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.
Jens Bastian via Macropolis | Portugal and Greece are geographically located at the opposite ends of the eurozone’s southern periphery. In the course of the past five years, both countries had to confront various political calamities and economic crises, culminating in having to seek financial assistance from international official creditors.
MADRID | The Corner | Peripheral equities and bonds have been strongly favored by Draghi’s speech last Friday at Jackson Hole with intense improvements in sovereign credits from Portugal, Spain and Italy, which have reached record lows. In particular, Spain’s 10-year bonds yields are at 2.12% under the 2.38% of comparable U.S. Treasuries and especially today the Spanish Treasury has reduced sharply the interest rates of three- and nine-months bills in an auction of € 3,500 million at historical lows, without entering in negative territory like on the secondary market. Nevertheless, UBS strategists are starting to change their bullish view on peripheral Europe basing on market and fundamental arguments.
BERLIN | Alberto Lozano | The Portuguese government splits BES into two banks. On the one hand, it will inject €4.9 billion of capital in a new company called “Novo Banco”, which will get all the assets and employees from the crisis-hit bank. On the other hand, all toxic assets mostly related to its exposure to the Espirito Santo family will stay in the current Espirito Santo’s “bad bank”.
MADRID | By The Corner | Experts at Morgan Stanley consider that Portugal is now a good opportunity due to its current technical levels. Since the Espirito Santo incident, the PSI20 has plummeted by 17.5%, but these analysts see a potential technical recovery of 10-12%. The Portuguese treasury has covered its entire financing needs for 2014 and is now raising funds for 2015.
MADRID | By J.P. Marín Arrese | The troubles faced by Banco Espirito Santo ’s main share holding group have delivered a widespread blow to financials and periphery sovereigns. A nasty reminder that Eurozone doesn’t seem so stable as everyone bet it was. Investors are flying to safety, pushing the US Treasuries and German bunds close to past records. Stock exchanges and market sentiment are bound to undertake brisk U turns, at no warning. The more so as sharp and continued rises always offer a good excuse for a sell-off. There is nothing to worry about.
MADRID | OP-ED by Fernando Barciela | Laconic and without any fuss, PM Pedro Passos Coelho announced that three years after the €78 billion bailout Portugal will stand on its feet without the European Troika. His pledge aimed to get political momentum at the upcoming European elections, although it greatly stirred public anger. The rate on 10-year securities slid two basis points to 3.61 percent, from a record 18.29 percent in January 2012, according to Bloomberg data. Investors betting on Portuguese bonds have seen a 15 percent return this year through May 2.
LONDON | By BARCLAYS | The Portuguese government presented yesterday the draft Budget Law for 2014. Fiscal measures to be deployed amount to EUR3.9bn (2.4% of GDP), about 0.4% of GDP above the EUR3.3bn announced in May when the cabinet approved additional austerity measures to meet revised fiscal targets for this year and next (EUR1.4bn in 2013 and EUR3.3bn in 2014).
LISBON | By Helena Matos via Presseurop | The International Monetary Fund, European Commission and European Central Bank are back in Lisbon to evaluate the results of the 2011 bailout plan. This is good because otherwise Portugal would make the same mistakes that led to the crisis in the first place.
PARIS | By Philippe Ricard via Presseurop | In Lisbon, shock therapy has failed to bring down the government. In Vilnius, it has made for a fast-tracked entry into Europe. What lessons can we learn from these criss-crossing paths?