Tuesday, June 18, 2013

Is a Eurozone Crisis back ? Probably.

From Financial Time today 18th of June :
Cyprus’ president has asked eurozone leaders for a complete revamp of his country’s €10bn bailout, warning Nicosia may not be able to meet the rescue’s current terms because it has harmed the country’s economy and banking system even more than expected.
In a letter sent last week and obtained by the Financial Times, Nicos Anastasiades wrote that the restructuring of the country’s two largest banks, the centrepiece of the March rescue, was “implemented without careful preparation”, wiping out the working capital of many Cypriot companies and requiring unprecedented capital controls that were suffocating the island’s economy.

“The economy is driven into a deep recession, leading to a further rise in unemployment and making fiscal consolidation all the more difficult,” Mr Anastasiades wrote to the heads of three EU institutions and the International Monetary Fund. “I urge you to review the possibilities in order to determine a viable prospect for Cyprus and its people.”

An unsustainable scheme is poised to change. And with the Euro as high as 1.34 this afternoon against the USD, it is tempting to bet against it !
Have a good evening !

Friday, May 31, 2013

About sustainability of Eurozone

Sustainable for democratic countries ?

Friday, April 5, 2013

Didn't you miss something, Mr Draghi ?

I listened this morning to the press conference of ECB that took place yesterday. At the end of the conference (which was a bit boring this time in my opinion) a journalist asked the following question to the President of the European Central Bank :
"Say the situation in Greece or Spain deteriorate even further and they are forced to step out of the Eurozone, is there a plan in place so that the markets don't collapse ? Is there a structural safety net, especially in the area of derivatives ?"
Here is the answer of Mr Draghi :
"These questions are formulated by people who vastly underestimate what the euro means for Europeans. They vastly underestimate the amount of political capital that has been invested in the euro... It is a very important thing..."

This answer reminds me what happened in the native country of Mr Draghi, Italy, one month ago, when the political party leaded by the former Prime Minister Mario Monti, which supported the most the Eurozone project and the budgetary discipline, has been totally wiped out from the political spectrum.
This answer reminds me that a party called MoVimento 5 Stelle leaded by a comedian called Beppe Grillo and of which mantra is "Vafancullo" received 23,5% of votes in the Senate and 25,5% in the Chamber of Deputies.
This answer reminds me that in Italy, this founding member state of European Union, the populist and anti-euro Silvio Berlusconi received 29,1% of votes in the Chamber of Deputies.

When you refered to the important meaning of the euro for the Europeans and the huge amount of political capital that has been invested in the common currency, didn't you miss something, Mr Draghi ?

Wednesday, April 3, 2013

Bank of Cyprus awarded by Euromoney !

Bank of Cyprus received in 2012 an award from Euromoney as the Best Private Bank in Cyprus.
What is really funny is the last sentence of the advertising :
"This recognition by Euromoney is ever more important in today's macroeconomic environment as it reaffirms the Bank's ability to safely and successfully respond to its client's financial needs and emphasizes its clients' loyalty and trust."
Depositors at Bank of Cyprus are expected to loose up to 60% of their assets.
Private Banks, which paid a lot of money in order to proudly wave their Euromoney awards, should quicly remove any reference to this dodgy achievement.
Thank you Euromoney for this comic moment !

Tuesday, March 26, 2013

Behind the scenes of a disastrous European bargaining

This article from the Wall Street Journal is a must-read in order to measure the chaotic process of European negociations about the bail-out of Cyprus last weekend and the growing political mistrust and resentment between European countries.
"I have never, ever witnessed anything like this. It's a disaster.", a senior Eurozone official said.
The bitterness over the Cyprus mess will probably hamper future attempts to fix the bloc's flaws : if and when a much bigger nation like Spain or Italy will request a financial help from its European partners, will Eurozone have any chance to avoid a breakup ?
The next test of Eurozone cohesion will probably be Slovenia. A mess again ?

Monday, March 25, 2013

The Diesel-Boom effect

Jeroen Dijsselbloem (Diesel-Boom), the new president of the Eurogroup, who followed veteran Luxemburg Prime Minister Jean-Claude Juncker, declared today in an interview with Reuters and Financial Times that Cyprus rescue will be a model for future bailouts in Eurozone.
This model means that troubled banks will either go bankrupt or will be rescued by tapping private investors and depositors : European taxpayers will not have to pay anymore if banks fail.
"Taking away the risk from the financial sector and taking it on to the public shoulders is not the right approach”, he said.
This new approach marks a brutal change of course since the crisis began three years ago.
The ugly consequences of Lehman Brothers collapse in September 2008 let markets think that a new bank collapse will be avoided at any cost by authorities in order to keep the financial system working. And recent measures taken by European leaders, notably the setup of the 500 billion € European Stability Mechanism (ESM) decided 9 months ago, and supported by ECB Outright Monetary Transactions scheme (OMT), confirmed that conviction.
But since yesterday, things are different. As a perfect neo-conservative apologist, Mr Diesel-Boom insisted : “If I finance a bank and I know that if the bank gets in trouble, I will be hit and I will lose money, I will put a price on that. I think it is a sound economic principle. And having cheap money because the risk will be covered by the government, and I will always get my money back, is not leading to the right decisions in the financial sector.”
Result of this new paradigm in Eurozone :
In Italy, Intesa Sanpaolo -6.2% and UniCredit -5.8%. 

In Spain, BBVA -3.6%, Santander -3.2% and troubled Spanish lender Bankia slumped 41.4%
In France, Société Générale -6% while Credit Agricole lost 5.8%
Italy’s FTSE MIB index fell 2.5%.

Spain’s Ibex 35 slid 2.3%.
This is what we can call the Diesel-Boom effect.
Take care, and have a nice week !

Monday, March 18, 2013

ECB view about Euro area economic situation

Imagine you are a European prime minister or head of state, attending the Euro Summit on the 14th of March in Brussels.
Mario Draghi, President of the European Central Bank, starts his presentation about Euro area economic situation and the foundations for growth.
Here are the slides of his presentation.