European economy

frankfurt sklyline

Who Is Going To Pay In A Low/Negative Yield Environment?

Allianz Global Investors | That question is heard quite often in connection with the corona-related fiscal packages. While there is no shortage of suggestions of how the new public expenditure and old debt is to be funded, many people seem to be overlooking the fact that the current low or negative interest-rate environment is already making a major contribution to debt reduction. This article will analyse the impact of implicit interest rates, growth and inflation on debt ratios in Germany, France, Spain and Italy.

The ECB thinks that the European financial system could withstand even lower rates

EU Strengthens As A Hub For Green Finance: 45.4% Of 2019 ‘Green’ Bond Issues Globally Were Denominated In Euros

In 2019, the euro consolidated its role as the second most widely used currency in the world at a considerable distance from the dollar, which retains its hegemony as the global reserve currency. The exception was in the area of green bond issues, where euro-denominated issues once again led the market. Specifically, according to data provided by the ECB, about 45.4% of ‘green’ bond issues worldwide were denominated in euros, compared to 25.7% in dollars and 28.9% in other currencies.


The PEPP And The APP Programmes Combined Would Cover Almost 90% Of The EU’s Estimated Financing Needs

Intermoney | Based on the ECB’s macroeconomic forecasts, we can extrapolate that the financing needs of the EMU countries will be around €1.5 Tr between 2020 and 2021. And if 73.5% of the PEPP continues to be used to acquire sovereign debt from the different Eurozone’s members, the programme would cover almost 65% of the needs for this year and next. All this, without taking into account the €120 Bn from the reinforced Asset Purchase Programme (APP) and the €360 Bn that it should add up to mid-2021.

bank generico

The Spanish And Italian Banks Are The Least Capitalized, With A CET1 FL Of 11.9% And 13% Respectively

Santander Corporate & Research | Yesterday, the European Banking Authority published its 2020 transparency exercise, which takes data from individual banks at end-2019. The EBA’s findings indicate that the EU weighted average CET1 fully loaded capital ratio stood at 14.8% in Q4’19. Also yesterday, the European Systemic Risk Board (ESRB) published a second set of measures adopted in response to the coronavirus emergency, which include a recommendation to restrict capital distributions until January 2021.

Retail Eurozone

Quarantine Drives Eurozone’s Retail Sales To Record Lows

Bankia Estudios | Retail sales again recorded a sharp decline in April (11.7% vs 11.1%), driven down to an all-time low. By items, the rise in online sales stands out, showing a significant increase (10.9% vs. 0.7%), pointing to a change in the pattern of consumer behaviour. This could, in part, be consolidated in the medium term, although it is too early to draw conclusions. The rest of the items recorded sharp falls, although of lesser intensity than in March.

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Lagarde Has Done Another Good Job

Olivia Álvarez (Monex Europe) | The ECB delivers on market expectations and steps up the total amount of quantitative easing under PEPP purchases by €600 billion. The rise outperformed the consensus call by at least some €100 billion, bringing along a stronger-than-expected market reaction. The program firepower, worth €1.35 trillion now, is set to channel the main recovery mechanism by the ECB, which is vocally reinforcing its accommodative stance amid the current recession environment.

Angie merkel

The German Rescue Fund Reaches €1.3 Tr (4% GDP), By Far The Largest In Europe

In Germany, Angela Merkel has announced a 130 billion euro stimulus package to combat the crisis caused by the pandemic. After the second day of negotiations, the German coalition government has managed to agree on an aid programme to be implemented between this year and next, which will be added to the one launched in March, valued at 156 billion euros, exceeding the initial estimates of 50-100 billion.

montedeipaschi and more

Monte Dei Paschi, About To Be Able To Set Up Its Bad Bank

Bankinter | The European Commission (EC) has given Banca Monte Dei Paschi Di Siena (MPS) the go-ahead to finally set up a toxic asset restructuring entity. The plan has yet to be approved by the ECB and the Italian watchdog (Consob) but there is a high probability of success. The most important thing is that the EC does not consider the operation as a form of state aid. The finalisation of the process is planned for end-2020 or the beginning of 2021.

ECB Lagarde signing

The ECB Needs To Increase PEPP At Least €350-400 Bn

Gilles Moëc (AXA IM) | Although purchases through the Pandemic Emergency Purchase Programme(PEPP) have retreated from the peak at 8.5bn per day at the beginning of May, the latest pace is still consistent with all the €750bn being spent by the end of September, while the ECB has pledged to maintain it until at least the end of the year. Mechanically, the ECB would need to “top it up” by at least €350-400bn –i.e. to bring it above the symbolic level of 1 trillion euros –to be comfortable until December.