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 […]
Italy And The New Eurozone Risk Morphology
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 […]
Restoring European Solidarity
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 […]
Why A Rebooted ESM Is Much Better Than An EMF
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. […]
ECB, Greece And The Ticking NPL Time-Bomb
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 […]
Strong Euro Is Here To Stay
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 […]
Rescuing Veneto Banks Would Have Cost Less With Indirect Nationalization
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 Brussels Reforms: Path To More Austerity For Italy
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 […]
Redenomination Risk Emerges In German Bund Market
The last few months have seen a sizeable upward jump in government bond yields of the Eurozone countries: France, Italy, Spain have recorded increases ranging between 50 and 100 basis points. With the notable exception of Germany, where rates continued their puzzling descent into negative territory. In late February German “Schatz” with a maturity of […]
Italy 2017: Back To Austerity
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 […]
Interest Rate Rise Could Presage #Italeave
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 Italian Non-performing Loans Problem And Europe
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 […]
