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Has A New Euro Downtrend Started?

Standard Chartered think so, targeting an eventual move to 1.15.

They feel the ECB is getting closer to monetisation and euro-zone economy is weakening.

Dow Jones reporting the banks’ strategist Steve Barrow saying ‘In short, has the euro started a journey that will lead to significant declines in coming months? We think the answer is ‘yes,’ he says’

Dangers detailed for banks in Europe

Despite recent improvements in the health of European banks, they remain vulnerable to a daunting array of hazards that are expected to produce another round of sizable write-offs in the next couple of years, the European Central Bank said.

Its report cataloged in detail the problems facing the region’s financial institutions.

The challenges for banks in the 16-nation euro zone include exposure to a weakening commercial real estate market, hundreds of billions of euros in bad debts, economic problems in East European countries, and a potential collision between the banks’ own substantial refinancing needs and government demand for additional loans, the central bank said.

In its twice-yearly review of risks facing the nations that use the euro currency, the central bank expressed particular concern about banks’ need to refinance long-term debt of an estimated 800 billion euros, or $984 billion, by the end of 2012.

European banks will need to set aside an estimated 123 billion euros in 2010 for bad loans, and an additional 105 billion euros in 2011, the report said. That would be in addition to the 238 billion euros they set aside from 2007 to 2009.

A financial glossary

BANK, n. Bottomless cavity in the ground that sucks in money and the unwary.
I had quite a bit of money but then I put it in the bank.

BOND, n. A profitless contrivance used for catching the gullible or feeble-minded.
That pension fund is 100% in bonds now.

BROKER, adj. A comparative descriptive state for a client of a Wall Street bank.
He didn’t  exactly have a lot of money before he started dealing with Goldman Sachs. Now he’s even
broker.

BUBBLE, n. Fundamental prerequisite for a functioning Anglo-Saxon economy.
We need a new bubble to replace the ones we had in dotcom and property.

CENTRAL BANK, n. Lobbyist for commercial banks well versed in alchemy. (more…)

Germany Ban Short Selling

Germany’s financial-markets regular said it is banning naked short-selling of certain euro-zone debt and credit default swaps as well as some financial stocks effective at midnight local time, saying “excessive price movements” could endanger the stability of the financial system.

The ban will remain in effect through March 31, 2011. (more…)

IMF/EU Bails Out Greece (€110 billion), Papandreou Text, Greek Finance Minister, Riots (Videos)

Greece got a bailout Sunday from the IMF (International Monetary Fund) and EU (European Union).  There will be harsh austerity measures (increase in taxes, lower public sector wages, pension reform), read this Reuters article: Greek cabinet to discuss tough new austerity steps and listen to the Greek Financia Minister speak below.  Specifically on the bailout, WSJ reported that,”Greece reached a historic deal with other euro-zone countries and the International
Monetary Fund for a three-year, €110 billion ($146.5 billion) bailout”. [full WSJ article] The bailout also includes a €10 Billion support fund for banks (Bloomberg).  Find the full text of Papandreou addressing his Cabinet on the bailout here. Below are videos from RussiaToday, Reuters and EUX.tv featuring Greek Finance Minister Giorgos papaconstantinou outlining the austerity package, riot videos and more.


 

Will this be a short financial capitulation event transferred to main street in Greece?

Another Massively Interactive European Chart

With all chart porn these days focusing on Europe, the Economist may have outdone itself with this combo set of all key financial and economic statistics for European countries.

Here is the caption provided by the Economist:

 
 

EUROPE is damned if it does and damned if it doesn’t, fiscally speaking. Fears that Greece’s debt crisis presage similar episodes elsewhere in the euro zone—notably in Portugal and Spain—have sent sovereign-bond yields for several southern European countries drifting higher, and have fuelled fears about the exposure of Europe’s banks to indebted governments. Attempts to rein in the public finances may calm bond markets but they also risk weakening growth, which makes life more difficult for exporters in places like China and America, and spells trouble of a different kind for the banks.

The interactive graphic above underlines some of the problems that the European economy faces. In 2009 only Poland of the 27 countries in the European Union managed to record positive growth. Although many countries have now returned to growth, it is generally anaemic. In many countries unemployment rates have not risen as much as you might expect given the depth of the crisis—there are times when making it hard to fire people has some advantages. But the flipside of labour-market rigidity is that the unemployment rate may be “sticky”, because firms have less need to hire as recovery takes hold. That will keep demand growth subdued.

Mediocre growth rates are more of a problem for some countries than others. They spell particular trouble for those that have high levels of debt and that do not have the option to devalue their currencies. That explains why Greece was first to lose the confidence of the markets: with a public-debt-to-GDP ratio of 115% and a budget deficit of 13.6% in 2009, it was the euro zone’s outlier country. Other countries are now scrambling to avoid Greece’s fate. Ireland, another heavily indebted euro-zone member, embarked on austerity early; Portugal and Spain, whose problems stem as much from levels of external and private debt as from government borrowing, have had their hands forced. Others still are pruning before the markets exert real pressure: Britain’s debt has the longest maturity of any EU member but it is still aiming to get its finances in order within four savage years.

Full chart after the jump

Is the U.K. the Next Greece?

A day after the EU has come to terms on a bailout to save Greece, this Bloomberg TV analysis is pretty interesting. First, they point out that the rates Greece got were still pretty punitive, despite the fact that they were below market rates. But even more interesting is the notion that the U.K., not Portugal, Spain, or Ireland, might be the next economy to be forced to the brink because they’re not part of the Euro Zone and don’t have the partners to bail them out.



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