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Europe Channel: Latest Posts
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Don't Shoot the Messenger
Ukraine GDP Down 20% Year on Year In January
Well, Paul Krugman certainly got it right on this one, the Great Depression may now reasonably be considered to have arrived in Ukraine. Ukraine’s GDP declined 20 percent in January year-on-year, according to Valeriy Lytvytsky chief advisor to the chairman of the National Bank of Ukraine. “The decline in GDP in January was about 20 percent according to my reckoning. It’s the biggest drop ever. It’s a bad start,” he said. According to Lytvytsky the construction and industry sectors have been the hardest hit by the economic crisis.
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Don't Shoot the Messenger
The EU Bonds Story Rumbles On
Wolfgan Munchau was complaining only last weekend about the extraordinary narrow-mindedness of Europe’s economic and political leadership in the face of the current financial and economic crisis, from Ireland in the West to Hungary in the East, and from Greece in the South to Sweden in the North. But more than narrow mindedness what we are faced with is innocence and inability to react, and frankly I am not sure which is worst. I say “innocence” because it is by now abundantly clear that they simply haven’t yet grasped the severity of the problems we face (in countries like Spain, or even Germany itself, let alone in the East), and I say inability to react, since they are always and forever moving too little and too late. The initial response to the banking crisis last October was one example (where we saw a landshift-style volte face in the space of only one week) and the way we are now confronting the need to live up to the promises then made about guaranteeing the banking sector, and in particular the “systemic” banks, would be another.
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Europe
UBS does not see the need for panic over Eastern Europe
FT Alphaville has a post up indicating that the UBS EMEA economics team is much more sanguine about prospects in Eastern Europe than many market participants. The most important part of the UBS contents reads as follows:
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Asia
Fun With Acronyms
Macro Man is having fun with acronyms today. It started with a visit to the hospital this morning, where he got an MRI scan on his injured knee.
Upon his return, he saw his email inbox full of comments on currency weakness in Russia, India, Brazil, and even China; it seems as if the Big Bad Wolf has managed to huff and puff and blow down even the House of BRICS.
And what of the four little PIGS? German finance minister Peer “there’s no crisis in Europe” Steinbrueck admitted this morning that Germany and France may have to bail out entire countries, rather than just dodgy banks.
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Europe
The pigs, the Titanic, and Noah’s Ark
P.I.G.S. is the notorious acronym that was coined, in some Anglo-Saxon circles, at the time of the launch of the euro to denote the countries with worse public finances which would deserve to be shut out of the door (i.e Portugal, Italy, Greece, Spain). In these days, the zoological characterization of EMU members has been [...]
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Emerging Markets
Will the Euro exist in 3 years?
Before scoffing at the question, consider these facts:
Italy and Greece have quickly growing public debt of about 100% of GDP and shrinking tax revenues. Without independent currencies, Italy and Greece can’t devalue and inflate away their debt. Investors are still willing to finance such high levels of borrowing at single digit interest rates under the assumption that as members of the EU, Italy and Greece are safe from both inflation and default. What happens when investors start questioning the long-term solvency of these governments? What happens if they face a sovereign “bank run” as investors flee to safer sovereign debt? -
Europe
Germany Shows Leadership (?)
In the discussion over whether or not Ireland and other eurozone countries face serious economic issues (e.g., as suggested by the credit default swap, CDS, market), we have been joined by an unlikely ally: the German Finance Minister, Peer Steinbrueck. To avoid any misunderstanding, here is the exact wording from Bloomberg this morning:
German Finance Minister Peer Steinbrueck said late yesterday that euro region countries may be forced to bail out members of the 16-nation bloc that face problems refinancing their debt.
While he didn’t name countries facing problems, Ireland is in a “very difficult situation,” Steinbrueck said.
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Europe
The employment costs of subsidizing Fiat (Mr Berlusconi meets Stolper and Samuelson)
Following the debacle of car sales and production in Italy, as elsewhere, see here, and the “calls for action” by Confindustria, the entrepreneurs association (according to which about 300,000 may be at are at risk) also the Berlusconi government has finally decided to pass new support measures for the automobile industry: a subsidy of 1,500 Euros for purchases of a new cars (the measures also contemplates tax deductions for furniture and white goods).
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Don't Shoot the Messenger
Santander’s Banif Fund Suspends Payments
“I would now expect several eurozone countries with weak banking sectors to get into serious difficulties as the crisis continues. There is a risk of cascading sovereign defaults. If this was limited to countries of the size of Ireland or Greece, one could solve this problem through a bail-out. But solvency risk is not a problem confined to small countries. The banking sectors in Italy, Spain and Germany are increasingly vulnerable.” Wolfgang Munchau, Financial Times, 15 February 2009.
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The Wilder View
Lending standards tight according to global loan officer surveys
Global lending standards are tight; and why shouldn’t they be when the unemployment rate is surging in most G7 economies?
