Tag: euro-zone

Posted on

20 Banks That Will Get Crushed If The PIIGS Go Bust

Now it looks like Commerzbank could be the next bank to fall in the crisis, which we found to have exposure to the PIIGS second only to Dexia of non-peripheral European banks in this exposure stress test.

….We took a list of the largest European banks by assets and compared their market cap, common equity, and total exposure to PIIGS debt (thank you for the bank statistics, EBA!). Then we calculated exposure to PIIGS debt (sovereign and private) as a percentage of the banks’ common equity. (Notice that HSBC, ING, and even Societe Generale are all absent from this list.)

So far our track record is pretty good–we predicted that Dexia was the most vulnerable bank outside of the PIIGS back in July. If the eurozone crisis continues to escalate, we will see more and more banks bow to the pressure of exposure and become unable to borrow money.

via 20 Banks That Will Get Crushed If The PIIGS Go Bust.

Posted on

Fiscal union is the only real solution | Credit Writedowns

A fiscal union led by Germany would in effect force debtor nations who want more German and ECB support to surrender more of their fiscal sovereignty, in a binding way, to EU Commissioners, who would have greater authority in shaping national budgets and fiscal policies.

Rather than ECB bond buying or a common bond issuance being a solution to the problems, those activities are only possible once the solution is in place. Needless to say monetary union was a significant surrender of monetary sovereignty. However, by retaining fiscal sovereignty, countries found an escape hatch. A move to fiscal union is to close this loophole.

via Fiscal union is the only real solution | Credit Writedowns.

Posted on

Euro Pressures Mount–Necessary for Eventual Resolution | Credit Writedowns

Germany is using this crisis to tighten its hegemony in Europe. It needs to close the fiscal loopholes. Many have recognized that this was a necessary birth defect in EMU–monetary union without fiscal union. A fiscal union–where countries, especially those that struggle to adhere to the Stability and Growth rule, have to cede a greater degree of fiscal autonomy. This will take the form not of German officials, but EU Commissioners having greater say in the fiscal policies of the debtors.

via Euro Pressures Mount–Necessary for Eventual Resolution | Credit Writedowns.

Posted on

Merkel Rejects Rapid Action on the Euro – NYTimes.com

PARIS — Quashing recent speculation of a softening in Germany’s hard-line stance on the euro, Chancellor Angela Merkel repeated on Thursday her firm opposition either to bonds issued jointly by the euro zone countries or to an expansion of the role of the European Central Bank as quick responses to the sovereign debt crisis.

“Nothing has changed in my position,” she said at a news conference…..[but] The German newspaper Bild reported Thursday that the Merkel government was inching towards accepting so-called eurobonds, at least in some form, even if the public stance remained against them, and that some of her party said they could be a tradeoff for treaty changes.

via Merkel Rejects Rapid Action on the Euro – NYTimes.com.

Colin Twiggs: ~ I am getting a sense that Angela Merkel already knows the outcome. As a consummate negotiator she is using the debt crisis to force her EU colleagues to make concessions that in normal times would be politically unthinkable. Germany does not want to abandon the euro which has served them well over the last two decades. They also does not want to risk inflation — so an ECB solution is ruled out. But euro-bonds may be acceptable to the German public — provided that there are strict controls throughout the EMU to ensure fiscal discipline. That, I suspect,  is her desired outcome — she just has to make her EU counterparts feel the heat long enough that they fully appreciate the concessions she makes — and do not start back-tracking on their commitments.

Posted on

Euro Bonds: The Pros and Cons, According to the European Commission – Real Time Brussels – WSJ

A European Commission discussion paper on euro bonds to be released on Wednesday puts forward….three possible approaches for issuing common government bonds in the euro zone.Two would carry “joint and several” guarantees, making euro zone states responsible for repaying the debts of others. Option 1 envisions all national government bond issues in the euro zone being converted to common euro bonds, while option 2 envisages a partial replacement of national bonds with euro bonds. Option 3 would be for the partial replacement of national government bonds with euro bonds carrying ”several” but not joint guarantees, making each state responsible for its own share of euro bonds. The third approach would be easier to implement, in part because it wouldn’t require changes to European Union Treaties, but would carry fewer benefits.

via Euro Bonds: The Pros and Cons, According to the European Commission – Real Time Brussels – WSJ.

Posted on

EUROPA – Press Releases – New action for growth, governance and stability

Extract from Press release regarding European Commission proposal for a common euro-zone bond market and tighter budgetary controls for members:

The proposed Regulation strengthening surveillance of budgetary policies in euro area Member States would require these countries to present their draft budgets at the same time each year and give the Commission the right to assess and, if necessary, issue an opinion on them. The Commission could request that these drafts be revised, should it consider them to be seriously non-compliant with the policy obligations laid down in the Stability and Growth Pact. All of this would be done publicly to ensure full transparency. The Regulation also proposes closer monitoring and reporting requirements for euro area countries in Excessive Deficit Procedure, to apply on an ongoing basis throughout the budgetary cycle. And euro area Member States would be required to have in place independent fiscal councils and to base their budgets on independent forecasts.

The proposed Regulation strengthening economic and fiscal surveillance of euro area countries facing or threatened with serious financial instability would ensure that the surveillance of these Member States under a financial assistance programme, or facing a serious threat of financial instability, is robust, follows clear procedures and is embedded in EU law. The Commission would be able to decide whether a Member State experiencing severe difficulties with regard to its financial stability should be subject to enhanced surveillance. The Council would be able to issue a recommendation to such Member States to request financial assistance.

The Green Paper on Stability Bonds analyses the potential benefits and challenges of three approaches to the joint issuance of debt in the euro area. The paper sets out the likely effects of each of these approaches on Member States’ funding costs, European financial integration, financial market stability and the global attractiveness of EU financial markets. It also considers the risks of moral hazard posed by each approach, as well as its implications in terms of Treaty change. Stability Bonds are seen by some as a potentially highly effective long-term response to the sovereign debt crisis, while others are concerned that they would remove the market incentive for fiscal discipline and encourage moral hazard. The Commission makes clear that any move towards introducing Stability Bonds would only be feasible and desirable if there were a simultaneous strengthening of budgetary discipline. The extent of this strengthening needs to be commensurate with the ambition of the approach chosen.

via EUROPA – Press Releases – New action for growth, governance and stability.

Posted on

EU Sets Out Proposal on Euro-Zone Bonds – WSJ.com

BRUSSELS—The European Commission proposed Wednesday significantly tighter controls over euro-zone members’ budgets, alongside options for a common euro-zone bond market.

….The commission said the deteriorating economic climate requires greater reform efforts from member states.

If a government doesn’t comply with the EU’s demands, they could be locked out of European Union budget funding, which can amount to billions of euros a year.

….The proposals are designed to strengthen the way the euro zone is governed and they go as far as the Commission has said it can go without changing the European Union treaty. Closer integration would set the groundwork for issuing joint bonds among the euro currency’s 17 governments.

via EU Sets Out Proposal on Euro-Zone Bonds – WSJ.com.

Posted on

The credit crunch is coming – macrobusiness.com.au

The SMH has [a] very important story this morning on the funding crisis that is bearing down on the major banks:

Australian banks are preparing for a potential freeze in global funding markets as Europe’s worsening stresses threaten to send the world’s financial markets into a tailspin. Renewed funding pressures for the big banks, which need to raise $16.3 billion over the next two months, are likely to make it tougher for business and some consumers to access credit.

via The credit crunch is coming – macrobusiness.com.au | macrobusiness.com.au.

Posted on

Germany’s economic and political generals are fighting the wrong war – Saul Eslake

The role which the European Central Bank needs to be allowed to play in resolving the European sovereign debt crisis needn’t amount to sustained financing of government deficits. It is perhaps better conceived of as being akin to central bank intervention in the currency markets.

When, in moments of one-sided speculation, or panic, foreign exchange markets push a currency to what by any reasonable yardstick appears to be extremely over- or under-valued levels, it’s not unusual for central banks to sell or buy that currency in sufficient volume to push it back in the opposite direction. If the central bank concerned is perceived as ‘credible’, the volume of purchases or sales required to achieve its objective will often be quite small. And if its judgement as to what constitutes ‘reasonable’ is correct, it will usually end up making a profit.

via Germany’s economic and political generals are fighting the wrong war – On Line Opinion – 24/11/2011.

Posted on

German Bond Auction Spurs Worries – WSJ.com

A German government debt auction drew some of the weakest demand since the introduction of the euro, signaling diminishing investor appetite for even the safest euro-zone assets amid Europe’s worsening debt crisis….The German government was able to sell only €3.644 billion $4.92 billion of the €6 billion in 10-year bunds on auction for an average yield of 1.98%. Interest rates on Germany’s 10-year bonds rose sharply after the auction to 2.09%, their highest level in three weeks, leapfrogging the yield on the U.S. 10-year note.

via German Bond Auction Spurs Worries – WSJ.com.

Powered by WordPress / WordPress Maintenance Service By Website Helper