The austerity measures approved by [Italian] Parliament include selling state assets and increasing the retirement age to 67 from 65 by 2026. They would decrease the power of professional guilds, privatize municipal services and offer tax breaks to companies that hire young workers.
EconoMonitor : EconoMonitor » Europe Begins Its Endgame. Watch and Learn, for Europe’s Problems Are the World’s.
The current structure of Europe cracks under the slowly rising stress of vendor financing: export-based prosperity for some, debt-financed consumption by others. Unless reformed, this can only end badly. The global economy has similar imbalances. In 2010 the trade surpluses of China, Russia, and East Asia (China being half the total) were almost equal to the US trade deficit of $560 billion. OPEC, Germany, and Japan accumulated another $518 billion surplus. These numbers continue year by year, accumulating stress that will eventually break the current global financial order.
We should watch and learn from Europe’s experience in the months to come. We, and the rest of the world, may follow them sooner than we expect.
Banks to dump more Italian debt | Ticker | IFRe
With the ECB providing a bid for Italian bonds that might not otherwise exist, board members at some of Europe’s largest bank say now is the time to accelerate disposals. Many are also reversing long-standing policies of buying into new Italian bond issues, denying Rome an important base of support.
“Our traditional buying days are no longer,” said one board member at a European bank, one of Italy’s 10 biggest creditors, who added that the bank has also sold off previous bond purchases. “Unless there is more certainty on Italians changing direction, it will be very tough for them to find buyers.”
China’s inflation victory comes with high price – FT.com
In October, normally a peak month for home buying, real estate transactions plunged 25 per cent month on month, according to the statistics bureau.
via China’s inflation victory comes with high price – FT.com.
Italy Fears Rattle World’s Investors – WSJ.com
Big investors felt comfortable owning big stakes of Italian debt in part because they knew they could sell without much difficulty. That has changed.
“It used to be one of the most liquid markets out there, but it isn’t anymore,” said Peter Schaffrik, head of European rates strategy at RBC Capital Markets in London. Not long ago, an investor had little problem buying or selling €500 million of Italian bonds at a clip, he said. “Now it’s difficult to trade more than €50 million.” The worsened trading conditions have led to more-exaggerated moves.
via Italy Fears Rattle World’s Investors – WSJ.com.
Liquidity is drying up in the Italian bond market, making it near impossible to roll-over maturing debt issues. The Italian bond market is third biggest in the world. If the EMU struggled to reach an accord over Greece, what chance do they have now?
Here’s One Reason the Euro Hasn’t Gotten Crushed. Yet. – WSJ
[Jens Nordvig at Nomura] estimates suggest that $100-125bn may have been repatriated by Eurozone equity portfolio investors in Aug-Oct.
This is an outsized figure, and may have helped avoid a much bigger decline in EURUSD since August.
Looking ahead, we are skeptical that this repatriation flow will continue to provide strong support for the Euro.
via Here’s One Reason the Euro Hasn’t Gotten Crushed. Yet. – MarketBeat – WSJ.
A Couple of Depressing Data Points From Digging Into China’s Trade Statistics. – Overheard – WSJ
Looking at the data in yuan terms, exports grew just 9.4% year-to-year. Taking account of inflation, which has been unusually high this year, the real figure would be even lower.
via A Couple of Depressing Data Points From Digging Into China’s Trade Statistics. – Overheard – WSJ.
New Greek Premier Steps Into Spotlight – Bloomberg
Lucas Papademos, named today to be interim prime minister of Greece, steered the country into the euro region as central bank governor more than a decade ago. Now the former European Central Bank vice president will have to secure the country’s euro membership for a second time.
Papademos, who has never held elected office, helped foster economic growth rates that surpassed Germany’s and France’s in his eight years at Greece’s central bank before moving to the ECB in 2002.
Watch Europe’s Bank Deposits, Not Its Political Moves – James Wood
People are now moving euro-denominated deposits out of Greece, Portugal and even Italy in protection against a possible exit of these countries from the European Monetary Union…….What is the effect of the movement of deposits? The banks losing their deposits will soon be facing a liquidity crisis. A publicly understood liquidity crisis leads to bank failures. In short, the focus on political considerations misses the looming problem of a liquidity crisis and bank failures.
via Watch Europe’s Bank Deposits, Not Its Political Moves – Seeking Alpha.
Aussie and Loonie hurt by dollar surge
The Aussie broke short-term support at $1.02, signaling a test of parity. The descending 63-day Twiggs Momentum “iceberg” warns of a primary down-trend. Breach of parity would indicate another visit to primary support at $0.94. In the long-term, failure of primary support would offer a target of $0.80*.
* Target calculation: 0.94 – ( 1.08 – 0.94 ) = 0.80
Canada’s Loonie “peeked” briefly above parity before retreating to test support at $0.975/0.980. Descending 63-day Twiggs Momentum, below zero, indicates a primary down-trend. Breach of support would test $0.94; and failure of primary support at $0.94 would offer a target of $0.88*.
* Target calculation: 0.94 – ( 1.00 – 0.94 ) = 0.88