Showing posts with label euroskeptic. Show all posts
Showing posts with label euroskeptic. Show all posts

2018-05-30

MacroView | Forget Brexit, Fear of Italy Doing a EURO Exit Shakes Markets

UPDATE: Wall Street Climbs as Worries Over Italy's Politics Ease | NYTimes.com: May 30, 2018 12:32pm EDT.

Original post:
If you're in the U.S. and got back from your Memorial Day weekend late, you may be wondering, what happened to cause markets to tumble Tuesday? Here's a recap:

Italian president rejects nomination of Eurosceptic minister

Financial Times (ft.com) video above published May 27, 2018: Leaders of Italy's leading populist parties have dropped their bid to form a government after President Sergio Mattarella rejected their nomination of a Eurosceptic finance minister.

Dow Tumbles Nearly 400 Points; S&P 500 and Nasdaq Also Decline | TheStreet.com May 29, 2018: "Stocks fall sharply Tuesday as a political crisis in Italy rocks markets across the globe." Also: Investors are dumping Italian government debt | ft.com.


Italian bond yields are rising rapidly because the country is laden with debt and in political turmoil. TheStreet.com's Tracy Byrnes enlisted London Bureau Chief Martin Baccardax to help explain how it will affect the rest of us.
Germany's DAX
Who  is  was Carlo Cottarelli?

Financial Times (ft.com) video above published May 28, 2018: As newly appointed prime minister, the former IMF official will focus on improving Italy's finances ahead of new elections, but many think he will immediately face a vote of "no confidence" and some now think new elections may be scheduled as early as July, 2018--major parties in Italy say Cottarelli’s mission is 'all but dead' and parliament will soon be dissolved --Italy may return to polls in July, sources say, amid market rout | Reuters.com.
The MacroView:
Italy's new election could become a referendum on the European Union and the euro--President readies Italy for snap polls to be fought on EU, euro | Reuters.com--the far-right League and anti-establishment 5-Star Movement may unite for an upcoming new election in Italy. League leader Matteo Salvini said on Monday, May 28: “Today Italy is not free; it is occupied financially by Germans, French and eurocrats ... if there’s not the OK of Berlin, Paris or Brussels, a government cannot be formed in Italy. It’s madness, and I ask the Italian people to stay close to us because I want to bring democracy back to this country.” When? New elections in Italy 'by start of 2019' at the latest or as early as autumn: Italy's president named a former IMF economist Carlo Cottarelli as caretaker prime minister to lead the country into new elections, possibly as soon as the autumn in the eurozone's third largest economy.  Mr Cottarelli, 64, was director of the IMF's fiscal affairs department from 2008 to 2013 and became known as "Mr Scissors" for making cuts to public spending in Italy--rte.ie.

Most Exposed to Italy’s Sovereign Debt? (Other than Italian Banks): BNP Paribas, France’s largest bank, with €16 billion of Italian sovereign debt holdings, Dexia (French-Belgian) holds €15 billion of Italian debt, and Banco Sabadell has €10.5 billion invested in Italian bonds (40% of its entire fixed asset portfolio, worth €26.3 billion, and 110% of its tier-1 capital)--WolfStreet.com.

ECB & Eurozone: Banque de France to pursue efforts to spur consolidation of Europe's financial sector: Villeroy | Reuters.com--Editor's note: if consolidation is "encouraged," Europe may end up with a few (5 or 6?) large banks (mostly German or French) controlling the EU/eurozone financial sector. The five largest commercial banks in the U.S. had 44 percent of total assets in the banking system as of 2014 (most likely even more now). Unlike the U.S., however, Europe still has a lot of large "troubled" banks with underlying financial problems--consolidation now could exacerbate a situation the ECB has failed to remediate.

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2016-07-06

Deutsche Bank $DB $DBK, Italian Banks, Approaching a 'Lehman Moment'?

Top: Deutsche Bank (NYSE: DB) shares are down 25% since the Brexit vote on June 23, 2016.
Bottom: Deutsche Bank (NYSE: DB) shares are down 92% since May 11, 2007. Source: google.com
Background: "Deutsche Bank was one of the major drivers of the collateralized debt obligation (CDO) market during the housing credit bubble from 2004 to 2008, creating ~$32,000,000,000 worth. The 2011 US Senate Permanent Select Committee on Investigations report on Wall Street and the Financial Crisis analyzed Deutsche Bank as a 'case study' of investment banking involvement in the mortgage bubble, CDO market, credit crunch, and recession. It concluded that even as the market was collapsing in 2007, and its top global CDO trader was deriding the CDO market and betting against some of the mortgage bonds in its CDOs, Deutsche bank continued to churn out bad CDO products to investors."--Deutsche Bank | Wikipedia.com (emphasis added)


Deutsche Bank AG | Domain name: db.com | Shares traded on: FRA: DBK and NYSE: DB
  • 23-29 Jun 2016: "... investor George Soros believed the U.K. would vote for Brexit ... and Soros was long the pound as the results were announced. After the vote, though, Soros shorted about $100 million worth of Deutsche Bank shares, targeting Germany's biggest lender as a potential victim of Britain's secession. It was a good bet: Deutsche has tanked since the June 23 vote, falling to the lowest level since Germany's DAX stock index was established in 1988 ..."--Bloomberg.com


  • 29 June 2016--[U.S.] Federal Reserve releases results of Comprehensive Capital Analysis and Review (CCAR)--"The Federal Reserve objected to the capital plans of Deutsche Bank Trust Corporation and Santander Holdings USA, Inc. based on qualitative concerns."
  • 4 July 2016: "... the continuing implosion of major banks over in Europe is the main factor that is driving investors to safe haven assets such as silver. Rumors continue to spread that Deutsche Bank is essentially insolvent at this point, and many are watching for the imminent collapse of the largest and most important bank in Germany. When this happens, it will be a much, much more cataclysmic event for the global financial system than the collapse of Lehman Brothers was back in 2008. But today I want to focus on the ongoing implosion of the major banks in Italy. Italy has the 8th largest economy on the entire planet, and their banks are drowning in approximately 400 billion dollars worth of non-performing debt. The Italian government would like to bail these banks out, but the rest of the EU appears ready to block that effort because it would violate EU rules. As a result, the big Italian banks experienced a bloodbath on Monday…"--washingtonsblog.com (emphasis added)
  • 5 July 2016: European stocks slammed after property fund suspensions | MarketWatch.com: "European stocks moved sharply lower again Tuesday, as concerns over the U.K.’s Brexit vote gripped the market ..."


    • See Brexit Triggers EU Power Struggle between Merkel and Juncker | spiegel.de: "... After Merkel speaks with Juncker on the phone that weekend, her belief that the Commission president is more a part of the problem than a part of the solution doesn't change. The chancellor believes that Juncker's appetite for power is one of the reasons why the British have turned their backs on Europe ..."

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    2016-07-05

    Beyond Brexit: Four Forces Shaping the Future of Europe (video)

    Four Forces Shaping the Future of Europe:

    The United Kingdom has become the first country to vote to leave the modern European Union (EU), but the debate over Europe and the Union is far from over. WSJ.com's Niki Blasina explains four forces that will determine the future of the EU. Published June 24, 2016
    1. Euroscepticism
    2. Economic Instability
    3. The Migrant Crisis
    4. Terrorism
    Even before the UK "Brexit vote" on June 23, 2016, there was much "Euroskepticism" in the EU:
    Pew Research Center survey conducted in 10 EU nations
    among 10,491 respondents from April 4 to May 12, 2016 

    See Euroskepticism Beyond Brexit: Significant opposition in key European countries to an ever closer EU, Pew Research Center release, June 7, 2016 (pdf).  The 10 countries (see list in Chart above) included in the survey account for 80% of the EU-28 population and 82% of the EU’s GDP. A median of 70% in the nine EU nations surveyed outside the UK, "believe it would be bad for the EU if the UK decided to depart. Only 16% say it would be a good thing." 

     UPDATE: "... In the UK, it is clear that numerous individuals were concealing their true preferences about Leave vs. Remain. The elite in the UK, and the EU as a whole, mounted a campaign of insult and intimidation. They had no positive message, but engaged in fear-mongering and ad hominem. Any brave soul who put his or her head above the parapet was immediately subjected to a barrage of invective. So many people stayed hunkered down, and concealed their preferences ... This means that the EU is particularly vulnerable to preference falsification at present. It is also acutely vulnerable to a shattering of its brittle structure when those preferences are revealed. For this reason, I would say that the expectation should be that the EU will muddle through, but there is a substantial tail risk that it will shatter into 28 pieces. And when it does, it will not go with a whimper, but a bang."--Brexit: A Case Study in Preference Falsification | StreetwiseProfessor.com

    UPDATE: Brexit Aftershocks: 'You're Lying to Us!' | spiegel.de: "... jocularity and nonchalance he otherwise exudes has vanished. Juncker these days is ill-tempered and irascible. After the summit comes to an end, a reporter from Austrian public broadcaster ORF becomes the focus of his frustration. She asks a question about CETA, the already negotiated free-trade agreement with Canada. The day before, Juncker has told European leaders that he would like to enact the treaty without the involvement of national parliaments in EU member states--thus feeding into all the stereotypes out there of an autocratic, elitist Brussels ... Now, the EU is stumbling from crisis to crisis ..."





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