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European economy

Snapshot of European financial sector' structure

European economy 16th January 2021

Has Deflation Returned To Europe?

Azad Zangana (Schroders) | November 2020 was the fourth consecutive month that headline inflation for the eurozone – using the harmonised index of consumer prices (HICP) – was negative. The response to the coronavirus pandemic has caused the most severe economic shock across the continent since the Second World War. Temporary factors are to blame for current negative inflation rates, but low inflation is expected to keep interest rates very low for years to come.

Fiat Peugeout

European economy 29th December 2020

The EC Approves With Conditions The Birth Of Stellantis, The Merger Between Peugeot And FCA

Banca March | The European Commission has given the green light, with conditions, to the merger of Peugeot with Fiat Chrysler Automobiles after the commitment on the part of both manufacturers to adjust their activity in the sector of small commercial vans. The union of the two firms meant they would control about a third of that market, more than double its immediate competitors. The deal will give rise to the fourth largest car manufacturer in the world by units sold and a stock market value of over €40 Bn.

European banks linda

European economy 26th December 2020

European Banks: Becoming More And More Utility-Like

Scope Ratings | The pandemic showed that in times of crisis, politicians, supervisors, and central banks are willing to extend significant help to the banking sector. No major European bank has come close to resolution this year; nor will any in the near future in our view. Credit markets took note. After an initial scare in March, senior spreads tightened close to pre-crisis levels. Our view is that banking is turning into utilities and that the sector is becoming what it should be: boring. 

comisioneuropeaTC

European economy 23rd December 2020

Brussels Says ‘No’ To The Creation Of A Bad Bank

The European Commission is concerned about the management of NPLs after the impact of the pandemic and the economic slowdown in the Q4. However, Brussels is reluctant to create a bad bank, mainly because of the high costs of creating a European agency to manage these assets. Instead, the EC proposes to reform the insolvency and debt recovery regime, with the aim of unifying legislation at European level. At the same time, making it easier for banks to get rid of doubtful assets on their balance sheets.

Protectionism vs free trade

European economy 22nd December 2020

Eurozone Trade Surplus Grows By 10.3% In October To €30 Bn

The positive trend in the euro area trade balance increased in October by 10.3% year-on-year, reaching 30 billion euros, according to data on international trade in goods published by Eurostat. By items, exports of goods from the euro area to the rest of the world contracted by 9%, to 199.3 billion euros. The fall was offset by a sharper decline in exports, which fell by 11.7%, to 169.3 billion euros. Commercial activity amongst the euro members fell by 6.8% in the tenth month of the year, to 166.1 billion euros.

The “R” club is recruiting

European economy 17th December 2020

Sharp Rise In Public Debt: Will The Euro Area Resist?

Adriá Morrón Salmerón (CaixaBank Research) | The COVID-19 pandemic is causing a sharp increase in debt. Since the outbreak of the pandemic, public debt ratios have risen suddenly and significantly to almost unprecedented levels (the historical precedents are closely linked to major wars). For instance, in Italy and Spain a jump of +25 pps of GDP is expected in just one year, whereas it took five and three years, respectively, to amass a similar increase after the financial crisis of 2007-2008.

 

Does the new ECB's Purchase Programme result into a more volatile basis between bond credit spreads and CDS premia?

European economy 16th December 2020

The ECB’s Partial Lifting Of Dividend Veto Leaves Pay-Out 40%-50% Below Pre-Crisis Distribution

The Supervisory Board of the European Central Bank yesterday agreed to lift the veto on banks’ dividends. However, it is urging them not to distribute more than 15% of accumulated profits in 2019-2020, nor exceed 0.20 points of the CET1 capital ratio. From both options they have to choose the lesser one. The measure will be in force until end-September 2021, when it will be reviewed to see if it can be lifted in light of the economic situation.

European banks management

European economy 15th December 2020

Covid-19: The First Real-Life Stress Test For European Banks Since Post-GFC De-Risking

Scope Ratings | European banks have proven resilient in the face of Covid-19. There has been no banking crisis and no bank has come close to resolution. Supportive fiscal, monetary and supervisory policies have offset credit, funding and solvency risks. Most banks entered the crisis with healthy balance sheets. Balancing the stabilisation effect of the expected rebound against asset-quality deterioration, and factoring in business-model adjustments will underpin our rating approach to the EU banking sector next year.

Bulgaria

European economy 14th December 2020

Bulgaria-Recession Softened By Fiscal And Monetary Measures

Crédito y Caución (Atradius) | Bulgaria’s monetary policy framework is strong, with a solid commitment to its currency board arrangement (the lev has been pegged to the euro since 1997). As a result, the Bulgarian Central Bank usually follows monetary policy decisions made by the European Central Bank. Although Bulgaria entered the Exchange Rate Mechanism II of the EU in June 2020, an adoption of the euro seems rather unlikely in the short run. While the currency peg supports foreign investor confidence, it somehow limits Bulgaria’s ability to combat external imbalances.