Tag: euro-zone

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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.

via EconoMonitor : EconoMonitor » Europe Begins Its Endgame. Watch and Learn, for Europe’s Problems Are the World’s..

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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.”

via Banks to dump more Italian debt | Ticker | IFRe.

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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?

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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.

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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.

via New Greek Premier Steps Into Spotlight – Bloomberg.

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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.

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America and China must “crush” Germany into submission – Ambrose Evans-Pritchard

Having followed the German political scene closely for the last five months, it is clear to me that almost the entire German political establishment is out of its depth, ideological, sometimes smug, apt to view the EMU debt-crisis as a Calvinist morality tale, and lacking in deep understanding of what it has got itself into.

One can understand German worries about money printing – and especially the loss of fiscal sovereignty and democratic control – but matters have already moved on. It is too late for that.

via America and China must crush Germany into submission – Telegraph Blogs.

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Global Liquidity ‘on the Cusp’ of Drying Up – WSJ.com

“Global liquidity has fluctuated wildly over the past five years and we are on the cusp of another retrenchment,” [Bank of Canada Governor Mark Carney] said in the text of a speech, which was focused on global liquidity, to the Canada-U.K. Chamber of Commerce in London.

Mr. Carney, who was appointed chairman of the Financial Stability Board at last week’s G20 Summit, said market volatility is increasing and activity declining as global liquidity shrinks. “The effect on the real economy will soon be felt,” he said. The Bank of Canada expects the euro-area to experience a brief recession.

via Global Liquidity ‘on the Cusp’ of Drying Up – WSJ.com.

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‘Excessive Liquidity’ Not the Solution for Central Banks – WSJ.com

Governments and central banks shouldn’t throw principles overboard in their efforts to fight the debt crisis, Jürgen Stark, a hawkish member of the European Central Bank’s Executive Board, warned Tuesday. “Red lines mustn’t be crossed, otherwise efforts to solve the crisis today create the basis for a new crisis tomorrow,” Mr. Stark said in a speech in Lucerne, Switzerland.

via ‘Excessive Liquidity’ Not the Solution for Central Banks – WSJ.com.

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Top German Economist: ‘It’s in Greece’s Interest to Reintroduce the Drachma’ – SPIEGEL ONLINE – News – International

[Economist Hans-Werner Sinn, president of the Institute for Economic Research, in Munich]: What politicians refer to as a “rescue” will not actually save Greece. The Greeks won’t ever return to health under the euro. The country just isn’t competitive. Wages and prices are far too high, and the bailout plan will only freeze this situation in place. So it’s in Greece’s interest to leave the euro and reintroduce the drachma.

via Top German Economist: ‘It’s in Greece’s Interest to Reintroduce the Drachma’ – SPIEGEL ONLINE – News – International.

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