Yields on Italian 10-year bonds will keep under tension after the latest economic data brought investors a negative surprise. The country’s GDP suffered a further contraction of -2.5 percent year on year in the second quarter of 2012: the previous figure had been -1.4 percent and market expectations had pointed at -2.3 percent. Industrial production played a major role, with a -7.9 percent year on year rate that was 2.4…
MADRID | The chain of default warnings is getting larger. If the regions of Murcia and Catalonia confirm they need help from the €18-billion central fund to repay its debt maturities, as Valencia explicitly did on July 20, the autonomous bailout would reach so far €7.7 billion. Of them, €6 billion could be made available with almost immediate effect, as Loterías del Estado would be the lender. The regions’ short-term…
At the end of the first quarter of 2012, the government debt to GDP ratio in the euro area stood at 88.2%, compared with 87.3% at the end of the fourth quarter of 2011. Eurostat said that in the EU the ratio increased from 82.5% to 83.4%. Compared with the first quarter of 2011, the government debt to GDP ratio rose in both the euro area (from 86.2%) and the EU (from 80.4%). At…
By Julia Pastor, in Madrid | After so many fruitless meetings, conversations and rounds nobody expected that the European leaders would be able to reach a more than reasonable agreement for Europe, that tough Germany would relax its position towards its Southern partners, and Spain and Italy would resist before the steam engine of the euro zone. But it happened. Banks will be recapitalised directly with the European Stability Mechanism…
By Nuño Rodrigo | www.cincodias.es | While our European leaders battle with a crisis seemingly impossible to be resolved, while euro zone third and the fourth economies feel threatened by the danger of being rescued because they cannot afford to access the markets, and while for all of these reasons the world approaches a crisis relapse, the guardian of austerity secrets and price stability wakes up every day with a sack of almost…
By Luis Martí, in Madrid | Amid the recent flurry of proposals for restructuring of the euro zone and opinions on its decomposition, seasoned with all sorts of half truths, two reports –one of the European Commission, by order of Parliament, and one of the Council of Economic Experts which advises the German government– have seriously dealt with the viability of Eurobond-based-solutions. The Commission's report was published late 2011 as a…
By Carlos Díaz Guell, in Madrid | Spain, its public debt as much as its equity markets remain a paradise for investors on short positions who bet demand will go down, while investors interested in the long term just abandon the country because of the lack of reasonable expectations. They are not necessarily evil speculators but simply professionals representing many investors who seek higher returns to their capital and now Spain…
MADRID | Barclays Capital made a realistic yet not Armageddon-like exercise in which the Spanish banking sector would need a recapitalisation equivalent to 6 percent of the country’s GDP, plus an additional 5.4 percent of GDP as an extra-safety calculation. Its analysts threw in 0.9 percent of GDP in Greek liabilities, and 3.5 percent of GDP in administrations’ accumulated debt payments. The scenario considered included yields on 10-year bonds of…
LONDON | The worsening of Spain’s debt risk grades will have grave implications, whether market participants believe the situation in which the country’s public finances are is reversible or not. Portfolio manager at Skandia Investment Group’s fixed income funds and researcher, Anthony Gillham distrusts talk of priced-in negative events. Although last Friday’s announcement by Standard and Poors that Spain is to be downgraded by two notches from A to BBB+ was…
By LaCaixa Research Team, in Barcelona | In the years prior to the recession that started in the last decade, in many countries the gradually increasing debt of the private sector allowed for much more intensive economic growth than would have been seen without it. The abrupt appearance of the crisis frustrated this expansion and revealed an excessive level of debt. This debt is now a heavy burden that can counteract…