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Juncker

In Europe 27th June 2014

Juncker’s victory breaks EU’s financial heart

MADRID | By Ana Fuentes | Despite British PM David Cameron’s intense campaign against him, Jean-Claude Juncker was chosen as European Commission new president on Friday with 26 out of 28 heads of states’ votes. Candidate of the centre right European People’s party, the largest group in the parliament, and a veteran EU deal-broker, Luxembourg’s former PM vows for increasing the power of Brussels and reducing the voice of nation states. He’ll be officially appointed on July 16 with the strong opposition of the EU’s financial centre.

 

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In Europe 27th June 2014

Italy is on sale… for a while

MADRID | The Corner | On July 1 the new Italian fiscal reform will begin and the tax rate on capital gains will go up from 20% to 26%. Both private and institutional investors are selling before that date so as to rebuy again after and get a +2% after tax return. The FTSEMIB stands below the levels recorded after Mr Renzi’s victory and at the same levels registered before Mr Draghi’s last intervention. The index is behaving worse than the Spanish Ibex 35, and –if this trend continues, next week will be the moment to resume positions.

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In Europe 27th June 2014

ECB – Most likely done now

ZURICH | By UBS analysts | On 5 June, the ECB delivered a comprehensive monetary policy package, comprising cuts in the refi rate (from 0.25% to 0.15%), the deposit rate (from zero to -0.1%) and the marginal lending facility (from 0.75% to 0.4%). The ECB also rolled out the ‘full allotment mode’ – the commitment to supply unlimited liquidity (against adequate collateral) at the refi rate – from July 2015 to December 2016, and it will inject liquidity by ending the sterilisation of the Securities Markets Programme (SMP) portfolio. 

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In Europe 26th June 2014

Falling debt against increasing GDP

MADRID | By Luis Arroyo | What good does it do a falling debt if nominal GDP is increasing? According to the Real World Economy in Greece, the households’ debt went as shown in the chart. That is, the nominal value of the existing debt has dropped, but it has increased in relation to the income or the GDP with which it is paid. And this, ladies and gentlemen, is the best expression of the Debt Deflation concept.

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In Europe 25th June 2014

European recovery on track, but moderate and uneven

ZURICH | By UBS analysts | The economic recovery in the Eurozone remains on track, but Q1 GDP data have once again shown the slow pace of growth and wide discrepancies that exist between individual economies. We cut our 2014 Eurozone growth forecast to 1.0% (from 1.1%) and continue to project 1.5% growth for 2015. Nominal GDP growth is expected to pick up to 1.7% this year and 2.7% in 2015, but nonetheless, it remains much slower than would be desirable to accelerate debt deleveraging

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In Europe 24th June 2014

The TLTRO clashes with the old LTRO

MADRID | The Corner | The liquidity net increase of the new measures by the ECB may be substantially less than expected, because of two main reasons: as a consequence of the 3-year LTRO maturity next December and February, and due to the improvement in the workings of the money markets.

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In Europe 24th June 2014

German Ifo business climate falls to 6-month low

MADRID | The Corner | The  much-awaited German Ifo Business Climate Index for industry and trade fell to a seasonally adjusted 109.7 points this month, below forecasts for 110.2 and down from 110.4 in May. Although the country’s firms still make positive assessments of the current business situation, the Munich-based institution explained in a press release on Tuesday, they feel less optimistic about the future. And fear the potential impact of the crises in the Ukraine and Iraq.

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In Europe 24th June 2014

The euro goes negative

NEW YORK | By Dickson Buchanan Jr. via Truman Factor | The European Central Bank’s (ECB) decision to charge a negative interest on overnight deposits is not going to lead to a higher targeted inflation rate, despite ECB President Mario Draghi’s insistence that it will. Like all cases of central planning, this decision will have unintended and costly consequences – some of which are already starting to play out. 

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In Europe 23rd June 2014

Asked for wider liberalization, many Germans don’t see more room for it

BERLIN | By Alberto Lozano | Although when speaking of reforms nobody is pointing to Germany, international organizations are pushing for it in the country, especially in the services sector. The goals are boosting consumption and rebalancing the euro monetary union, and higher productivity in services sector becomes a challenge with large potential gains for both Germany and the whole Eurozone. But some voices insist this won’t easily happen.