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 […]
The Halt In Global Trade Growth And The Rise Of Neo-Mercantilism
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. […]
The ECB At A Dangerous Crossroad As Berlin Endangers QE
In the stormy aftermaths of Brexit, with Eurozone stock markets losing 8% on average and Sterling crashing, government bonds have remained substantially unperturbed. The ECB shield, in the form of the €80 billion of Public Sector Purchase Program (PSPP) monthly asset purchases, has been remarkably effective and has reduced volatility to the bare minimum. Even […]
Saudi Arabia: The Next “Black Swan” For The Global Economy
Just two weeks ago, the Saudi government announced that in September it will hit the international bond markets with a Dollar denominated issue. In the Kingdom’s history, this is the first foreign debt issue. Incredible though it may appear, the sheiks, holders of the world’s largest oil reserves, appear cash-starved. The Saudi monarchy that in […]
Helicopter Money: An Old Novelty
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 Poor Chances Of The ECB TLTRO II Lending Program Succeeding
After the benign feedback of international markets to the ECB’s new asset purchase program, the banking system is again under pressure in all of Europe. Not surprisingly, the most stressed banks are in Italy, where the problem of €200bn of bad loans is anything but under control. A new string of painful recapitalizations is looming […]
Greek Pensions: Tsipras’ Last Ditch Fight Versus Troika
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 […]
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