Post Tagged with: "Spain"
The Elephant in the Room Is Spain, Not Italy
The decision for Europe’s bosses is this: they must ultimately confront the consequences of their policy choices. They can destroy the eurozone by continuing with the same failed mix of policies or by salvaging it by adding what has been missing from the outset: a mechanism for shifting surpluses to the deficit regions in the form of productive investments (as opposed to handouts or loans)
An Update on Italian Sovereign Outperformance
Ahead of the next LTRO at the end of the month, Spanish and Italian bonds may begin consolidating after the large moves seen over the past month. The scope for Italian out performance in the month ahead appears somewhat more limited than over the past month. Indeed, the 5.5% yield level on the Italy’s 10-year generic bond may prove a bit sticky. It also corresponds to trend line on the weekly charts, drawn off the yield low of 3.7% in mid-Oct 2010. Spain’s 10-year yield decline is slowing as it slips through the 5% threshold
The Unlikely Bull Market
This is not the time to be fully invested but neither is it the time to be side lined. We are in a nervous market where great opportunities present themselves at regular intervals. We recommend holding 25-50% in cash or cash like instruments (depending on your risk profile) which can be deployed at short notice when those opportunities arise
Auerback: Austerity during recession is equivalent to medieval bloodletting
Here’s a good video performance by Marshall Auerback on BNN’s Business Day program. Marshall thinks the Greek default deal is actually a relatively good one. But sees a Portuguese default after the Greek default as a real possibility and envisions a scenario in which Portugal and Spain look to extract similar terms. Moreover, the quid pro quo for Greece is austerity – and that makes getting debt loads down harder when implemented during a downturn
Dollar Mixed as Spain raises 4.5 bn euros in bond auction
The dollar is currently mixed against the majors and EMs as asset markets consolidate near recent highs. Spain raised 4.5 bn euros in a bond auction the upper end of their desired range. On the data front, Australia’s December trade surplus exceeded expectations increasing to A$1.71bln in December from a revised A$1.34 bln in November (was A$1.38 bln). Chinese markets outperformed the region closing nearly 2% higher, but the news flow was mixed, and even slightly contradictory
Dollar Pops Back
Dollar is broadly stronger against the majors and EM currencies after Greece rejected calls for direct budget control. Asian stocks fell, with the MSCI Asia Pacific index down 0.9%; EuroStoxx 600 is currently down 0.7%. Economic data saw Spanish Q4 GDP contract, EZ confidence rise less than expected; US personal income
A Month In Spain That Didn’t Shake The World
Spain’s economic problems are very grave. The country is facing a decade long depression, and if enough young qualified people leave during this period then the country could enter a negative dynamic from which it will never properly recover. At the outset (2007) I and others argued for a 20% internal devaluation to shift resources over to the export sector. This did not happen, and virtually no one is interested in the idea. The main priorities are still reducing the deficit, and restructuring the financial sector without injecting any significant quantity of public money. Both these policies are contractionary in their impact. In addition the proposed labour market reform is timid, and won’t act quickly enough to stop the rot on the growth front
Chart of the Day: Developed economies’ debt levels by sector
This is a great chart below via the Wall Street Journal. It shows the total debt to GDP ratios for the largest developed economies in the world broken down into four sectors: households, non-financial corporations, financial institutions and government
Spanish government doubts it can achieve deficit target
I have been saying for a few months now that all of the periphery would miss their targets as depression took hold. Belgian newspaper De Standaard reports that the new Spanish government is fearful. My translation from Dutch below
The Massendowngrade Effect
Perhaps the main point to take to heart from the events of the last week is the way the recent ECB liquidity measures have apparently been able to stabilise the debt crisis, at least for the time being, even while it is not clear that they will have the same success stabilising the deterioration in the respective real economies
Willem Buiter: “We will certainly have a panic stage before the debt crisis is resolved” (part 2)
Continuing from part 1 of the Willem Buiter interview with het Financieele Dagblad
Buiter: “The temporary pause in the European debt crisis is as deceptive as the frenzy before the New Year”
The countries of the eurozone will eventually emerge from the sovereign debt crisis — with pain and difficulty