National Saving Rates Across Europe: Diverse

 Rebecca Wilder Jan 25, 2010 12:11AM

Greece – it’s the Eurozone’s black sheep. If this isn’t a Hail Mary, I don’t know what is: Greece Plans Bond Issue Soon. From the Wall Street Journal: Greece said Friday that it plans to syndicate a five-year benchmark bond next week to address renewed market jitters over its ability to finance its giant budget deficit, even as yields on Greek debt hit a new high. The bond, long awaited by market participants and seen as a key test of Greece’s ability to attract investors, will raise between€3 billion and €5 billion, the head of the country’s debt agency said. But Greece is in good company – the so-called PIIGS (Portugal, Italy, Ireland, Greece, and Spain). In fact, the low saving is broad-based, with net national saving – net national saving is an aggregate measure of saving, including private and public sectors – being the lowest in Portugal, –6.9% of gross disposable income on average spanning 2007-2008, and highest in Switzerland, +13.9% over the same period. This differential of saving patterns across Europe, i.e., Germany saves and Portugal does not, stalls any sort of bailout talk – technically, the Maastricht Treaty prohibits inter-government bailouts. However, if Greece’s Hail Mary bond issuance doesn’t work, something’s got to give. Marshall Auerback offers an interesting solution. Greece is simply the first in a long line of European (worldwide, actually) countries that face fiscal consolidation (see two FT articles by Martin Wolf, here and here). So we wait and see.

Hungary isn’t another Greece……..Now is it?

Edward Hugh

Jan 22, 2010 1:25PM

I couldn’t help being struck earlier this week by the following statement in an interview the Financial Times had with Hungarian Finance Minister, Peter Oszkó:

„Structural reforms of the pension and social welfare systems, plus a rebalancing of the tax system, should allow the government to report a 3.9 per cent budget deficit in 2009, on a par with the preceding year and in line with IMF requirements“. 

Is the “Volcker Rule” More than a Marketing Slogan?

Simon Johnson

Jan 24, 2010 11:43PM

At the broadest level, Thursday’s announcement from the White House was encouraging – for the first time, the president endorsed potential new constraints on the scale and scope of our largest banks, and said he was ready for “a fight”.  After a long tough argument, Paul Volcker appeared to have finally persuaded President Obama that the unconditional bailouts of 2008-2009 planted the seeds for another major economic crisis. 

Clearly this is Their First Rodeo

Mark Thoma

Jan 22, 2010 12:48PM

Economics of Contempt has A Few Assorted Thoughts on Financial Reform. I wish I could disagree with his contention that the reform proposals from the administration represent little more than „a fairly transparent political stunt.“ Maybe I’ll be pleasantly surprised, and I hope I am, but it’s hard to be optimistic (and things like this don’t help):   

Bailouts: Catching a Falling Knife

Edward Harrison

Jan 25, 2010 3:45PM

Back in June before real panic struck, I outlined my thinking on the financial services sector in a post called “Financials: catching a falling knife.” My basic point at the time was that investors – especially sovereign wealth funds (SWFs) and hedge funds – were seriously underestimating future losses in the financial services. I suggested that buying financials was like catching a falling knife and that things would only improve when these investors gave up and went home. 

Greek burdens ensure some Pigs won’t fly

By Daniel Gros, Published: January 28 2010 20:08  Financial Times

Financial markets have coined a new term to sum up troubled eurozone states: the “Pigs”. Portugal, Ireland, Greece and Spain have found their bonds moving together, with Greece and its troubles a bellwether for the entire group. These countries all had a long boom based on cheap credit, which ended in a bust in which their public finances deteriorated spectacularly – raising concerns as to whether they will be able to service their debt.

However, this acronym is misleading, as is the exclusive concentration on fiscal policy.

Nouriel Roubini on the 2010 Economy: NEWSWEEK & YouTube

Nouriel Roubini

Jan 27, 2010 1:26PM

Newsweek Video — In preparation for President Obama’s first State of the Union address, Nouriel Roubini gives his perspective of what economic challenges we’ll face this year and answers CitizenTube users‘ questions on the financial crisis. (Click for Video) [7:03]

 

What Are the Risks to the UK’s Banking Sector?

UK are banks no longer categorized as being among the “most stable and low-risk” in the world. According to Nigel Greenwood, S&P’s credit analyst, “the weak U.K. economy will continue to hinder the credit profile of the U.K. banking industry. This reflects the sharp decline in economic output and our expectation that the unwinding of the high level of debt (of the government, households, and certain industrial segments) will weigh heavily on relative economic growth prospects and banks‘ financial performance.“ In December 2009 S&P had placed the UK banking system in Group 3 out of the 10 in the Banking Industry Country Risk Assessment (Group 1 being the strongest and Group 10 being the weakest.) (S&P, 01/28/10)

German Unemployment Rises in January: What Is the Labor Market Outlook?

• On January 28, 2010, labor market data released by Destatis, Germany’s statistical office, showed a mild increase in the seasonally adjusted unemployment rate in January 2010, following six consecutive months of declines. While German GDP is expected to shrink a steep 5% in 2009, the impact on unemployment has so far proved negligible.