Miguel Navascués | Take a look at the outstanding balances in the ECB’s TARGET2 payments system, which maintains an up-to-date record of the debts and loans each country has with the other. As can be seen from the table below and the subsequent graphics, Italy, where the banks have 360 billion euros of doubtful loans, as well as Spain, have again begun to show signs of weakness.
Christina Dykes | On July 2, The Economist had a surprisingly alarmist cover-page heading. “Anarchy in the UK” it read, a claim it justified in an editorial that said the United Kingdom “has seldom looked so wildly off the rails.” Having backed the Remain campaign, the magazine is either a bad loser or it has been blinded by its own narrative. It is not the country that is off the rails—it is the political class. And that has become evident.
Nick Malkoutzis via Macropolis | When Turkey catches a cold, Greece gets the shivers. It’s always been the way. When there is political instability in Turkey, Greece starts to worry about Ankara externalising the crisis and turning against a weaker neighbour to divert public opinion.
The European Commission (EC) opted against imposing fines on Spain and Portugal for their non-compliance with 2015 deficit targets. So Brussels did not implement the penalties equivalent to 0.2 percent of gross domestic product included in the Stability and Growth Pact for failure to comply with budget rigour. The fines would have amounted to about 2 billion euros for Spain and around €350 million for Portugal.
The EU Comission has decided not to fine Spain and Portugal for its deviation in the public deficit in 2015. Both countries, which have been traditional fiscal sinners since the crisis began, did not take effective actions last year. Although symbolic, Brussels could have imposed fines of up to 0.2 percent of GDP on Madrid and Lisbon, around 2.1 billion euros in the case of Spain.
The financial web Bondvigilantes offers a precise review of the details of Mario Draghi’s magic words from four years ago: “Within our mandate, the ECB is ready to do whatever it takes to preserve the euro. And believe me, it will be enough”.
James Alexander | It’s been lonely blogging that the Euro Area economy was not nearly as bad as consensus reckons, even consensus amongst our fellow Market Monetarists. But the data has consistently shown Euro Area NGDP growth doing better, and at least as good as the long-term average.
After Brexit, what could be more natural than for the UK to strengthen ties with the US than with Europe, which has miraculously survived thanks to the intervention of the Anglo Saxons in two wars in Europe. Perhaps one kind of Transatlantic Trade and Investment Partnership is dead: but the Europeans cannot stop another one being formed between the US and the UK.
BofAML | BoE’s decision to hold rates looks like a policy mistake. But one they can rectify quickly, at their August 4 meeting. We expect a 25bp rate cut, credit easing and potentially a QE salvo. We expect slightly less than we thought before yesterday’s meeting. A properly combined fiscal and monetary push seems unlikely: a fiscal stimulus will take longer to design, and may be limited given budget constraints.
Up to now, the balance of the ECB’s corporate debt purchase programme is more positive than negative. Since it started on June 8, the number of corporate debt issues in the eurozone has shot up, allowing for a decline in yields (positive).