The remaining international confidence in the euro evaporated and made even German bonds to lose their "risk free" status. The crisis is no longer confined to the "sinners of the south". Suddenly, no-one wants to hold euro denominated assets of any variety, and that includes what had previously been thought the eurozone safe haven of German bonds. "Investors have gone on strike". The American Investors are getting their money out as fast as they decently can and British banks have stopped lending to all but their safest euro zone counterparts. Even those have been denied access to dollar funding. The UK hardly has anything to boast of... it's got its own legion of problems, many of them not so dissimilar to those of the euro zone periphery. The defining moment was the fiasco over Wednesday's bond auction, reinforced on Thursday by the spectacle of German sovereign bond yields rising above those of the UK. If you are tempted to think this is another vote of confidence by international investors in the UK, don't. It's actually got virtually nothing to do with us. Nor in truth does it have much to do with the idea that Germany will eventually get saddled with liability for periphery nation debts, thereby undermining its own creditworthiness. No, what this is about is the markets starting to bet on what was previously a minority view - a complete collapse, or break-up, of the euro. Up until the past few days, it has remained just about possible to go along with the idea that ultimately Germany would bow to pressure and do whatever might be required to save the single currency. The prevailing view was that the German Chancellor didn't really mean what she was saying, or was only saying it to placate German voters. When she finally came to peer over the precipice, she would retreat from her hard line position and compromise. Self interest alone would force Germany to act. There comes a point in "every crisis" when the consensus suddenly shatters. That's what has just occurred, and with good reason. In recent days, it has become plain as lite that the "lady's not for turning".
Access Investments-Building Awareness - European Union-ROMANIA
Friday, November 25, 2011
Contingency planing - throughout Europe and beyond
The remaining international confidence in the euro evaporated and made even German bonds to lose their "risk free" status. The crisis is no longer confined to the "sinners of the south". Suddenly, no-one wants to hold euro denominated assets of any variety, and that includes what had previously been thought the eurozone safe haven of German bonds. "Investors have gone on strike". The American Investors are getting their money out as fast as they decently can and British banks have stopped lending to all but their safest euro zone counterparts. Even those have been denied access to dollar funding. The UK hardly has anything to boast of... it's got its own legion of problems, many of them not so dissimilar to those of the euro zone periphery. The defining moment was the fiasco over Wednesday's bond auction, reinforced on Thursday by the spectacle of German sovereign bond yields rising above those of the UK. If you are tempted to think this is another vote of confidence by international investors in the UK, don't. It's actually got virtually nothing to do with us. Nor in truth does it have much to do with the idea that Germany will eventually get saddled with liability for periphery nation debts, thereby undermining its own creditworthiness. No, what this is about is the markets starting to bet on what was previously a minority view - a complete collapse, or break-up, of the euro. Up until the past few days, it has remained just about possible to go along with the idea that ultimately Germany would bow to pressure and do whatever might be required to save the single currency. The prevailing view was that the German Chancellor didn't really mean what she was saying, or was only saying it to placate German voters. When she finally came to peer over the precipice, she would retreat from her hard line position and compromise. Self interest alone would force Germany to act. There comes a point in "every crisis" when the consensus suddenly shatters. That's what has just occurred, and with good reason. In recent days, it has become plain as lite that the "lady's not for turning".
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09.34 Market chatter that the Italian bond auction is to be delayed is a "load of BS" according to Katie Martin, currencies editor at Dow Jones and Wall Street Journal writer.
09.24 Italian ten-year bond yields have risen to 7.16, up 13 basis points.
Occupy Wall Street demonstrators celebrated Thanksgiving last night with 3,000 meals of turkey and pumpkin pie. "One group sat around a guitarist, singing Bob Dylan songs. Another clustered listened to a cellist play Bach, while a third group took in the upbeat sounds of a traditional fiddle and banjo duo," AFP reports
London FTSE 100 is down 0.94pc to 5079.
Paris CAC 40 is down 0.61pc to 2805.
Frankfurt Dax is down 0.75pc to 5389.
Milan FTSE Mib is down 1.35pc to 13732.
Madrid IBEX is down 0.9pc to 7658.
US markets will be trading on shorter hours due to the Thanksgiving holiday. Wall Street is heading for a lower opening, with Dow Jones industrial futures falling 0.2pc to 11,209 and S&P 500 futures falling 0.2pc to 1,157.
JP Morgan has today cut the S&P 500 target to 1350, down from 1475.
09.05 Italian retail sales fell for a fifth consecutive month, down a seasonally-adjusted 0.4pc on the month in September. They were down 1.6pc year on year.
08.53 Budapest has this morning accused Moody's of launching "financial attacks against Hungary" after the nation's debt was downgraded to junk.
The government cited its commitment to keep the budget deficit below 3 percent of economic output next year, 1 percent of GDP worth of reserves in the 2012 budget and an expected decline in debt levels as arguments against the cut.
Andrew Bailey, deputy head of the Prudential Business Unit at the Financial Services Authority (FSA), noted that British banks are not heavily exposed to the eurozone, but said they must prepare for some countries to exit the single currency – or a complete break up.
"We cannot be, and are not, complacent on this front," Mr Bailey said. "As you would expect, as supervisors we are very keen to see the banks plan for any disorderly consequence of the euro area crisis.
"Good risk management means planning for unlikely but severe scenarios and this means that we must not ignore the prospect of a disorderly departure of some countries from the eurozone.
"I offer no view on whether it will happen, but it must be within the realm of contingency planning," he added. Failure to plan for the exit of a country from the euro would be "unsound risk management", Mr Bailey said.
Formerly a chief cashier at the bank of England, Mr Bailey will be deputy head of the new Prudential Regulation Authority which will be a subsidiary of the central bank.
"The eurozone was designed without an exit mechanism and so working out how this may happen is difficult," Mr Bailey said.
Last week, Japanese bank Nomura said a euro break-up is a "very real risk" and advised bond holders to check whether they are likely to be repaid in other, reinstated European currencies if the euro crumbles. Other economists and bankers have issued warnings that financial companies need to prepare for the worst.
In the same speech, Mr Bailey said that it was not clear that UK banks were overcharging their customers.
"It's not obvious to me that the public is being overcharged in retail banking," he said, but accepted that there was a need for more transparency over charges.
"What is very hard is for the public to work out for what it's paying for the simplest elements of banking services and that of course has an effect on things like switching [accounts]," he said.
There was no such thing as free banking, Mr Bailey said, and the notion of it "distorted the landscape".
This could be tricky at a very granular level... and even dangerous.... if an unwinding somehow creates "holes" in banks' funding structures with plenty of room for trickiness bordering on outright theft. Billions seemed to have almost disappeared during the AIG disaster as well as with Lehman and now MF Global not to mention Madoff. I hope that those people who were involved in the original transition "in" are also somewhat involved in the "out".
The two extremes of very rich/liquid and heavily-overleveraged are the two most likely groups to try to take advantage of any restructuring, and I would not put it beyond the Greeks, Spanish and Italians to try some tricks along the way, claiming some silly concept of sovereign rights over the rest of us.
The two extremes of very rich/liquid and heavily-overleveraged are the two most likely groups to try to take advantage of any restructuring, and I would not put it beyond the Greeks, Spanish and Italians to try some tricks along the way, claiming some silly concept of sovereign rights over the rest of us.
ritish banks are not heavily exposed to the eurozone "
Yet Bank for International Settlements dated june 2011 Says
UK bank exposures to europe
Italy............73 billion
Spain...........100 billion
Portugal.......25 billion
France...........305 billion
Germany........190 billion
The EU is undemocratic, always was, and the Euro´s design fatally flawed from the outset. Maybe we will be rid of them soon?
Unfortunately, French entitlement syndrome will not go away. We will need to watch them like hawks.
Tomorrow we celebrate the encirclement of Stalingrad by the Red Army. Maybe we will get a present from the markets, now that Thanksgiving is over. A European thanksgiving?
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