Some thoughts about EUROPE - The once-booming former Yugoslav republic was plunged into recession by the
economic crisis, which dented demand for its exports of manufactured goods,
machinery and transport equipment, chemicals and food. The economy is expected
to shrink by at least 2% this year. But the statistic that has everyone
concerned is the €7bn of bad loans on Slovenian banks' books, an amount
equivalent to around one fifth of the country's total GDP. The rating agency
Moody's has already downgraded Slovenia's second largest bank, and the IMF has
estimated that the government needs to recapitalize the nation's lenders to the
tune of at least €1bn. Perhaps most worrying is the fact that the Slovenian
prime minister, Alenka BratuĊĦek, was moved to say this week that her country
would not be seeking a bailout. Bond investors are not taking any chances.
Prices of Slovenian government debt have plunged, sending yields rising by an
eye-watering 0.8% on Wednesday alone. Slovenia's 10-year debt is now yielding
around 6.15%, not far from the 6.49% yield on 10-year bonds from Portugal, which
is already in a bailout program. Laurence Wormald at SunGard Financial Systems
said: "The evidence suggests that action will be needed by Slovenia within the
next two, three months. However, a bail-in is likely to be less drastic than the
one in Cyprus, since Slovenian banks are much less leveraged than those of
Cyprus. Also Slovenia is different from Cyprus in one crucial respect, in that
Slovenia has not created a large offshore banking center." After Slovenia,
who's next? The research house Capital Economics has its money on Malta and
Luxembourg....1. Either a split up into a northern and southern Euro-zone
2. or Germans, leave the Euro-zone. This would mean to forgive debt in the amount of about 1,2 trillion Euros, but I think it is worth it. A growing number of Germans is sooo fed up with this Euro-debacle. Naive and stupid as we actually are, we initially thought this was meant to be a peace project. And now take a look around. A bunch of incompetent Eurocrats turned this beautiful idea into a devastating nightmare. Before we knew what was happening we were catapulted to the helm of Europe and everyone expected us to wave a magic wand to solve the crisis.
Unfortunately we didn't have a magic wand and so we proposed the same recipe for southern Europe which put Germany back on track 10 years ago. Now it doesn't work for a number of intricate reasons, and suddenly Merkel gets depicted with a Hitler mustache, with the German economy morphed into a German Panzer conquering Europe - accused to have sold our products at gunpoint to helpless southern Europeans.
I think it is time for all Europeans to leave this Euro-zone-kindergarten to avoid further misunderstandings.
6 comments:
wiss manufacturing in surprise contraction
Over to Switzerland, where the manufacturing sector also unexpectedly moved into negative territory last month.
The Swiss PMI dropped to a seasonally adjusted 48.3 in March, from 50.8 in February. That is below the 50 mark that separates growth from contraction and is a big miss from analyst forecasts for a reading of 50.2.
Analysts at Credit Suisse and the SVME purchasing managers' association said:
The chaos surrounding the bailout package for Cyprus and stalemate in the Italian elections also created uncertainty among Swiss companies.
We anticipate that the recent flare-up int eh crisis will last a while yet, but that the medium-term trend toward a recovery in the eurozone is not at risk.
Next up Italy, and hopes are not high.
German manufacturing contracts
Even German manufacturing is bad, moving back into negative territory after a positive reading in February.
The sector – which represents around a fifth of the German economy – was hit by a fall in new orders, raising doubts about the strength of a eurozone recovery in the first quarter.
Markit's manufacturing PMI for Germany dropped to 49 in March from 50.3.
Tim Moore at Markit said:
Manufacturers cited heightened uncertainty about the economic outlook especially across export markets within the euro area, as having curtailed client spending.
It will also be interesting to see if the poor-little-Cyprus-human-rights-brigade from last week will turn up on this thread, and what they will have to say.
a) Cyprus has been unduly hard hit. There is nothing funny about that at all.
b) The total costs to the European Union itself moneywise will be far higher than had a different solution been found. I wrote this in a very early post, and this theme has since been elaborated on in many media. In other words, the EZ moralists will pay more in the near future for their moralizing choice. Not less.
c) Future bailout scenarios have now become very toxic. Slovenia is troublesome but highly manageable, if wiser heads prevail. Spain and Italy, however, will be completely unmanageable if early bank runs start there. Portugal is a trigger for further Spanish problems.
Troika's €uro-rollercoaster Fantasy FX League
Brought to you by: Template; or not template? That is the question, and co-sponsored by: Bankruns"r"us Productions
2013-Q1's key Movers & Shakers:
(ECB€ BASE RATE = 1D€)
1CYP€ = 0.8520€
1 MAL€ = 0.9020€
1 SLO€ = 0.9375€
1 LUX€ = 0.9820€
1 PT€ = 0.9620€
1 EIR€ = 0.9720€
1 IT€ = 0.9520€
1 GK€ = 0.9220€
1 ESP€ = 0.9520€
1 FR€ = 0.9820€
MISC:
1 GB€ = 1KP (PEANUTS)
1 RUS€ = 0.0008oz XAU
€tc, €tc.
Anastasiades denies family member exported funds
This weekend the blame game began in Cyrpus, with reports emerging that a company with family ties to the president Nicos Anastasiades withdrew funds from the island ahead of its bailout.
Just to recap, last week Cyprus and the troika of international lenders agreed a €10bn bailout plan aimed at saving the island from financial meltdown.
•Under the terms of the deal, depositors holding more than €100,000 at the Bank of Cyprus will lose 37.5% of their savings in exchange for bank shares. A further 22.5% will be put into a fund that earns no interest and could be confiscated should the bank need further funds.
•Depositors in Laiki bank with over €100,000 will face heavy losses. Those with deposits of less than €100,000 will have their accounts transferred to Bank of Cyprus.
•The central bank of Cyprus imposed strict capital controls following the announcement of the bailout to stem the flow of funds fleeing the country.
But, it seems, several people had advance warning of the deal and millions of euros leaked out of the island before it was announced.
Greek and Cypriot media have published a list of what is to be 132 companies and individuals that pulled money out of Cypriot banks and sent it abroad days before the capital controls came into force.
Among them was A. Loutsios & Sons Ltd., a company said to be co-owned by the father-in-law of one of Anastasiades's daughters.
The list could not be verified although the company has denied that it moved any cash.
The president said the reports were an "attempt to defame companies or people linked to my family".
A Greek website has published another list, naming six former and current politicians and several others, who it claims benefited from favorable loan restructuring at Laiki Bank. All of those named have denied any wrongdoing.
The Russian government says it will not compensate Russian savers who have lost money in the Cyprus banking crisis.
Russians are believed to have billions of euros in Cypriot accounts and deposits above 100,000 euros (£84,300; $128,200) in the two biggest banks could be reduced by as much as 60%.
Such losses would be "a great shame", First Deputy PM Igor Shuvalov said, "but the Russian government won't take any action in that situation".
Cyprus now restricts cash withdrawals.
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