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ALERT : EU to prepare further Russian sanctions

  
  Education
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All 28 of the EU’s heads of state have put out a joint statement backing further sanctions on Russia after violence in Ukraine’s eastern provinces worsened markedly in recent days.

The statement dispels concerns that the bloc would prove too disunited to agree on new sanctions on Moscow despite the “Minsk” peace plan falling into tatters.

The heads of state or government highlighted there was “evidence of continued and growing support given to the separatists by Russia, and said they had therefore asked the bloc’s foreign ministers to “assess the situation and to consider any appropriate action, in particular on further restrictive measures”, at their upcoming meeting on Thursday.

We express our concern about the deteriorating security and humanitarian situation in eastern Ukraine. We condemn the killing of civilians during the indiscriminate shelling of the Ukrainian city of Mariupol on 24 January 2015. We note evidence of continued and growing support given to the separatists by Russia, which underlines Russia’s responsibility. We urge Russia to condemn the separatists’ actions and to implement the Minsk agreements.

Bank Exposure To Bulgarian And Romanian Sovereign Risk

  
Analysis, Economy, Education
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There’s been a lot of talk recently about Hungary following in Greece’s footsteps and potentially defaulting on its debt. Bulgaria and Romania are two other weak economies in Eastern Europe, and the chart below shows bank exposure by country to Bulgaria, Romania, Hungary and Greece (source):

It’s interesting to note the exposure that Greece has to Bulgaria and Romania. Romanian and Bulgarian debt comprise more than 25% of the foreign debt that Greek banks hold. Austria also has a high concentration of risk in these four countries, at 29% of total foreign claims outstanding.  When investors talk about contagion, what they are really referring to is positive feedback loops.  We can see from the chart above how trouble at one country can quickly develop into a concern for other countries.  The situation in Greece could make it difficult for Bulgaria and Romania to roll over their debt, an event which would in itself reduce the value of Greece’s assets, creating further difficulty for Bulgaria and Romania.

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