European Economy


Spainaly under pressure

Sorry for the lateness of this post, one of those days I’m afraid. Italian borrowing costs were seen rising overnight as the country moved into a second day of auctions of  bonds and bills. Of note €2.884 billion in three-year debt at a yield of 3.89% were sold. The last auction of few weeks ago came in


Spain has only denial

There seems to be a pattern emerging as stressed Eurozone nations struggle against the austerity based policy that slowly strangles them. The first stage is a denial that anything is wrong, the second is that there is some problems but with renewed vigour the issues will be solved and the third stage is when reality


Spain’s balance sheet recession

So I return after the Easter break to find Europe in much the same shape as when I last saw it, with one minor difference.  Spain is no longer an unrecognised risk, but a known issue: Spanish bond yields rose today, after surging the most since January last week amid investors’ concern that Rajoy’s government may


Chart of the Day: LTRO2 weakness

Todays chart follows from the one I posted pre-Easter on the ECB (European Central Bank) LTRO (long term refinancing operation). This comes from a great piece of research from Nomura (h/t Delusional Economics – see below) and charts the weakness in 5 year Italian and Spanish bond yields since the introduction of the 2nd tranche


Eurozone recession baked in

Another night of Eurozone Purchasing Manager Index (PMI) reports, this time in services, with remarkably similar results to the manufacturing indexes: Overall outside of a few upside surprises, such as that from Ireland, the data continues to follow my overall theme of “Periphery nations weakening, France in the middle, Germany outperforming, but the whole ship


On Spanish banks and Greek bonds

Recently there has been mounting evidence that although the ECB’s 3 year LTRO has been successful in both supporting sovereign bonds and banking system recapitalisation, it is failing to restart lending in the private sector. To those who understand that banks are never reserve constrained, but capital constrained, this makes obvious sense. However, it isn’t just


Eurozone’s miserable March

There was a barrage of data out of Europe overnight with the major flow being manufacturing purchasing managers indexes – PMI. I thought, given the volume of data, I would just provide a summary of each document and if you are interested to read further you can follow the links yourself. Overall outside of a


Spain’s severity is not sustainable

The pain in Spain continues with the government releasing the country’s latest budget which has been described by some Spanish economists as ‘the most severe since Franco’: Spain’s government has announced $36 billion in new budget cuts, as it attempts to reassure the European Union that it will not need a financial bailout. The budget savings will take the


Europe moving beyond the LTRO

So it appears, at least in the short term, that the ECB’s LTRO effect is starting to wear off as markets finally catch up on the story of the underlying economy’s of periphery Europe: Euro zone bond markets Thursday received their first jolt since the Greek debt exchange was clinched earlier this month as Italian and


European banks aren’t lending

European monetary aggregate data for February was released overnight by the European Central Bank. This is one of the pieces of data I have been waiting for in order to get a better handle on the broader success of the 3 year long term refinancing operation (LTRO). The annual growth rate of the broad monetary


Reindustrialization of Europe

Cross-posted with permission from MacroTragedy, a Greek-based macro-analyst who you can also follow on Twitter It certainly is no secret that the west is de-industrializing fast and has been doing so for some time now. This trend has been present since the 1980s. Nonetheless, some countries, did manage to buck this trend and re-industrialized. Now


The rain in Spain

Back in November last year I posted on my confusion over the jubilation shown by the citizens of Spain as they elected Mariano Rajoy as their new political leader. Mr Rajoy’s strategy during the election campaign was to say very little about what he was actually intending to do to address his country’s financial problems, preferring


Europe holds back the fire for now

Two weeks ago I wrote a post on Professor Sinn and the growing concern from the German central bank about TARGET2 liabilities. The pressure from the German camp is on-going and late last week it appears they had a win of sorts. The ECB has given the euro zone’s 17 national central banks the power to ban


Chart of the Day: PIIGS yield update

Time for an update on PIIGS (Portugal, Ireland, Italy, Greece and Spain) cost of raising debt. Remember, the Eurozone member states must fund their government deficit spending by selling bonds in the private debt markets. The Euro is effectively a “gold” standard currency, unlike the fiat currencies of other developed countries. The 10 year bond


Europe looks to boost its firewalls

So just another week in Europe which means yet another summit. This time it is in Copenhagen where the main topic on the agenda will be the expansion, or lack thereof, of the European firewalls. If you’re having deja vu don’t worry, we have been here before, and as I explained then the combination of the


Europe performing as expected

Anyone who has been following my European commentary for any length of time will know that I have been running a number of risk themes on Europe due to what I consider to be misguided and one-sided policy which will ultimately be counterproductive. These themes come under the major trend that I see in the Eurozone:


The PIIGS Strike Back

So, as I suspected would happen, the push-back against the suicide pact continues. This week Spain managed to convince the EU that it should be allowed to loosen its deficit targets for this year a little in return for a greater push in 2013. Eurozone finance ministers have given unemployment-ridden Spain more wiggle room in cutting