• Tag Archives Spain
  • The Euro Is Not Dead, Claims EU Survey

    The mood has shifted.
    By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET. Europeans are finally learning to love the euro, it seems, at least according tothe latest edition of the Eurobarometer, which is published twice yearly by the European Commission: 64% of the respondents, representing 16 out of 19 Eurozone economies, believe that having the euro is ‘a good thing for their country,’ the highest proportion since 2002, and up from 56% in 2016. Only 26% of respondents thought it was a bad thing.
    A further 74% of respondents said that the euro is a good thing for the EU as a whole, the highest proportion in the 2010-2017 series. This is somewhat ironic given that even the ECB conceded this week that the main idea behind the euro as a driving force for regional economic convergence has produced, let’s say, mixed results, having essentially failed where it mattered the most, in Southern European economies:
    ‘It is striking, however, that little convergence has occurred among the early euro adopters, despite their differences in GDP per capita. In contrast to some initial expectations that the establishment of the euro would act as a catalyser of faster real convergence, little convergence, if any, has taken place for the whole period 1999-2016’
    Nonetheless, the results of the survey point to a marked improvement in Europe’s love affair with the single currency, as growth in the Eurozone has reached its highest level (a forecast 2.6% for 2017) since the financial crisis began 10 years ago.

    This post was published at Wolf Street on Dec 8, 2017.


  • Could Italy’s Banking Crisis Drag Down Mario Draghi?

    Just don’t mention ‘Antonveneta.’ By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET. A blame game has begun in Italy that risks casting a bright light on the leadership of both the Bank of Italy and Italy’s financial markets regulator Consob. The controversial decision to award the central bank’s current Chairman Ignazio Visco a fresh six-year mandate despite presiding over one of the worst banking crises in living memory has ignited a tug-of-war between political parties and the president, who makes the ultimate decision on who to appoint as central bank chief.
    The first to cast aspersions was Italy’s former premier Matteo Renzi, who, no doubt in an effort to distract from his own party’s part in the collapse of Monte dei Paschi di Siena (MPS), called into question the supervisory role of both the Bank of Italy and Consob during Italy’s banking crisis.
    Silvio Berlusconi, a key player in the center-right coalition whose party came out on top in recent elections in Sicily, was next to join the fray. ‘The Bank of Italy did not exercise the control that was expected of it,’ he told reporters in Brussels in response to a pointed question about Visco.

    This post was published at Wolf Street on Nov 22, 2017.


  • Will Spain be the First to Default on Pensions?

    The Pension Crisis is brewing rapidly and we will begin to see this make headlines much more so around the world. There is hardly a country not in trouble (Norway the exception), where pensions are underfunded as governments have relied upon tax revenue. As the crisis in Spain brews, it will be the pension crisis there which blows the lid off of the entire problem. The Spanish pension system is moving rapidly toward a major crisis threatening its collapse. The Madrid government needs to issue debt to close the huge gaps as, without new debt, the pension crisis would have a meltdown this year. The question becomes when will buyers of debt realize that it is not even backed by economic growth. This is similar to a person without a job borrowing from the bank just to pay the rent. What government have done in the management of pensions is criminal for anyone in the private sector.

    This post was published at Armstrong Economics on Nov 21, 2017.


  • Spain’s Pension System Hits Crisis Point (and Everyone Ignores it)

    But how did things get this bad?
    By most measures sun-blessed Spain is an idyllic place to grow old in. Life expectancy is among the highest in the world, and the national pension fund’s payout ratio (pension as percent of final salary) is the second highest in Europe after Greece. But if current trends are any indication, that may soon be about to change.
    The country’s Social Security Reserve Fund, which was meant to serve as a nationwide nest egg to guarantee future pension payouts, given Spain’s burgeoning ranks of pensioners, has been bled virtually dry by the government. This started ever so quietly in 2012 when the government began withdrawing cash from the fund. Some of it was used to fill part of the government’s own fiscal gaps while billions more were tapped to cover the Social Security system’s growing deficits. As a result the pension pot has shrunk from over 66 billion in 2011 to just 15 billion in 2016.
    To avoid wiping out the fund altogether this year, the Spanish government extended a 10.1 billion interest-free loan to Spain’s social security system, which enabled it to pay out the two extra pension payments due in June and December. That way, only 7-7.5 billion will be tapped from Spain’s public pension nest egg. Emptying the pot altogether this year would have been politically unpalatable, says El Pas. Instead, it will be emptied next year as the social security system racks up yet another massive annual shortfall.

    This post was published at Wolf Street on Nov 18, 2017.


  • How Corporate Zombies Are Threatening The Eurozone Economy

    The recovery in Eurozone growth has become part of the synchronised global growth narrative that most investors are relying on to deliver further gains in equities as we head into 2018. However, the ‘Zombification’ of a chunk of the Eurozone’s corporate sector is not only a major unaddressed structural problem, but it’s getting worse, especially in…you guessed it… Italy and Spain. According to the WSJ.
    The Bank for International Settlements, the Basel-based central bank for central banks, defines a zombie as any firm which is at least 10 years old, publicly traded and has interest expenses that exceed the company’s earnings before interest and taxes. Other organizations use different criteria. About 10% of the companies in six eurozone countries, including France, Germany, Italy and Spain are zombies, according to the central bank’s latest data. The percentage is up sharply from 5.5% in 2007. In Italy and Spain, the percentage of zombie companies has tripled since 2007, the Organization for Economic Cooperation and Development estimated in January. Italy’s zombies employed about 10% of all workers and gobbled up nearly 20% of all the capital invested in 2013, the latest year for which figures are available. The WSJ explains how the ECB’s negative interest rate policy and corporate bond buying are keeping a chunk of the corporate sector, especially in southern Europe on life support. In some cases, even the life support of low rates and debt restructuring is not preventing further deterioration in their metrics. These are the true ‘Zombie’ companies who will probably never come back from being ‘undead’, i.e. technically dead but still animate. Belatedly, there is some realisation of the risks.

    This post was published at Zero Hedge on Nov 17, 2017.


  • Claudio Grass Interviews Mark Thornton

    Introduction
    Mark Thornton of the Mises Institute and our good friend Claudio Grass recently discussed a number of key issues, sharing their perspectives on important economic and geopolitical developments that are currently on the minds of many US and European citizens.
    A video of the interview can be found at the end of this post. Claudio provided us with a written summary of the interview which we present below – we have added a few remarks in brackets (we strongly recommend checking the podcast out in its entirety – there is a lot more than is covered by the summary).
    Interview Highlights
    We currently find ourselves in a historically and economically significant transition period. The already overstretched bubble in the markets is still expanding, but we now see bold moves by the Fed to reduce its balance sheet, at the same time the ECB plans to taper, overall presenting us with a fairly deflationary outlook. This reversal of the expansionary policies of the last decade can be seen as the first step toward a potentially ferocious correction in the not-too-distant future.
    The ECB is trapped, as it already holds 40% of euro zone sovereign debt. At the same time, Spain, Italy and Greece continue to potentially present major challenges, as a banking crisis could easily reemerge in these countries [ed note: banks in Europe have managed to boost their capital ratios, but the amount of legacy non-performing loans in the system remains close to EUR 1 trn. Moreover, TARGET-2 imbalances have recently reached new record highs, a strong sign that the underlying systemic imbalances remain as pronounced as ever]. Mario Draghi intends to reduce the ECB’s asset purchases from EUR60 billion to EUR30 billion per month. He may soon realize that if the ECB does not buy euro zone bonds, no-one will.

    This post was published at Acting-Man on November 14, 2017.


  • Doug Noland: “Money” on the Move

    This is a syndicated repost courtesy of Credit Bubble Bulletin . To view original, click here. Reposted with permission.
    It’s been awhile since I’ve used this terminology. But global markets this week recalled the old ‘Bubble in Search of a Pin.’ It’s too early of course to call an end to the great global financial Bubble. But suddenly, right when everything looked so wonderful, there are indication of ‘Money’ on the Move. And the issue appears to go beyond delays in implementing U. S. corporate tax cuts.
    The S&P500 declined only 0.2%, ending eight consecutive weekly gains. But the more dramatic moves were elsewhere. Big European equities rallies reversed abruptly. Germany’s DAX index traded up to an all-time high 13,526 in early Tuesday trading before reversing course and sinking 2.9% to end the week at 13,127. France’s CAC40 index opened Tuesday at the high since January 2008, only to reverse and close the week down 2.5%. Italy’s MIB Index traded as high as 23,133 Tuesday before sinking 2.5% to end the week at 22,561. Similarly, Spain’s IBEX index rose to 10,376 and then dropped 2.7% to close Friday’s session at 10,093.
    Having risen better than 20% since early September, Japanese equities have been in speculative blow-off mode. After trading to a 26-year high of 23,382 inter-day on Thursday, Japan’s Nikkei 225 index sank as much as 859 points, or 3.6%, in afternoon trading. The dollar/yen rose to an eight-month high 114.73 Monday and then ended the week lower at 113.53. From Tokyo to New York, banks were hammered this week.

    This post was published at Wall Street Examiner by Doug Noland ‘ November 11, 2017.


  • The Ponzi scheme that’s more than 100x the size of Bernie Madoff

    By January 1920, much of Europe was in total chaos following the end of the first World War.
    Unemployment soared and steep inflation was setting in across Spain, Italy, Germany, etc.
    But an Italian-American businessman who was living in Boston noticed a unique opportunity amid all of that devastation.
    He realized that he could buy pre-paid international postage coupons in Europe at dirt-cheap prices, and then resell them in the United States at a hefty profit.
    After pitching the idea to a few investors, he raised a total of $1,800 and formed a new company that month – the Securities Exchange Company.
    Early investors were rewarded handsomely; within a month they had already received a large return on investment.
    Word began to spread, and soon money came pouring in from dozens, then hundreds of other investors.

    This post was published at Sovereign Man on November 10, 2017.


  • Is There Any Way Out of the ECB’s Trap?

    The ECB faces the Devil’s Alternative that Frederick Forsyth mentioned in one of his books. All options are potentially riskly. Mario Draghi knows that maintaining the so-called stimuli involves more risks than benefits, but also knows that eliminating them could make the eurozone deck of cards collapse.
    Despite the massive injection of liquidity, he knows that he can not disguise political risks such as the secessionist coup in Catalonia. The Ibex reflects this, making it clear that the European Central Bank does not print prosperity, it only puts a floor to valuations.
    The ECB wants a weak euro. But it is a game of juggling to pretend a weak euro and at the same time a strong economy. The European Union countries export mostly to themselves. Member countries sell more than two-thirds of their goods and services to other countries in the eurozone. Therefore, the more they export and their economies recover, the stronger the euro, and with it, the risk of losing competitiveness. The ECB has tried to break the euro strength with dovish messages, but it has not worked until political risk reappeared. With the German elections and the prospect of a weak coalition, the results of the Austrian elections and the situation in Spain, market operators have realized – at last – that the mirage of ‘this time is different ‘in the European Union was simply that, a mirage.

    This post was published at Ludwig von Mises Institute on 11/09/2017.


  • Global Stock Meltup Sends Nikkei To 25 Year High

    The global risk levitation continues, sending Asian stocks just shy of records, to the highest since November 2007 and Japan’s Nikkei topped 22,750 – a level last seen in 1992 – while European shares and US equity futures were mixed, and the dollar rose across the board, gains accelerating through the European session with EURUSD sumping below 1.16 shortly German industrial output shrank more than forecast, eventually dropping to the lowest point since last month’s ECB meeting. Meanwhile soaring iron-ore prices couldn’t provide relief to the Aussie as the RBA held rates unchanged as expected; Oil traded unchanged at 2.5 year highs, while TSY 10-year yields rose while the German curve bear steepened, both driven by selling from global investors.
    The Stoxx Europe 600 Index edged lower, erasing an early advance, despite earlier euphoria in stocks from Japan to Sydney, which reached fresh milestones. Disappointing reports from BMW AG and Associated British Foods Plc weighed on the European index as third-quarter earnings season continued. Earlier, the Stoxx Europe 600 Index rose as much as 0.3%, just shy of a 2-year high it reached last week. Maersk was among the worst performers after posting a quarterly loss, saying a cyberattack in the summer cost more than previously predicted. Spain’s IBEX 35 gains crossed back above its 200 day moving average. European bank stocks trimmed gains after European Central Bank President Mario Draghi said that the problem of non-performing loans isn’t solved yet, though supervision has improved the resilience of the banking sector in the euro region. Draghi was speaking at a conference in Frankfurt.
    Over in Asia, equities rose to a decade high, with energy and commodities stocks leading gains as oil and metals prices rallied. The MSCI Asia Pacific Index gained 0.8 percent to 171.40, advancing for a second consecutive session. Oil-related shares advanced the most among sub-indexes as Inpex Corp. rose 3.7 percent and China Oilfield Services Ltd. added 4.6 percent. The MSCI EM Asia Index climbed to a fresh record. The Asia-wide gauge has risen 27 percent this year, outperforming a measure of global markets. The regional index is trading at the highest level since November 2007. Hong Kong’s equity benchmark was at its highest since December 2007 as Tencent Holdings Ltd. advanced for an eighth session. Australia’s S&P/ASX 200 index closed at its highest level since the financial crisis.

    This post was published at Zero Hedge on Nov 7, 2017.


  • Spain Just Lit a Fuse Under Catalonia – its Richest Region

    Acute uncertainty is like sand in the gears of the local economy.
    It’s amazing how fast the wheels of the Spanish justice system go round when the establishment wants them to, and how slowly they revolve when it doesn’t, which is usually when members of the same establishment – senior politicians and civil servants, bankers, business owners, or even royalty – are in the dock, which is happening with disturbing regularity these days.
    On Thursday we saw Spanish justice at its fastest. In the dock was the recently sacked vice president of Catalonia’s separatist government, Oriol Junqueras, and seven other elected representatives of the breakaway region who stand accused of a litany of charges, including rebellion, which carries a maximum sentence of 30 years’ imprisonment.
    The counsel for the defence had less than 24 hours to prepare the case. After just a few hours of hearing preliminary evidence, the National Court Judge sent half of Catalonia’s suspended government to jail without bail. On Friday, the same judge issued an international arrest warrant for Carles Puigdemont, the disputed Catalan president who fled to Brussels on Monday, as well as four other former ministers who did not show up to court on Thursday.

    This post was published at Wolf Street by Don Quijones ‘ Nov 3, 2017.


  • Spain Order Jailing Of Catalan Leaders: ‘What Happens Next’ To Puigdemont?

    Here is the photo of Puigdemont having coffee in Brussels this morning when he was meant to be in court in Madrid. Caught by @adelgadoRne pic.twitter.com/Njr3niwpAh
    — The Spain Report (@thespainreport) November 2, 2017

    The Spanish public prosecutor on Thursday ordered the country’s High Court that the Catalonian secessionist leaders be jailed. An arrest warrant be issued for ousted Catalan president Carles Puigdemont and eight members of his former government.
    Investigative magistrate Carmen Lamela issued the ruling on Thursday at the request of prosecutors who are pursuing a criminal case stemming from the declaration of secession the Parliament of Catalonia made Friday. The eight are Oriol Junqueras (Deputy First Minister, economy), Jordi Turull (spokesman), Raul Romeva (foreign affairs), Josep Rull (territory), Meritxell Borrs (public administration), Carles Mund (justice), Dolors Bassa (work & social affairs), Joaquin Form (interior).
    Earlier, the prosecutor’s office requested the jailing of Catalonian Vice-President Oriol Junqueras and seven other officials charged with rebellion, sedition and embezzlement of public funds, while the probe is ongoing, La Vanguardia reported. The prosecutor also asked the judge to issue a European arrest warrant for former leader Carles Puigdemont while also requesting that counselor Santi Vila, who resigned from government before Catalonia declared independence, be released on bail of 50,000.

    This post was published at Zero Hedge on Nov 2, 2017.


  • Market Talk- October 31, 2017

    A slow but steady day in Asian equity markets, but happy in the knowledge that the BOJ left almost everything unchanged. The Nikkei closed almost unchanged but has set an impressive two month rally. At above 22k the index closes at a 21 year high, but after the weak opening it took all day to recover unchanged. The Yen was a little weaker (0.5%) as it challenges the 114 handle again. The Australian ASX did open better but drifted throughout the day eventually closing on its low. However, irrespective of todays price action it has been a constructive month for the All Ords with a gain of around 3%. Shanghai managed to shake-off the PMI miss (51.6 against market expectations of 52), with Services also declining. In Hong Kong the Hang Seng we closed down -0.3% with bank stocks weighing on the market.
    Although we finished the month on a positive note, volumes were low. This usually is the case when a large index is closed and with Germany on a national holiday the absence of the DAX was noticeable. Spain’s IBEX helped sentiment though with a daily gain of +0.7%. The market is valuing ‘no news’ as positive these days, so with the demand for yield ever present any quiet day is good for low grade paper. This is present when comparing global credits to the states where it is not uncommon to find BBB credits trading even yield with US treasuries. The CAC managed a small +0.2% gain whilst the largest bank (BNP Paribas) recorded as the worst performing European bank stock today (-2.7%). UK’s FTSE managed a small positive for the day but an +0.5% in the currency helped international investors as traders continue to price in a BOE move on Thursday. Talk is that BREXIT discussions may be progressing better than many had expected but we have yet to hear details.

    This post was published at Armstrong Economics on Oct 31, 2017.


  • The Rising Separatist Movements in Europe-Eastern Europe

    There are many in Spain who just outright disagree with any right of Catalonia to be independent. History, culture, language, nothing really matters. Some have said it is the Spanish Constitution and all of Spain should vote to let Catalonia leave or stay. All of that said if Madrid had just allowed a fair referendum then whatever the vote was should have stood.
    This is all about saving the EU and not Spain. It was the oppression that probably made others vote to leave. All of Spain cannot vote against one region. London did not vote on Scotland and neither did Toronto against Quebec. California has people pushing to separate and that is not a right to be decided by me in Florida.

    This post was published at Armstrong Economics on Nov 1, 2017.


  • Invest In Gold To Defend Against Bail-ins

    – Italy’s Veneto banking meltdown destroyed 200,000 savers and 40,000 businesses
    – EU bail-in rules have wiped out billions for savers and and businesses, with more at risk
    – Bail-ins are not unique to Italy, all Western savers are at risk of seeing savings disappear
    – Counterparty-free, physical gold bullion is best defence against bail-ins
    One of Italy’s twenty regions is calling for more autonomy from the state following a nonbonding referendum. Why? Because a government supported ‘rescue package’ caused the lifesavings of 200,000 savers to be wiped out during the implosions of Popolare di Vicenza and Veneto Banca.
    Since then the banks have been rescued in one way or another yet the impact of the collapse on individuals and small businesses is only just becoming clear.
    As in Spain’s Catalonia the region of Veneto is wealthier than the average Italian region, with its own industries and language yet it has been left with a pile of ash when it comes to its banking sector.

    This post was published at Gold Core on November 1, 2017.


  • S&P Futures Slide After Chinese Stock And Bond Rout; Spain Rebounds, Dollar Drops

    U. S. futures slid 0.2% as investors await a barrage of announcements including Wednesday’s Fed decision, Friday’s jobs report and, most importantly Trump’s imminent announcement of who the next Fed chairman will be, although after the latest trial balloons, Jay Powell is now largely priced in. Asian equities edged modestly higher despite a tumble in Chinese stocks and bonds with Japan’s Nikkei closing 3 points in the green, while European shares hold steady after concerns eased about the Catalan crisis with no notable developments over the weekend, pushing Spanish stocks and bonds higher.
    As reported last night, the big overnight event was the tumble in Chinese stocks, which fell the most since early August, dropping as much as 1.7% before closing below 3,400, down 0.8%, and breaking the calm that persisted through the recent Party Congress, as government bonds extended a monthly rout amid concern the government will step up efforts to reduce leverage in the financial sector. Small-cap shares bore the brunt of the selling, with the ChiNext gauge tumbling as much as 2.5%.

    This post was published at Zero Hedge on Oct 30, 2017.


  • Puigdemont Seeks Asylum In Belgium After Spain Files Charges Against Catalan Government For Rebellion

    Update: As we warned earlier, La Sexta has just reported that (former) Catalan leader Carles Puigdemont will seek asylum in Belgium.
    According to eldiario.es, Puigdemont has made the decision to travel to Brussels advised by a legal team that recommends him to remain in that country.
    The movement of the former Catalan president intends to internationalize the judicial decisions and to force the Belgian justice to position itself on the possible emission of a euroorder of detention by Spain. In addition, the expresident and the exconsellers that accompany him raise the possibility of requesting political asylum in that country.

    This post was published at Zero Hedge on Oct 30, 2017.


  • Catalan Leader Urges “Peaceful” Rebellion As Spain Takes Over Government

    Update (0920ET): A Spanish government spokesman has responded to Puigdemont’s address, saying that “Spain will not comment on comments by Puigdemont who is out of a job.”
    * * *
    As we detailed earlier, in a pre-record message this morning, Catalan separtist leader Carles Puigdemont urged Catalans to peacefully oppose Spain’s formal takeover of the region’s affairs.
    Puigdemont said the activation of article 155 of the Spanish Constitution was illegitimate and called on Catalans to show “patience, perseverance” and faith in the future, and urged “democratic opposition” against Spanish government orders to sack his administration and dismiss the regional parliament.
    As The Spain Report notes, he announced he Catalans must “continue defending” their new republic “with a sense of civic responsibility,” adding “our will is to continue working to guarantee our democratic mandate”.

    This post was published at Zero Hedge on Oct 28, 2017.