As economic clouds darken once more, a eurozone without risk-sharing remains a eurozone at risk.

The failure to provide for risk-sharing in the eurozone architecture has sustained chronic mistrust, reflected in sovereign spreads.

In the second quarter of 2018 global debt reached a new peak, climbing to 260 trillion dollars ($260,000 billion). At the same time, the global debt to GDP ratio crossed the 320% threshold for the first time. Of that total, 61 percent (160trn) is private debt of the non-financial sector, while only 23 percent is […]

It’s a well-established fact that the eurozone as a monetary union is a weird animal. Among the main reasons that surely stands out is its one-size-fits-all monetary policy that does not fail to be continually targeted by criticism from economists, politicians and other stakeholders in the various member countries. The ECB’s monetary policy interventions share […]

Strange to say, but between the international debt crisis of the 1980s and the Great Recession of 2008, Europe has shown an overall GDP growth rate greater than the rest of the world. In that period two major political events occurred: German reunification in 1990 and the birth of a single interest rate term structure […]

After the controversial European Monetary Fund (EMF) proposal by the European Commission of December 2017, it’s clear that the debate about the future role and structure of the European Stability Mechanism is not over. It will only end when the Euro area benefits from a unified government bond market with a single risk-free yield curve. […]

After the ECB regulatory tightening on banks’ non-performing loans (NPLs), announced with the well-known “addendum” to its guidance to banks of October 5, a barrage of anger came from the Italian banks and institutions (even the Minister of Economy Pier Carlo Padoan and the Bank of Italy took a stand) to defend the threatened stability […]

The euro rally on FX markets really begins to look interesting now: 1.2 on the Dollar, a level never experienced since January 2015, just before the ECB’s official announcement of its Quantitative Easing program. This year, the Euro has strengthened by over 14% against the US currency. A paradox lies between the lines: the Federal […]

The Italian government has launched a package of extraordinary measures to handle the crisis at Veneto Banca (VB) and Banca Popolare di Vicenza (BPVI). The two Venetian banks have long been under surveillance by the Single Supervisory Mechanism (SSM) of the ECB due to repeated breaches of the supervisory capital requirements. A first extraordinary intervention […]

New reforms for the Eurozone are in sight, ready to be implemented in the short term by taking advantage of the stronger than expected European economic recovery. As was clearly hinted by the tenor of official declarations, after the electoral turmoil of recent months, Brussels intends to go on the counter-offensive against populist movements with […]

The political turmoil that followed the Renzi government’s resignation after the results of Italy’s referendum on constitutional reforms, the hurried appointment of the new executive and the endless emergency of Monte dei Paschi overshadowed the letter that the European Commission sent on December 5th to the outgoing administration. In concise terms, the letter confirmed what […]

When it seemed the ECB had “hibernated” the spread in its balance sheet for good, back it comes. In recent weeks, the yield spread between Italian and German government bonds over ten years has risen by more than 60 points in 60 days. We can expect a further surge while market fears over the Italian […]

The narrative about Eurozone problems is often – and rightly – focused on the Italian banks’ troubles, burdened as they are by €338 billion of non-performing loans (NPLs) with little or no chance of recovery owing to the persistent crisis of the Italian manufacturing sector. The Monte dei Paschi drama is just the tip of […]

The process of globalization is in retreat. The latest victim of the global economic slowdown is international trade: after tumultuous growth in the last 26 years, disrupted only temporarily by the financial crisis of 2008-2009, the estimated volume of goods and services traded globally has been stalled for more than 18 months around $13 trillion. […]

Times have surely changed: as little as three years ago, Quantitative Easing was considered a remote hypothesis, EU inflation was well over 2% and only a small fraction of “heretics” (including myself) dared to discuss “helicopter money” as a measure to revive the economy. The “money from helicopters”, dubbed complete madness by Milton Friedman from […]

The Troika is in Athens and will not leave without deep cuts to pensions, even though the country is back in recession. Far from last summer’s media glare, a renewed clash of powers is on course between the Troika and the Tsipras government that could severely impact upon the exhausted Greek economy. Among the controversial 48 points […]

The severe financial crisis of recent years hit Eurozone industrial production; in a bank-centric currency area this resulted in tremendous growth of NPLs (non-performing loans), amounting today to €900 billion. In some countries, banking system issues arose from real estate bubbles and structured finance transactions. The absence of a unified economic policy and of a […]

2015 will go down as the year when the oil price crash did not result in a swift decline in oil output. At a first glance, this seems a very strange phenomenon. Although the price reduction has been massive (-75% in 18 months) it is certainly not the fastest: in 2008, with the crash of […]

For the fifth time in seven years Japan is back in recession, with GDP shrinking by a further 0.2% in the third quarter. Meanwhile, inflation has fallen from more than 2% to zero in just over six months. This is certainly not the first time that Japan has ‘gained’ a recession/deflation status: the growth dynamic of […]

After eight months of continued contraction, the Chinese manufacturing juggernaut is officially stranded. The rollercoaster ride of the summer of 2015 with its market crashes and sudden policy changes has unleashed widespread fear in government offices of losing further points of GDP growth. The latest estimate (probably optimistic) of a 6.9% growth rate appears disappointing […]

The debt crisis may no longer be in the spotlight but the financial situation in Greece remains complex. Greek banks continue to survive at the edge of bankruptcy, kept afloat only by Emergency Liquidity Assistance (ELA) from the ECB and by still-enforced capital controls. After the August “agreement”, the Troika has promised the Greek government €25 […]