JP Marin-Arrese |It seems obvious the current crisis will hammer public finances everywhere. As economic activity plummets, unemployment indemnities and a sharp and prolonged fall in revenues will shatter the Treasury coffers. All the more so should governments implement substantial spending plans and salvage operations. We are heading towards a towering deficit-laden aftermath
Following the recommendations of European banking supervisors to suspend dividend payments for 2019 and 2020, Morgan Stanley analysts estimate that, in a hypothetical scenario, eliminating all dividend payments for ’19 and ’20 would generate on average 140 bp in CET1 (about EUR 100 Bn). Banks such as Caixabank, DBK, and Italy’s Banco Monte dei Paschi di Siena and Banco BPM would not be impacted due to their low dividend payouts.
Unigestion | The current shock that the investment world is facing has three unique features: it is exogenous, it will likely be temporary, and its effect on the real economy is extremely uncertain. According to our core scenario, 2020 should see the first global recession since the Great Financial Crisis. This scenario assumes that the quarantine will have a limited impact on financial services, insurance, utilities and healthcare services, and leaves 20% of usual energy consumption.
José Ramón Díez Guijarro (Bankia Estudios) | Extraordinary measures have allowed financial markets to stabilize during the week. With one exception, as it seems that the concept of urgency is different in Europe from that in the rest of the world. The European summit on the coronavirus ended with the decision to take two weeks to analyse proposals. Even in a situation like the present one, northern European countries are not prepared to mutualise risks. We will see if all this does not end up affecting the waterline of the European project.
Philippe Waechter (Ostrum AM) | The ECB has just launched a new asset purchase operation worth 750 billion euros over the period up to the end of 2020 at least. The purchases will relate to public and private securities which are eligible for the asset purchase program (APP) previously implemented by the ECB. The weight of each state in this buying program will be that of each state in the capital of the ECB. The press release suggests a lot of flexibility in interpretation.
European Views | In the first weeks of the United Kingdom’s official departure from the European Union, one of the most significant moves made by Boris Johnson’s government has been the launch of a “freeport” plan masterminded by Johnson’s handpicked Chancellor Rishi Sunak. Downing Street claims that its decision to create “up to ten new innovative Freeports” – special trade zones where goods can transit or be stored without having to pay taxes or customs – means “hubs of business and enterprise will be opened across the UK.”
Luis Alcaide (Capital Madrid) | Next Sunday, the 15th, municipal elections will be held. To what extent will national problems, such as the controversial reform of pensions by decree, influence the results?
On Wednesday, President Trump announced a ban on flights to the U.S. from continental Europe for the next 30 days, with the aim of curbing the coronavirus’ spread. The impact will be high for European carriers such as Air France-KLM and Lufthansa and, to a lesser extent, for IAG. In 2019, passengers to North America accounted for 11% of IAG’s total.
As expected, the main elements of the ECB’s easing package focused on providing liquidity to a real economy through additional term-financing operations at subsidized interest rates as well as supporting overall aggregate demand through additional net asset purchases while deemphasizing reducing policy rates.
Tristán de Borbón (London) | On March 2 the British government started to negotiate a free trade agreement with the EU… and to set out its goals for an agreement with the USA. A strategy that puzzles analysts.