Föhrenbergkreis Finanzwirtschaft

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Posts Tagged ‘Euro’

News from Euroland – recession imminent

Posted by hkarner - 8. Dezember 2018

17 mins. to read

When the money tap went dry…

Across Europe, and particularly in the 18-member Eurozone, the economic news is sobering. It’s now clear that the credit crunch in emerging markets which has played out over most of this year, plus the slowdown in China, are having negative consequences in Europe. Yet, despite the ongoing trauma of Brexit, the UK is cruising along relatively smoothly – for now.

A number of critical events are about to coincide. Firstly, the ECB will cease printing money by means of quantitative easing (QE) in December. The principal measure of the money supply across Europe, M3, was growing by around 5 percent per year when the ECB was buying up to €80 billion of bonds a month in 2013. That rate slowed to 2.1 percent in Q3 this year and will prospectively fall to zero in Q1 2019.

QE was instigated by ECB President Mario Draghi who took over the reins on 1st November 2011. At the beginning of 2012, at the height of the European Sovereign Debt Crisis, he pledged that the ECB would do everything it takes to save the Euro. First came a programme of soft loans to Eurozone banks (the so-called LRTO); then came a massive programme of government and then corporate bond-buying following the example set by America’s Federal Reserve in the aftermath of the financial crisis of 2008. Den Rest des Beitrags lesen »


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The Evaporation Of The Greek Banking Sector

Posted by hkarner - 7. Dezember 2018

Tuesday, November 13, 2018, Observing Greece

The below statistics (source: Bank of Greece) show the development of the aggregate balance sheet figures of the Greek banking sector (all banks except the Bank of Greece) since the beginning of the financial crisis. Aggregate means that the figures are simply added up and not consolidated, i. e. there may be overstatements in some categories. For the years 2010 and 2015, the figures are as of June. For 2018, the figures are as of September (in BEUR).

2018 2018
vs vs
2010 2015 2018 2010 2015
Claims on domestic financial institutions 19,1 2,1 5,6 -13,5 3,5
Claims on foreign financial institutions 107,4 26,0 13,5 -93,9 -12,5
Domestic loans 273,9 217,1 181,2 -92,7 -35,9
Foreign loans 7,0 4,8 3,1 -3,9 -1,7
Domestic securities 42,9 13,6 11,6 -31,3 -2,0
Foreign securities 35,3 56,2 13,8 -21,5 -42,4
Domestic equities 7,0 4,8 3,6 -3,4 -1,2
Foreign equities 11,7 9,1 4,1 -7,6 -5,0
Remaining assets 40,4 52,8 54,8 14,4 2,0
Total assets 544,7 386,5 291,3 -253,4 -95,2
Debt to Bank of Greece 96,1 126,7 12,2 -83,9 -114,5
Debt to domestic banks 7,5 0,3 1,1 -6,4 0,8
Debt to foreign banks 63,8 7,6 23,2 -40,6 15,6
Domestic deposits 223,1 130,5 147,5 -75,6 17,0
Foreign deposits 25,5 9,8 6,9 -18,6 -2,9
Remaining liabilities 98,6 42,7 33,2 -65,4 -9,5
Total liabilities 514,6 317,6 224,1 -290,5 -93,5
Capital & Reserves 30,1 68,9 67,2 37,1 -1,7
Total liabilities & equity 544,7 386,5 291,3 -253,4 -95,2

In 2018, total assets (291 BEUR) were only a little over half the total assets of 2010 (545 BEUR), i. e. a decline of 47%. Put differently, almost half of a most important sector of the Greek economy evaporated. Den Rest des Beitrags lesen »

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Der Wille zu vertiefter Eurozone wird stärker, der Weg bleibt weit

Posted by hkarner - 5. Dezember 2018

Thomas Mayer aus Brüssel, 4. Dezember 2018, 18:40 derstandard.at

EU-Finanzminister wollen die Eurozone mit einem Reformbündel vertiefen, eine Bankenunion und einen europäischen Währungsfonds schaffen

Frage: Wozu braucht man diese noch engere Verzahnung der Eurostaaten?

Antwort: Die Finanz- und Wirtschaftskrisen seit 2008 haben gezeigt, dass die Existenz der gemeinsamen Währung Euro und der Stabilitätspakt allein einzelne Länder nicht vor dem Bankrott schützen. Seither wurden viele Regeln verschärft, die EU-Kommission bekam neue Instrumente zur Sanktionierung. Ein Rettungsfonds, der ESM, wurde geschaffen, der pleitebedrohten Ländern mit billigen Krediten aushilft, für die alle Europartner haften. Nun geht es darum, dass die Eurozone in der Finanz- und Wirtschaftspolitik noch näher zusammenrückt, man einander hilft, kontrolliert, Konvergenz fördert.

Frage: Kommt dafür ein eigener EU-Finanzminister, der allen anderen sozusagen vorsteht und anschafft?

Antwort: Wie es derzeit aussieht, nein. Der Vorschlag von Präsident Emmanuel Macron wurde in der Eurogruppe zurückgereiht. Aber es soll auf Basis eines deutsch-französischen Vorschlags „neue budgetäre Instrumente“ geben, die darauf abzielen, „die Eurozone zu stärken“. Mittel daraus sollen aber nicht vergeben werden, um etwa Schulden zu bedienen, sondern um die Wettbewerbsfähigkeit, die Annäherung der Finanzpolitiken der Euroländer und die Stabilität der Eurozone insgesamt zu stärken. Gemeinsame Projekte könnten finanziert werden, etwa zur Senkung der Arbeitslosigkeit, eine gemeinsame Arbeitslosenversicherung. Den Rest des Beitrags lesen »

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The Eurozone Economy’s Coming Downturn

Posted by hkarner - 28. November 2018

Lucrezia Reichlin, a former director of research at the European Central Bank, is Professor of Economics at the London Business School.

Until recently, the prevailing narrative in Europe was that the economic crisis was over. But there are signs that the eurozone may be facing an economic slowdown – a development that could change significantly the discourse leading up to next May’s European Parliament election.

MILAN – Next May’s European Parliament election is likely to be haunted by Europe’s inner demons, from the clash with Italy’s populist government over its budget to the xenophobic front that has formed in the Visegrád countries. The crisis of the traditional centrist parties, which have been essential to building and maintaining consensus in the European Union – even as they have struggled to implement needed reforms – is also far from resolved. But if, as current indicators suggest, Europe is facing an economic slowdown, the pre-election discourse could change significantly.

Until a few months ago, the prevailing narrative was that the economic crisis was over, even for the hard-hit countries of the eurozone’s periphery. As a result, Europeans had shifted their attention to other issues, such as refugees and security, that were threatening political stability and eroding consensus for the European project. Den Rest des Beitrags lesen »

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Voters will finally see what they’ll pay for a European fiscal union.

Posted by hkarner - 25. November 2018

Date: 24-11-2018
Source: The Wall Street Journal By The Editorial Board
Subject: The Costs of the Euro

The euro celebrates its 20th birthday in January, and as if on cue the fiscal costs of the common European currency finally are coming into view for voters. That’s the best reading of the budget principles French President Emmanuel Macron and German Chancellor Angela Merkel agreed to this month.

The bilateral deal, part of the pan-EU negotiation about the European Union’s budget, for the first time contemplates a special fund solely for the 19 countries that use the euro. A pot of money would be created within the EU’s existing budget exclusively for public works or other “investment” projects in euro members. The goal is to create fiscal stabilizers that can moderate economic swings and encourage “convergence” in productivity to avoid future crises. Den Rest des Beitrags lesen »

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Give Italy’s Government a Chance

Posted by hkarner - 19. November 2018

Bill Emmott is a former editor-in-chief of The Economist.

Given the poor track record of populist economic policies, it is understandable that the European Commission’s first instinct is to take a hard line against the Italian government’s proposed 2019 budget. But in doing so, it is condemning Italy to continued economic stagnation, and risking a much larger political crisis.

LONDON – In Europe, hardly anyone has a good word to say about Italy’s upstart ruling coalition, which comprises the populist Five Star Movement (M5S) and the nationalist League party. The only disagreement is between those who want to penalize Italy immediately for defying eurozone budget rules and those who are willing to delay punishment, or at least administer it more slowly. But here’s an idea: Why not eschew punishment altogether and give Italy’s government a chance?

The reason is not that the coalition is particularly likeable. It isn’t. M5S goes out of its way to insult and threaten critical journalists, and the League disparages immigrants and badgers local governments that show hospitality toward asylum seekers who have risked their lives crossing the Mediterranean. Den Rest des Beitrags lesen »

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The Eurozone’s 19th Nervous Breakdown

Posted by hkarner - 12. November 2018

Date: 11-11-2018
Source: The Wall Street Journal

Why Italy and Brussels are flirting with disaster rather than trimming debt and restoring growth.

It is not an exaggeration to suggest that the European Union stands on the brink of yet another crisis thanks to its fast-developing battle with Italy over that country’s new budget.

Nowhere in “The Art of the Deal” or any similar book does it advise creating the following bargaining situation: Neither party can back down without unacceptable embarrassment, but sticking to their guns will also lead to an unacceptable catastrophe.

Outside Germany, most want to blame Brussels for this sad state of affairs. EU mandarins are insisting that Italy stick to an earlier commitment to keep its deficit to 0.8% gross domestic product rather than the 2.4% the populist coalition now running Italy proposes.

If not for the 0.8% promise made by an Italian government that has been voted out of power by the Italians themselves, the EU is normally entitled to get on a high horse only when a member’s deficit reaches 3%. So why is this fight even worth having? Den Rest des Beitrags lesen »

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An Italian budget showdown underlines the need for euro-zone reform

Posted by hkarner - 11. November 2018

Date: 08-11-2018
Source: The Economist: Free exchange

The bloc’s greatest weakness is not its spending, but its politics

The fate of the euro was always going to depend on Italy. With annual gdp of more than €1.6trn ($1.9trn), about 15% of euro-area output and debt of nearly €2.3trn, it poses a challenge to the single currency that Europe seems unable to manage but cannot avoid. Matters are now coming to a head, as Italy’s new coalition government instigates a showdown over the European Union’s fiscal rules. The disagreement might well become disastrous. But it is also an opportunity for the euro zone to begin building a better, more durable approach to fiscal policy.

Trouble began earlier this year when the populist Five Star movement, led by Luigi Di Maio, formed a government with the right-wing Northern League, led by Matteo Salvini. Both promised budget goodies: Mr Salvini a hefty tax cut and Mr Di Maio a basic minimum income. Such largesse may test the deficit limit of 3% set by the eu’s stability and growth pact. And it seems certain to break other fiscal rules set by the bloc: the government’s initial budget plan is forecast to raise borrowing to 2.4% of gdp in 2019, above the 0.8% target to which Italy previously committed itself and enough to reverse recent, modest declines in its debt burden.

The eu did not take the news well. On November 5th other countries’ finance ministers warned that failure to revise the budget would lead to an “excessive deficit procedure”, and possible sanctions. But Italians are unbowed. Mr Di Maio, now deputy prime minister, argued in comments to the Financial Times that Italy’s fiscal expansion will prove so successful that other European leaders will clamour to follow, citing, somewhat dubiously, faster growth in America after a budget-busting Republican tax cut. Den Rest des Beitrags lesen »

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ECB President Calls on Eurozone Nations to Cut Debt

Posted by hkarner - 10. November 2018

Date: 08-11-2018
Source: The Wall Street Journal

Mario Draghi says move will help protect them from potential shocks like Brexit

ECB President Mario Draghi said he expects the region’s five-year-old economic recovery to continue, but noted a number of risks including rising trade protectionism, weaknesses in emerging markets, and financial-market volatility.

European Central Bank President Mario Draghi urged eurozone governments on Thursday to pay down their national debts to strengthen the currency bloc against potential economic shocks such as Brexit.

The warning comes amid a dispute between Italy’s government and the European Union over the nation’s planned budget deficit for next year, which the EU says is too high.

Speaking with lawmakers at Ireland’s Parliament, Mr. Draghi said he expects the region’s five-year-old economic recovery to continue, but noted a number of risks including rising trade protectionism, weaknesses in emerging markets, and financial-market volatility. Den Rest des Beitrags lesen »

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Stresstest: Austro-Banken haben laut IHS-Kocher Aufholbedarf

Posted by hkarner - 6. November 2018

3. November 2018, 13:30 derstandard.at

Schieflage Italiens als Unsicherheitsfaktor für Europa – Mit strengerem Budgetvollzug hierzulande mehr Spielraum für geplante Steuerreform schaffen

Wien – Der Chef des Instituts für Höhere Studien (IHS), Martin Kocher, sieht nach dem Bankenstresstest „keine großen Probleme“ bei den europäischen Banken. „Die Ergebnisse liegen eigentlich im Rahmen der erwartbaren.“ Auch die österreichischen Banken seien auf einem guten Weg, auch wenn sie im europäischen Vergleich etwas Aufholbedarf hätten, sagte er am Samstag im Ö1-„Mittagsjournal. Die Kapitalisierungsquoten der europäischen Banken hätten sich verbessert, aber auch einige Probleme seien durch den Stresstest aufgezeigt worden. Im Moment sei die Ertragslage gut.

Gefahren durch Schieflage Italiens

Die Frage sei aber auch, wie groß ein wirtschaftlicher Einbruch ausfallen könne. Auch wenn der Sektor insgesamt „schockresistent“ sei, berge die „Schieflage Italiens“ gewisse Gefahren vor allem für italienische, aber auch europäische Banken, die Italo-Staatsanleihen in ihren Büchern haben. „Das Problem ist, dass sich die italienische Regierung momentan nicht an Vereinbarungen hält“, sagte Kocher. Den Rest des Beitrags lesen »

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