Global bear rally of 2009 will end as Japan’s hyperinflation rips economy to pieces

 We start with a short column by Ambrose Evans-Pritchard of the London Telegraph giving us a quick run down of the problems faced around the globe. He thinks the #1 problem is Japan, and I more or less agree. I have written about Japan many times in the past few years. In my speeches I refer to Japan as a bug in search of a windshield. I am not so sure about the timing, however, as the economic and fiscal insanity that is Japan may be able to go on for longer than many think possible. But to me it is not a question of whether there will be a crisis, but when there will be one. This year? 2011? 2012? I doubt Japan makes it to the middle of the decade with a very serious and sad day of reckoning.

Hungary’s Economic Correction Still Fails to Convince

Edward Hugh

Dec 29, 2009 1:22PM

„Hungary’s potential economic growth should be 2 percentage points over the corresponding EU figure in order to ensure convergence“. Prime Minister Gordon Bajnai, speaking in London in October

Two contrasting pieces of news about Hungary’s economic plight have caught my eye over the last week. In the first place, and in an evident sign of the times, retail sales reportedly fell at their fastest annual rate in over ten years in October, whilst secondly, and more surprisingly, I learnt that Hungary’s economic-sentiment index rose to its highest level since October last year, when the gale force wind sent by the fall of Lehman Brothers engulfed the country. How can this be, I thought? These two pieces of information would, at least on the surface, seem to be pretty contractictory, with the former suggesting the deepest recession in living memory is getting even worse, while the latter seems to add backing to government claims that the worst is now behind them. 

Poland’s Economy Stands Out from Regional Peers: Explaining the Outperformance

• Poland stands out as the only EU economy to avert recession in 2009. The economy’s resilience in the face of the global crisis is attributed to a number of factors, ranging from a flexible exchange rate to smaller pre-crisis external imbalances, as well as a lower export-to-GDP ratio than most CEE peers.

Eastern Europe: How High Could NPLs Rise?

Analysis of financial health indicators shows that Eastern European banks are generally well-capitalized. In recent years, the share of non-performing loans (NPLs) in total loans ranged between 2% and 4% in most new member states. Nevertheless, NPLs are now spiking in most CEE countries, amid economic downturns and falling property prices. Most analysts do not expect NPLs to peak until mid-2010 at the earliest.

Weltbank hilft Raiffeisen-Tochter

28.12.2009 | 18:30 | CHRISTIAN HÖLLER (Die Presse)

 Raiffeisen erhält für die Ukraine-Tochter Aval einen weiteren Kredit von 105 Mio. Dollar. Aval ist das größte Sorgenkind der Giebelkreuzer in Osteuropa. Wien/Kiew. Raiffeisen International hat für ihre Ukraine-Tochter Aval einen weiteren Kreditgeber gefunden. Die Weltbank-Tochter International Finance Corporation (IFC) kündigte an, der Bank ein Darlehen in der Höhe von 105 Mio. Dollar (73 Mio. Euro) zu gewähren. Die IFC-Gremien in Washington haben bereits zugestimmt. Die Vertrag soll im Jänner unterzeichnet werden, sagt die zuständige IFC-Sprecherin Elena Voloshina im Interview mit der Finanzagentur „Bloomberg“. Der Kredit soll eine Laufzeit von zehn Jahren haben. „Aval ist in der Ukraine eine große Bank und daher systemrelevant“, so Voloshina.

Czech Fiscal Policy: Is the Sovereign Credit Rating in Danger?

The Czech parliament approved the 2010 budget in December 2009, and added further spending in the process, which is expected to result in a deficit above the original target of 5.3% of GDP. Analysts were generally critical of the budget. Finance Minister Janota, who is part of a caretaker government leading the country until elections in mid-2010, criticized lawmakers for changing his 2010 budget draft that, according to him, will effectively boost the shortfall of public finances to as much as 5.7% of GDP, from the original target of 5.3%. (Bloomberg, 12/13/09) Janota believes the current fiscal direction could result in a downgrade of the country’s sovereign rating.

A New Normal for Eastern Europe

Marcus Svedberg, Dec 21, 2009 12:13PM

Most countries in Eastern Europe recorded almost unprecedented economic contraction and market recoveries while celebrating the twenty year anniversary of the fall of the Berlin Wall. It may therefore seem a little far-fetched to argue that Eastern Europe is normalising at the end of one of the most extraordinary years since the transition process started. But there are some notable signs that the region is not only recovering but is about to enter a period of more normal development. The main feature of this new normal is growth in line with potential – rather than over potential – that is not based on low base effect or cheap credit but rather on low inflation, low positive real interest rates and political stability. Most countries in the region are still in recovery mode and will remain so during the first half of 2010, before entering this new normal in the second half of the year. There is, however, a wide spread in the region, and for some of the worst-hit economies in the region, such as the Baltic states, the recovery period will be longer.

Is Austria Set To Join The Honourable Company of PIIGs?

Edward Hugh, Global ‘Economy Matters

Dec 16, 2009 8:52PM

Hypo Alpe Adria bank, the Austrian arm of the Bavarian bank Bayern LB, was nationalized on Monday for the symbolic price of three euros. This unexpected action brought to the world’s attention something which has been obvious to some of us for a very long time: namely that all is not well with Austria’s banking system, and it is not well for one very simple reason - over-exposure to Central and East European Markets. Of course, when some of us first started pointing the problem out, we were roundly rebuked from all quarters, what a ridiculous idea! Izabella Kaminska had a reasonable review of how the arguments were being marshalled back in January here, while Paul Krugman attracted the wrath of all Austria back in April by, as this blogger puts it, stating the obvious. 

Harvard-Ökonom Rogoff über den möglichen Staatsbankrott Österreichs

von Oliver Bayer | 17.12.2009 | 10:38, Wirtschaftsblatt

 Dem renommierten Ökonomen  zufolge stehen Österreich noch weitere Troubles bevor. Wie auch Hans Jörg Bruckberger im Leitartikel des WirtschaftsBlatt heute argumentiert, droht der Wirtschaft und den Anlegern noch jede Menge Ungemach. Es bilden sich Spekulationsblasen, das von der Notenbanken in den Markt gepumpte Geld landet kaum in der realen Wirtschaft. Hier die Kernaussagen des Ökonomen.

 US-Ökonom : Geht ein Staat in Osteuropa pleite, wird es auch für Österreich eng.

IWF mahnt zu mehr Risikovorsorge in Osteuropa

aus orf.on:

Der Internationale Währungsfonds (IWF) hat die in Mittel- und Osteuropa tätigen Banken davor gewarnt, das Risiko von Kreditausfällen zu unterschätzen. Diese Geldhäuser hätten den Spielraum der Bilanzierungsregeln ausgenutzt und Vorsorgen für faule Kredite zu langsam aufgebaut, sagte IWF-Berater Christoph Rosenberg gestern auf einer Bankenkonferenz in Wien.

Zwar würden die meisten Banken dadurch in diesem Jahr einen Gewinn erzielen. Es bestehe aber die Vermutung, dass Banken zu lange an nicht werthaltigen Krediten festhielten, ohne dass diese zurückgezahlt würden. Langfristig sei das nicht im Sinne des Finanzsektors.