AXA IM | Companies have re-leveraged their balance sheets since the global financial crisis (GFC), driven by low borrowing costs. Although heightened, corporate leverage is not currently excessive in developed markets, although we see signs of concern in emerging markets. In this note we assess whether we should be concerned about corporate leverage at current levels.
The Bank of Spain plans to change the method for calculating provisions in H1 2016, in advance of the European Commission’s new accounting regulations due to be implemented in 2018. Under the new rules elaborated by the International Accounting Standards Board (IASB), provisions will be calculated based on the expected loss in credit operations and not on the loss already incurred, as has been the case up to now.
France has become the Sweden of the 1970s. Both right and left governments have allowed public spending in France, as a proportion of GDP, to exceed that of Sweden at its most critical period.
VIENNA | By Keith Weiner via Truman | I proposed seven drivers of financial implosion in my dissertation. My recent writing has focused on two of them. One is the falling rate of interest on the 10-year government bond. As interest falls, the burden of debt rises. Since the falling rate incentivized more and more people to borrow, the number of indebted people, businesses, corporations, and of course governments is large. When the rate gets to zero, the burden of debt becomes theoretically infinite.
MADRID | By Ana Fuentes | Trying to compete with emerging markets is not enough: Those EU countries trying to re-launch their industrial sectors in order to boost economic recovery need to go through technological changes, Yao Yang explains to The Corner. Dean of the China National School of Development and Director of the China Center for Economic Research, he believes that austerity in Europe has not been in vain. On the same day, business-research group Conference Board reported that Chinese growth will dip to 5.5% in 2015-19, Prof. Yang points out that such a decline would not mean any catastrophe.
ATHENS | By Jens Bastian via MacroPolis | The recent presentation of half-year results by the four systemic banks in Greece – National Bank of Greece (NBG), Piraeus Bank, Alpha Bank and Eurobank – brought a mixture of good news and underlying structural challenges affecting the operational capacity of domestic lenders.
MADRID | By J. J. Figares (LINK) | On Wednesday, the minutes of the last meeting of the Monetary Policy Committee of the Bank of England (BoE) were published. Although 9 of its members voted to retain unchanged its program of asset purchases in secondary markets, 2 of them, Ian McCafferty and Martin Weal, they voted against the proposal to keep interest rates reference at the current level of 0.5% and advocated to increase them by a quarter percentage point.
ATHENS | Via Macropolis | A study published in the latest Bank of Greece (BoG) economic bulletin highlighted the deterioration in Greek households’ living and income conditions during the years of crisis (2008-2012).
SAO PAULO | By Marcus Nunes via Historinhas | …while in others it cannot promote it! Japan falls in the latter category. According to this article in the WSJ “Japan´s price target looks difficult.” The nationwide core consumer price index rose 1.3% from a year earlier in June, after adjustment for a recent sales-tax hike, below a 1.4% increase the previous month, according to government data released Friday. Inflation moderated in May and June due to falling energy prices and a stable yen, which has put the break on growth in import costs.
MADRID | By JP Marin Arrese | A couple of years ago, Draghi rescued the Euro from its plight. Yesterday, he saved Europe from a protracted economic performance. By delivering more than expected by markets, he changed the rules of the game in monetary policy. His bold rate cut bringing funds hoarded by banking institutions into negative territory seems close to unconventional manoeuvring. His targeted 4-year massive 400 billion liquidity injection will prop up credit to enterprises and individuals, providing a robust boost to growth.