08:14 *SCHAEUBLE SAYS GERMAN ECONOMY’S EXPANSION IS SLOWING
BN 09/11 08:13 *SCHAEUBLE SAYS EURO CRISIS `NOT OVER,’ BE AROUND FOR MONTHS
BN 09/11 08:12 *GERMAN FINANCE MINISTER SCHAEUBLE SPEAKING IN GERMAN PARLIAMENT
BN 09/11 08:12 *SCHAEUBLE SAYS ECONOMIC SITUATION OVERSHADOWED BY EURO CRISIS Read more
That’s Portugal’s 5-year CDS back below 500bps for the first time since March 2011 (we threw in Spain and Italy too as they have tightened a fair bit and we had load of chart space). Click to enlarge, data via Markit:
Here are the full ‘technical features’, which Mario Draghi read out at Thursday’s press conference. Three big things stick out:
- The ECB will apparently make a ‘legal act’ to confirm that its bond holdings under “Outright Monetary Transactions” are pari passu, not senior. Legislation signals a welcome precommitment, but a nasty fudge here: 200 billion euros of bonds held under the SMP (which programme has now been terminated) will not come under the pari passu rule. Read more
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