Miguel Navascués | Take a look at the outstanding balances in the ECB’s TARGET2 payments system, which maintains an up-to-date record of the debts and loans each country has with the other. As can be seen from the table below and the subsequent graphics, Italy, where the banks have 360 billion euros of doubtful loans, as well as Spain, have again begun to show signs of weakness.
Julius Baer Research | We share the view of Mario Draghi, President of the European Central Bank, that his ultra-accommodative monetary policy stance alone cannot push the eurozone economy out of its current weakness but needs to be complemented with fiscal impulses.
The European Central Bank kept its interest rates and policy plans unchanged on Thursday and said the immediate stress caused to markets by Britain’s shock vote to leave the European Union had been contained.
BoAML | We have remained quite bearish on Euro area inflation for the past few years, particularly compared with ECB forecasts (but also consensus), and have highlighted the many downside risks to the inflation outlook.
James Alexander via Historinhas | While still waiting for the 1Q16 official Eurostat NGDP figure for the Euro Area of 19 countries it has been interesting to have a look at the implied deflators for the currency bloc and its constituents. (Ireland, Slovakia, Cyprus and Luxemburg are all hopelessly late delivering GDP figures, and the first two don’t even seem to do it to Eurostat standards for calendar-adjusted data.)
UBP | Unsurprisingly, the ECB kept its monetary policy unchanged. Corporate bonds buying are going to start on June 8th and the TLTRO on June 22nd.
Mario Draghi can hardly make a move, while Janet Yellen seems bound to do so, no matter the consequences. This summary offers some hindsight on the dilemma facing those at the helm of global financial stability.
For once, BBVA chairman’s words have been a kind of premonition. Last week, when he said rather desperately that “negative interest rates are killing us,” he was not referring to Popular. But the fact remains that a few days later, the bank with Angel Ron at the helm announced a capital hike for 2.5 billion euros, slightly less than half of its stock market value. The aim of the operation is to offset the impact of future regulatory requirements and the shortfall related to the “floor clauses,” calculated at nearly 4.7 billion euros.
In Sober Look, Marcello Minenna gives us a clue about a possible new breach in the euro’s structure. A few years ago (2011-2012), when the euro was going through its worst time, one of the consequences was that the central banks in the peripheral countries increased their debt position with TARGET2.
BofAML | No surprises. We do not expect any ECB action this week. After the package in March, we think the ECB will have a few months before going back to the drawing board. Dovish Fed tones and EUR appreciation do not help the ECB, but action beyond a reiteration of forward guidance seems very unlikely.