Posts tagged 'Eurozone'

Guest post: Regrets, IMF had a few

The International Monetary Fund’s “ex post evaluation” of its involvement in the Greek bailout continues to generate debate over the weaknesses revealed. Gabriel Sterne, a senior economist at Exotix with two decades of public sector experience including at the IMF, argues that the issues for the fund go much deeper.

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“Price is not destiny”

Like other Europe-focused strategists, William Porter at Credit Suisse has had some fun scrolling through the IMF’s mea culpa on Greece.

He notes that the IMF now admits that its actions were affected by a fear of market contagion, a misunderstanding of how to do a restructuring within a currency union and, most importantly perhaps, a dysfunctional dynamic within the Troika itself. Read more

Are we nearly there yet?

The short answer, when it comes to eurozone adjustment post-crisis, is No. David Mackie and team at JP Morgan reckon we are maybe halfway there.

The bank has a fresh tome out presenting the progress so far as a set of journeys for each EZ member — covering sovereign deleveraging, competitiveness adjustments, household deleveraging, bank deleveraging, structural reform, and national-level political reform. Read more

Spain’s awful unemployment

Is it only going to get worse before it gets better?

Unemployment - Spain Italy France Germany - SocGen

Societe Generale think so: as the chart says, they’re expecting it to reach 30 per cent in 2015 (from an already-awful and record-breaking 27.2 per cent, at last count). Read more

“Something to ponder while hoping for the best”: Cyprus and the IMF

Quite a lot to ponder really. Members of the IMF’s executive board were set to meet on Wednesday to discuss whether to approve lending to Cyprus, more or less behind closed doors.

But maybe not so much this time. It looks like Stockwatch in Cyprus has obtained a copy of the members’ comments on the Cypriot bailout — a rather high-level internal document to find its way to the public… and it makes for fascinating reading. Read more

Loopy

A telling chart (which you can click to enlarge) from BNP Paribas’ Ricardo Santos and Michelle Lam. As they note — after a break particularly in the second half of 2012, there’s recently been a marked increase in banks’ holdings of sovereign debt… especially in Italy, France, Portugal and Spain. Read more

Eurogloom

Some stagnant stats out of Eurostat on Tuesday….

Euro area unemployment rate at 12.1%
EU27 at 10.9%

Here’s the damage, broken down…  Read more

Soros vs Sinn

Hans-Werner Sinn — he of Target2 imbalance fame — had a piece on Project Syndicate last week in which he stood firm against George Soros and his demands for Germany to leave the euro if it continues to block the introduction of Eurobonds.

Though not because he thinks Germany is wrong to oppose Eurobonds, but rather because he believes there is no legal basis for such demands. Article 125 of the Treaty on the Functioning of the European Union, he says, expressly forbids the mutualization of debt. Read more

What price, uninsured depositor risk?

There’s been some thought-provoking revisionism floating around about Cyprus lately.

The gist seems to be this: Why not push bank bail-in policy in the eurozone much harder, right into uninsured depositors if need be, if Cyprus has not (yet?) budged most gauges of bank funding from their current calm. And more importantly, when there is a vicious circle to resolve. Read more

Marginalised in Spain

(Chart from El Pais with thanks… though please label the axes in the future. It drove us a little crazy.) Read more

So this is no longer news, right?

In the euro area the government debt to GDP ratio increased from 87.3% at the end of 2011 to 90.6% at the end of 2012, and in the EU27 from 82.5% to 85.3%.

Full eurostat stats here. Read more

Who’s the eurozone’s poorest, really?

The figures provided in this report incorporate the best judgement available at this time. Nonetheless, caveats remain. The data for Cyprus appear not to be comparable with those for other euro area countries in a number of dimensions and should therefore be interpreted with caution. However, once the above mentioned factors are accounted for, the net wealth figures for Cyprus appear less of an outlier…

Yes, we can imagine why the ECB’s first Household Finance and Consumption Survey might have wanted to make that clear at the outset. (Survey methodology here.)

Possibly because of headlines like this, landing after the German-financed bailout of Cyprus: Read more

Les holdouts misérables

As the pari passu saga in New York rattles towards its end… (or is it?)

The contest of wills and/or highly-paid lawyers between Elliott and Argentina goes on elsewhere, of course. Read more

Cyprus – just pop the red pill, please

Kinda strange that markets should get all a-jitter just as the Cyprus crisis is moving towards a resolution.

Simon Derrick of BNY Mellon asked on Friday: “The red pill or the blue pill.” The answer — choose reality — seems pretty obvious, but let’s first run through Derrick’s handy re-cap…

What’s the problem?

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You say nein, we say oxi [updated]

No: 36
Yes: 0
Abstain: 19

That’s the result of Cypriot MPs’ vote on the current version of the bank deposit levy, rejecting it as a condition of the island’s bailout. Note that the ruling party abstained. Still, that is the first no, after all these years and the bailouts, to the Troika. Read more

So, are they stupid?

To be perfectly honest, trying to second-guess Cyprus isn’t gonnna get us anywhere. The situation at pixel time was moving too fast at too great a distance. While we wait for a tiny bit of clarity — whether this evening’s vote on the bailout will go ahead is till unclear, let alone what the outcome will be — a question being asked by Credit Suisse’s William Porter and team seems apropos: What if they’re not “stupid”? Read more

Buiter: ‘Get in there, Cyprus!’

The Cyprus bail-in is qualified good news, in the eyes of Citi’s chief economist Willem Buiter.

Sure, it would be better if insured depositors on the island had been spared and it would have been nice if losses of uninsured depositors had reflected the recapitalisation needs of each individual bank. But first and foremost Buiter sees this as a decisive step in restructuring excessive debt across Europe, which is a necessity if the euro area wants to grow again. Read more

The stupid idea, and the system

Famous last words and all, but it is hard to see the fear flowing from Cyprus to the average depositor in a Spanish or Italian bank. Not in the short term. As for Lehman II, well, come off it.

After all, that’s probably partly why this inequitable tax on small depositors across Cypriot banks could be put on the Eurogroup negotiating table on Friday. The systemic danger is absent. Read more

Beyond financial repression

A couple of years back, when Carmen Reinhart and Belen Sbrancia updated the concept whereby governments might deal with a problematic mountain of debt by confiscating the savings of their subjects, the discussion was all about the subtle, sleight of hand solutions that might be employed.

Artificially cheap rates of interest might be forced on the embattled sovereign’s debt, local banks might be obliged to buy mis-priced government paper, exchange controls may be erected, and so on. Ordinary people, it seemed, could be financially repressed without realising they were in fact the victims.

There was no discussion back then of outright expropriation or a “tax”, as insured (and uninsured) depositors at Cypriot banks are now being forced to bear. Read more

A stupid idea whose time had come

A “one-off” often isn’t. Calling something after “stability” isn’t very stable. Saying that something is not a precedent usually makes it one.

Presenting the Cyprus bailout’s “upfront one-off stability levy” for depositors in Cypriot banks: Read more

Some Draghi for the weekend

Mario’s presentation to EU leaders from Thursday night. Msg: ‘Mind the gap’…

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When stress and spreads part company

William Porter at Credit Suisse has been mulling the market’s muted reaction to the Italian elections. Increased stress is no longer finding its way into widening spreads, thanks to the Draghi “put”.

This credit strategist is concerned. A dampened signaling mechanism increases the risk of something going badly wrong — a market crash, even. Read more

Bondholders, a two-pack, and “all necessary measures”

The EU’s Council and Parliament agreed on the text for two-pack laws on “enhanced surveillance” of sovereign bailouts on Thursday. It should be on the books soon.

So, if what happened in Greece last year was “exceptional and unique”… Read more

Deficits: good marketing in a time of austerity?

Let’s take a moment for a high level overview of public debt-to-GDP ratios in the eurozone. If that’s not your idea of fun, well, you probably wouldn’t be reading FT Alphaville.

Courtesy of a note by Lasse Holboell W. Nielsen of the Economics Research team at Goldman Sachs (we may have added some kittens)… Read more

A eurozone safe against, or is it safe for, sovereign holdouts? Part one

So, you’re wondering what kind of crisis Cyprus is. And you’ve watched the success of Nicos Anastasiades in the presidential elections so far. Anastasiades is not the kind of guy to demonise creditors for the sake of it, but he will have tough negotiations ahead of him of he wins. Read more

Come play ECBopoly

Go on, pretend you’re on the governing council. Here are the data points you have to try to steer monetary policy with:


(Click to expand) Read more

In the euro area, it’s pretty much going to suck for awhile

Shortly after the new year, the Economics Research team over at Goldman Sachs published their outlook for growth in the euro area. Frankly, it doesn’t look all that hopeful, especially in the periphery (surprise!). We hope you weren’t holding out for something better than the growth rates associated with a “muddle through” strategy…

But hey, at least it’s several rungs higher on the ladder of economic happiness than the collapse of the currency union, eh? Read more

More miserable jobs numbers for Europe

You really do wonder how long this trend can be allowed to continue. From Eurostat on Tuesday…

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The muddled consequences of negativity

Some Praet-prattle in the WSJ last week has put a bit of a dampener on the idea that the ECB is gonna go for a negative deposit rate in the near term. Read more

The sticks and carrots of a banking union

We have a banking union, kinda, sorta. After another marathon summit that stretched into the early hours of Thursday morning — with four hours apparently devoted to overcoming the differences between Paris and Berlin — a classic euro-fudge left everyone feeling relatively satisfied. From the FT:

While the compromise could permit all sides to declare political victory, it remains unclear whether the details effectively establish a two-tier regime or give the ECB ultimate responsibility for all banks.

Shocking. Read more