French TF2 ... with a special appearance by Sarkozy to explain the current state of the French economy. He has been talking for over an hour now with two TF2 newscasters and an invited audience is present. He has said that the finance sector is past the danger stage but it's now job losses and lack of jobs for young people that are the danger to the French economy. (Britain has the same problem - the increase in youth unemployment - as we know). Re the UK, Cameron's speech and opinions voiced by him at Davos have been described in some of the German media as "deplaziert" - out of place. A headline in one German paper today asks "Where are the good capitalists?" - and goes on to report from Davos that it is now socially acceptable (salonfähig) to criticise the "present system". A major news item is that Berlin is demanding control over Greece's budget. This sounds like the "Treuhandanstalt solution" by which a "Treuhandanstalt" type of organization was specially set up to reorganize the way East German economy was run, to turn it from a command economy into a free market economy. In effect the West German government took charge of a collapsing East German economy from 1990 until 1994 when the task was completed. Seems to me the Greek economy is in the same state of near-collapse right now and the Treuhand solution would work (and more rapidly imo) with Greece. For one thing, in Greece there is not the communist/command economy mentality as in East Germany, but on the other hand, corruption and nepotism (in East Germany it took the form of jobs for Communist party members) is endemic in the Greek economy. One result would surely be that foreign capital would be more confident about investing in the Greek economy, which is necessary for economic growth. Regarding opinions on who will take what size of a haircut in a settlement on Greek debt, I saw a comment from a banker that "psi" can also mean "public sector involvement". At any rate, top banker Joe Ackermann of Deutsche Bank is confident of a settlement - at least he said that a couple of days ago.
Access Investments-Building Awareness - European Union-ROMANIA
Sunday, January 29, 2012
Joe Ackermann of Deutsche Bank is confident of a settlement
French TF2 ... with a special appearance by Sarkozy to explain the current state of the French economy. He has been talking for over an hour now with two TF2 newscasters and an invited audience is present. He has said that the finance sector is past the danger stage but it's now job losses and lack of jobs for young people that are the danger to the French economy. (Britain has the same problem - the increase in youth unemployment - as we know). Re the UK, Cameron's speech and opinions voiced by him at Davos have been described in some of the German media as "deplaziert" - out of place. A headline in one German paper today asks "Where are the good capitalists?" - and goes on to report from Davos that it is now socially acceptable (salonfähig) to criticise the "present system". A major news item is that Berlin is demanding control over Greece's budget. This sounds like the "Treuhandanstalt solution" by which a "Treuhandanstalt" type of organization was specially set up to reorganize the way East German economy was run, to turn it from a command economy into a free market economy. In effect the West German government took charge of a collapsing East German economy from 1990 until 1994 when the task was completed. Seems to me the Greek economy is in the same state of near-collapse right now and the Treuhand solution would work (and more rapidly imo) with Greece. For one thing, in Greece there is not the communist/command economy mentality as in East Germany, but on the other hand, corruption and nepotism (in East Germany it took the form of jobs for Communist party members) is endemic in the Greek economy. One result would surely be that foreign capital would be more confident about investing in the Greek economy, which is necessary for economic growth. Regarding opinions on who will take what size of a haircut in a settlement on Greek debt, I saw a comment from a banker that "psi" can also mean "public sector involvement". At any rate, top banker Joe Ackermann of Deutsche Bank is confident of a settlement - at least he said that a couple of days ago.
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According to reports from Davos, the consensus among global economic leaders is that the most dangerous phase of the eurozone crisis may now be over. Mario Draghi has emerged as the hero of the hour. By using the central bank balance sheet aggressively to stem the credit crunch, the ECB President has dampened bankruptcy fears in the financial system, and talk of “another Lehman” has died down. But while market fear is on the wane, greed has not yet taken over, and that leaves much work for the central bank to do.
It is striking that financial markets have become much more forgiving of bad news from the eurozone since the ECB acted in December. This week’s problems in Greece and Portugal have not caused the contagion which would have happened last year.
Furthermore, there are signs that greater confidence in the financial system has already spilled over to the real economy. The PMI and IFO business surveys which were published last week were considerably more upbeat than expected, and they have triggered the first upgrades to eurozone growth forecasts seen for many a long day.
Eurozone real GDP declined at an annual rate of about 1.2 per cent in 2011 Q4, and GDP was widely expected to fall much faster in 2012 Q1 as the economy tumbled into an official recession. However, business survey data are now suggesting that GDP might be approximately flat in Q1, with German data once again looking particularly buoyant
Ironically, the potential problem for the ECB’s balance sheet is being highlighted by this week’s debate on whether the central bank should take a haircut on its holdings of Greek debt, which reportedly amount to over €40bn, or about half of the central bank’s capital base. These holdings were originally acquired in exactly the same way that the ECB is now acquiring Italian and Spanish debt, except on a vastly greater scale. Of course, everyone says that Greece is an entirely separate case, which has no implications whatsoever for what might happen in other cases. The ECB is making a very large bet that this will prove to be the case.
In the near term, the key question for the markets is whether the ECB will maintain and expand its liquidity operations, as necessary to prevent a devastating meltdown in the balance sheets of the banks in the troubled economies. Having got this far, I assume that the answer to this question is “yes”. There is no other game in town.
In the loner term, markets are driven by greed as well as fear. Fear has been on the wane, but greed has not yet taken hold. If and when it does, the high returns on offer to investors who are willing to assume sovereign and banking risk in the weak economies may eventually start to attract the private capital flows which are needed to finance the deficits of these countries.
aufsteiger | January 29 9:09pm |
Re Sarkozy on TV tonight, he is abolisihing the 35 hour week and introducing a financial transaction tax.
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