Banks with high levels of distressed debts will have to face the music eventually as interest rates return to normal and this will be the moment of highest risk for the Eurozone. The question is what will be the trigger for rates to increase - growth in the US, a credit crunch in China or war in Russia - take your pick! The deepening slowdown in emerging markets is holding back global recovery and risks fresh financial strains in Spain, Britain and other European countries with large bank exposure to the bloc, the OECD has warned.
Rintaro Tamaki, chief economist for the OECD club of rich states, said bond tapering by the US Federal Reserve has “only just begun” and threatens to trigger a fresh wave of capital flight from vulnerable parts of the emerging market nexus. “There remains a risk that capital flows could intensify,” he said.
Mr Tamaki said Spanish bank exposure to developing countries is 35pc of Spain’s GDP, mostly through the operations of Santander and BBVA in Latin America. Exposure is 21pc for Britain and 18pc for Holland. The US is largely insulated at just 3pc of GDP.
Much of Britain’s link is through lending to Chinese companies on the dollar market in Hong Kong. British-based banks account for almost a quarter of the estimated $1.1 trillion of foreign-currency loans to China.
The OECD called on the Fed to go easy on bond tapering and said the European Central Bank and the Bank of Japan may have to step up stimulus to prevent the recovery faltering. This round if it really gets out of sync, would be far worse than anything previous. I have my doubts if Yellen will soften up on the tapering as she is a home baser. Vlad could knock the chessboard as EU landers stew with fiscal ferment. The Greeks will need more bailout dosh too....given the recent meetings for the 3rd bailout have stalled.
I have my doubts that Draghi can control a potential runaway situation when real asset shifting starts. The Eurozone economics aren't that sound as he makes them out to be given lander debt is rising faster.
A new "low" is coming with levies; just park ones dosh in the right place.
2 comments:
You really have to wonder if the lunatics have taken over the asylum in Europe. They are still reeling from the banking crisis. But on top of it they pile a Japanese-style deflationary sclerosis. The Japanese are only now coming out of a 20 year deflationary stasis in their economy. Yet EU leaders (both financial and political) bid fair to take over the baton. Every day brings further signs the EU project is doomed. It's like slow suicide.
bring it on is what I say far too many parasites living on funny munny at the expense of honest hardworking savers, pensioners, and producers of wealth etc etc ,huge useless govts are ofc partially funded by this keynsian slieght of hand, parasites living of parasites that wont leave till the host dies, the Brussels circus is a prime example of the worst most grotesque useless govt ever known ,a total waste of taxpayers money and then there is national and regional govts it never ends, time to take out the garbage
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