Yiannis Mouzakis via MacroPolis | Last July the conditionality of Greece’s third programme included savings of 1 percent of GDP from pensions. It did not require any major fortune telling skills to anticipate that this would soon lead the government of Alexis Tsipras into an extremely tense situation.
Two fundamental factors have affected bank lending. On the one hand, market doubts over the banks’ ability to generate margins against a backdrop of low and even negative interest rates. And on the other, the indirect impact of current energy and raw material prices on the lenders’ balance sheets.
Nick Malkoutzis via MacroPolis | For some years now, and especially over the last 12 months, Greece has acted as Europe’s lifeguard, first aid provider and gravedigger. It seems, though, that the strain of the refugee crisis means Greece’s European partners also want it to serve as a prison warden.
BARCLAYS | We believe that uncertainty on the timing of the UK referendum on EU membership and its outcome will have a temporary negative impact on the UK’s economic activity, mostly through lower private investment. We expect growth to slow to 1.9% in 2016 from 2.2% in 2015
The current uncertain political panorama in Spain after the December 20 elections has not been reflected in any significant way in sovereign debt spreads. The yield on the 10-year bond compared with the German bund is around 130 bp, no more than 10-15 bp above the pre-elections level. One alternative to reduce (or diversify) exposure to Spain’s public debt may be take positions in Italian debt.
For the last few months, the European Commission has been warning Spain that it will certainly not comply with its public deficit targets for 2015 and 2016. Many analysts are in agreement with this, while Economy Minister Luis de Guindos rejects it. This is the panorama facing the new Spanish government which, for the moment, King Felipe VI has asked socialist leader Pedro Sanchez to form.
John Bruton | In June, the people of the United Kingdom may vote to leave the European Union (EU). At the moment, a narrow majority favors remaining in the EU, but a large group is undecided. That group could swing toward a “leave” position for a variety of reasons, including what might be temporary EU problems with refugees. However temporary the reasons might be, a decision to leave would be politically irreversible.
It is worth reading the article by Wolfgang Munchau in which he analyses the minutes of the last ECB Governing Council meeting. In short, Draghi affirms he is prepared to continue to try to drive inflation towards his 2% goal, but the Council members are not so enthusiastic. On the contrary, they put a spoke in his wheel.
Yiannis Mouzakis via Macropolis | The IMF formally announced last week that it changed the policy of exceptional access criteria, in essence reversing a highly political decision of the Fund back in 2010, a decision that saved the euro and paved the path for half a decade of economic devastation that sealed Greece’s fate.
Schengen, another great symbol of European integration, is walking on thin ice because of the difficulty of governments to manage the refugee crisis and the security problems posed by jihadist attacks. Schengen is no longer irreversible. Even countries like Sweden are considering gestures as symbolic as the closure of the bridge that connects it with Denmark.