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TLTRO will help peripheral banks’ funding, yet will it boost EZ credit?

MADRID | The Corner | No matter whether they lend the funds on to the private sector, TLTRO is likely to be an attractively priced source of funding for banks, especially in the eurozone’s periphery. For those lenders “the costs of TLTRO could be as much as 109-114bp below equivalent wholesale funding for four years, or 68-73bp for two years if they do not increase net lending to the private sector,” an UBS report says. That being said, analysts aren’t sure this is particularly going to boost credit lending. In the graph you can see the dismal evolution of M3 in the 18 single currency area “Shame on the ECB, which has acted behind the curve as always,” The Corner senior economist Miguel Navascués states.

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What is necessary to reactivate credit?

MADRID | By Ofelia Marín-Lozano | Now that stock markets are at  maximum levels (absolute maximum for S&P 500 and relative one for Eurostoxx 50), stress tests are decisive to reactivate credit. They are already in the first phase (which consists in evaluating the assets’ quality or AQR) and the overall outcomes will presumably be published in November. It seems likely that credit will recover sooner, inasmuch as banks know their individual results and the ECB may advance some messages.

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Nascent signs of lending recovery in Europe

LONDON | By Barclays analysts | We announce the end of credit restrictions to the European banking thanks to the latest credit data, which went from -3% yoy to -2.8%. Our market strategist reaches the conclusion that we are seeing signs of lending recovery (see chart).

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To control credit expansion is tricky

MADRID | By Luis Arroyo | In his beautiful and easy-reading blog Fixing the Economists, Philip Pilkington recently posted about the difficulties of the monetary policy to stabilize the economy. The most interesting aspect is perhaps that his comments are based on old and forgotten economists who wrote very well and had clear ideas. In this case, he chooses Kaldor and Harrod, two smart Keynesians.

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Credit lending: 2 ends of the financial string

MADRID | By Luis Arroyo | Which came first, the chicken or the egg? Does the credit decrease because the demand is weak or because banks don’t offer any? Requirements imposed by banks to lend money (excluding to the public administrations) are aggressive both in real and collateral interest rates. Meanwhile, the possibility that the ECB increased rates would further collapse bank credit.

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Spanish Public Debt Reaches One Trillion

MADRID | By Fernando G. Urbaneja | Spanish households and businesses were the most indebted at the beginning of the crisis (80% of the total), but now their debt is getting smaller in a systematic and decided way. The same cannot be said of the State, which keeps increasing its public debt with equal zeal (or even more) and has gone from less than 20% at the beginning of the crisis to 36% this week (and still growing).

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Why Monetary Expansion Is Not Enough

MADRID | By Luis Arroyo | Journalist Paul Krugman recently published an illuminating article by Samuelson about the (in)efficiency of the monetary expansion by its own when the liquidity trap has been reached. It is a very clear explanation about the problem of the money: central banks don’t create money if banks don’t want to give credit.

Now Investment

It’s Time To Look For Investment!

MADRID | By Luis Alcaide | Globally, investment in relation to sales figures are at their lowest level in the last 22 years, even though there is a huge amount of liquidity all over the world. What is the problem then? Crystal clear: money is not flowing and therefore growth cannot be reactivated.

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In Spain, Credit To Businesses and Households In Free Fall

MADRID | By Luis Arroyo and Tania Suárez | Credit is still stagnant in Spain and neither companies nor families are able to access money. According to the Bank of Spain, the development of credit in the country is still falling. The conclusion is that there is an insufficient banking money supply with a still very high fall rate.