Turkey: Addendum to latest @HDNER
In case you are wondering, @HDNER is the Twitter address of my beloved Hurriyet Daily News; I just wanted to provide some free advertisement for them:) Anyway, this post is about my latest column there, which was also posted here:
Let’s start with the global. There are several reasons European banks have been/could be leveraging: As in the case of Austria, it is the regulator that is asking banks to boost capital and limit cross-border loans. So who could really blame Raiffeisen and the rest?:) But the problem is not limited to Austrian banks: Faced with funding difficulties, banks are scrambling to plug in their capital deficits. FT summarizes this dual burden really well, in an article, at its Lex column and in a detailed analysis piece. A good indicator is the soaring of lending from the ECB to banks, as everyone is scrambling for dear old cash- interestingly enough, money parked at the ECB is very high as well- whatever few euros they have, banks would rather lend safely to the ECB than to each other.
Coming to the economic slowdown, PMIs have confirmed recession fears in the Eurozone, as both manufacturing and services PMIs fell. Turkish manufacturing fell in November as well, leading me to believe that I am really the harbinger of maladies:) But the most important signal of the slowdown, IMHO, was the October trade figures:
The slowdown in exports reflects Eurozone woes, for sure, but the sharp pullback in imports is related to the domestic demand slowdown. Here’s Citi’s note if you want the full details.
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