Thursday there is to be held yet another summit to discuss Greece. Most likely that states in the euro area agree to help – a little – Greece by obtaining a hard struggle that banks involved. Obviously this will be insufficient and we’ll be lucky if markets unleash the calf of the euro area for several weeks.
The procrastination of the euro area have reached such a degree that no one knows what form the aid to Greece: “The head of the Bundesbank – Jens Weidmann, the replacement of Axel Weber – expressed opposition to the issuance of euro bonds (guaranteed by the states of the Eurozone) demanded by George Papandreou. ”
“Angela Merkel suggests in turn that it would not be opposed (but she never really was?) In a default part of Greece on its debt.”
“A way that dismisses Hillary Clinton promises even support of the United States to Greece to avoid getting the default: it must overcome cancer debt crisis, which threatens the entire euro area ‘. ” To read the rest of the article by Philippe … Ahahahaha, the United States who fly to the rescue of Europe!
Meanwhile, the great charade we stress tests is again imposed. Stress, they have only the name. Admittedly, the criteria that were submitted banks were more severe than last time but they do not always default risk, even partial, of a State. Remind me what the situation is Greece?
Very predictable result: European banks have successfully passed the new stress tests. Only 8 of 90 banks have failed. What about …
For once, the markets have peeled the last available figures for exposure to sovereign debt. This morning, they are all in the red and the banking sector is particularly affected.
There is however a good chance the market very quickly forget this history of stress tests, until the next bank that will need European aid to avoid bankruptcy.
This should leave just enough time for markets to pay close attention to the American situation. On the other side of the Atlantic, the banquet is being watered to turn to boxing. At the heart of the debate: the question of raising the debt ceiling. A problem that can be summarized as follows: the Congress will be given the right the U.S. government to borrow more?
Republicans and Democrats are obviously not in agreement on this point. And it lasts for months. So that the rating agencies have once again released their big stick – or rather the threat of big stick. Moody’s announced that it would degrade the triple A of the United States if no solution to the debt ceiling was reached. Um … and?
Obviously, the loss of their AAA would be an economic disaster for the United States. And not for them. Holders of Treasury bonds over the world, tremble!
That the euro or the dollar will sink first? Analysts around the world must engage in projections in all directions to see who will collapse first of the dollar or the euro. The problems of the dollar, you know. Recent months have proven that the dollar was much more sensitive to bad news from the United States than is the euro to the woes of the Old Continent.
The undermining of the dollar made by the Fed since the beginning of the crisis is not likely to end: Then worry about gaining the history of the debt cap, Ben Bernanke seems to have changed sides – it was predictable – and consider a form of assistance to the U.S. economy. We do not know yet what form this help will (perhaps a new quantitative easing even if it does not bear the name) but we do not see how the Fed could give the U.S. government at a time when its ability to financing and to issue debt are strongly challenged.
If there are quantitative easing, the result will be a further rise in inflation and a further decline in the dollar.
Side of the single currency, the horizon seems at first a little less dark. While the Greek crisis drags on and is contagious, but the euro has shown incredible resilience in recent months. It drops a little with each jolt of PIIGS but recovers quickly.
Two reasons largely explain the resistance of the single currency:
1. The dollar falls further
2. The ECB is behind the euro, determined to save him at all costs.
That’s where the rub: the ECB. As we look more closely at the balance sheet of the European Central Bank, we realize that the main support for the single currency is not as reliable as that.
Our stress test of the ECB. December 31, 2010, the assets of the ECB amounted to 1900 billion euros. Its capital and reserves to 82 billion. This gives us a ratio of 23 / 1 – which means that if the value of the assets of the ECB’s 4.3% drop, it will go bankrupt. The whole question now is what makes up the assets of the ECB to determine their probability of losing a few percent of small value.
44% of these assets consist of asset-backed securities (ABS) – or 480 billion euros – and of “non-negotiable instruments” – 360 billion euros. Behind these words barbarians hiding some of the distressed assets (mainly mortgage loans and securities) that European banks have refourguer to the ECB in 2010. Obviously, they have been sold at face value, not their market value – always falling sharply. Into the coffers of the ECB are also active (still rotten, otherwise it has no interest) sold by the Irish banks in exchange for euros. These receivables are normally guaranteed by the Irish State itself but it is unclear how he could pay for problems.
The remaining 56% are composed of a bunch of things not really stew: 106 billion of loans to the Central Bank of Ireland, 46 billion to that of Portugal and 44 billion to that of Spain, etc.. And finally, 90 billion of assets Greek – or 4.7% of total assets and therefore more than the capital and reserves of the ECB.