J.P. Marín-Arrese | Even if income losses could shore up to some extent the immediate impact of a recessive bout, running huge deficits would exert a destabilising and uneven effect on public finances. The lack of risk-sharing schemes weighs down on Euro-zone resilience when subject to severe strain as record shows.
The ECB changed their forward guidance in yesterday’s meeting, signaling the hold in rates “at least to the end of 2019” along with a new round of TLTROs, in order to keep the credit flowing. Dave Lafferty, chief strategist at Natixis IM, reports: “If you were waiting for evidence that European monetary policy has turned the corner, you’ll definitely be disappointed… if not surprised.”
The current €719 Bn batch of so-called TLTROs will mature between mid-2020 and early 2021. Were they to expire or become more expensive, the interest margins of banks – especially in Southern Europe (Italy and Spain) – would be negatively hit and the credit impulse would weaken. Hence, as said by Agnieszka Gehringer, senior analyst at Flossbach von Storch, given the weakening economic momentum, the ECB has little choice but to extend the TLTROs.
According to Alphavalue, all European governments have their tentacles in companies that do not merit it (for example, the state of Lower Saxony “only” owns 12% of Volkswagen, less than Qatar Investment Authority). “It is worth pointing out that Finland has only invested a little less than 10 bn€ in NESTE,” they add.
Rafael Gil Nievas | No, I am not going to talk about Micula or Achmea (but I promise I will do soon). Now, I just want to raise, in plain language, a possible Brexit collateral effect. Let’s give some background.
Chandra Roy | As a looming Brexit relentlessly edges closer, could the prospect of a new global cooperation slowly edge to the brink of reality? Speaking recently about Brexit and the implications on global trade, Bank of England Governor, Mark Carney, described it as an “acid test of whether a way can be found to broaden the benefits of openness while enhancing democratic accountability”.
AT1 CoCos were created to help European banks raise assets to meet Basel III capital requirements following the 2008 financial crisis. According to an analysis of Wisdom Tree, “under Basel III, some of the first AT1 CoCo bonds issued are now approaching their first call date (five years from issuance) and this year we will see for the first time how issuers will behave in terms of calling the AT1 CoCo bonds or extending them. Given this will set precedent for the market, investors are closely watching.”
Ofelia Marín- Lozano | Interest rates on 10 year sovereign bonds, which are considered “risk free rate”, are at minimum but the European Stock Exchange, the EuroStoxx50 is where it was five year ago, despite the profits have grown by near 60%… Why have they triplicated the risk premium?
J.P. Marín- Arrese | The PM has dramatically shifted her Brexit plans. She no longer clings to forcefully maintaining them against all the odds. Her doomed proposal will suffer yet another rebuke from Parliament. Immediately, she will put on vote the ‘no deal’ option, betting it will sink deep enough to thoroughly disallow its supporters.
Three years on from its vote on EU membership and the UK still has little idea what its future relationship with the EU might turn out to be. Under pressure from europhile members of her cabinet, Theresa May has finally decided that running the Brexit clock down is in nobody’s interest. Instead, she has now taken the perhaps equally disappointing decision to kick the Brexit can further down the road, if politically necessary.