EUROINTELLIGENCE DAILY BRIEFING, 13 de Dezembro de 2012. Enviado por Domenico Mario Nuti. joaompmachado13 de Dezembro de 201213 de Dezembro de 2012Economia Navegação de artigos PreviousNext A banking union for 150 out of 6000 banks European finance ministers agreed the supervisory structure of a banking union early this morning; under the agreement, the ECB will supervise banks with asset values of over €30bn or 20% of their home country’s GDP; there are conflicting reports about the rule of engagement about how and whether the ECB can usurp control from national regulators over smaller banks; the governance structure will consist of a supervisory body, a steering committee, and the ECB’s governing council; the agreement is expected to finalised by February/March 2013, and the new SSM will start to become operational in March 2014; voting at EBA will be on the basis of a double majority – one inside the banking union, one outside; there will be no direct bank recapitalisation by the ESM until at least 2014; the agreement would complete stage 1 of a three-stage process towards banking union; the EU summit today will focus on broader issues of economic policy co-ordination, but there will be no discussion on a creating a joint fiscal capacity; Silvio Berlusconi gives Mario Monti a poisoned chalice by offering him the leadership of a centre-right coalition; Berlusconi left everyone confused as he publically rotated through all combinatorial options; Monti is expected to clarify his position by the end of the week; Mariano Rajoy is worried about the impact of Berlusconi’s return on Spain’s position; Italy’s housing and mortgage market has collapsed as the recession bites; but there is some good news from the tourism industry; Guido Gentili says Italy has a straight choice between the usual political mush or addressing the issues that are facing the country head-on; Catalonia is likely to have a vote on independence in 2014, along with an austerity budget; EU Commission, ECB and IMF meet to finalise the payment of the next Greek tranche; the total EU/IMF aid is to be disbursed in four tranches between now and March; the shortfall from the bond buy-back may be bridged through a buyback scheme targeted specifically at the holdouts; the Greek finance minister is to present the tax bill to the troika for approval, while there is more political infighting in Greece; Yanis Varoufakis, meanwhile, has done the math on the Greek bond buy-back, and finds that it actually increases the country’s total net debt. The single most important question remains unanswered this morning: What are the rules of engagement through which the ECB can usurp powers from national regulators? The Ecofin reached a broad political agreement on the first stage of a banking union in the early hours of this morning, according to which the ECB becomes the banking regulator of some 150-200 banks, which would leave 5800 or so outside its remit. There is a single line of command, but responsibility for the 5800 remaining banks remains with national supervisors. Die Welt reports this morning that the ECB can intervene only in reasonable cases – where it is not clear who decides what constitutes a reasonable case. The Financial Times says it was yet unclear whether this leads to a two-tier banking system. The lack of a detailed rules of engagement could mean that these very important details have yet to be agreed at technical level. Until that question is answered in meticulous detail, there is no way to assess whether this agreed banking union will have an impact on the crisis, and will be able prevent future financial crises. In any case, these negotiations only covered the supervisor. Bank resolution and deposit insurance will follow later. As so often, the media focussed on the issues that were most disputed politically – like the details of the supervisory structure – but which are ultimately not the most important for the success or failure of the project. Here are the cornerstones of what happened last night: The ECB will be the regulator of banks with assets of more than €30bn, or banks constituting at least one fifth of their home country’s GDP. The thresholds were chosen to include the three biggest banks in each country. The estimates last night range from a total number of 150 to 200 banks in the eurozone. The ECB can intervene in smaller banks (under a procedure that has yet to be made known, or yet to be worked out) The governance structure will consist of a separate supervisory body, the ECB governing council as final arbiter, and a steering committee to solve disagreement. Agreement to be finalised in February 2013 – as this requires support from the European Parliament. The Single Supervisory Mechanism (SSM) kicks in March 2014. The EBA will continue to be in charge of harmonising rules at EU-level, and there will be safeguards for the non-eurozone members through a double majority – one inside the banking union, one outside. No direct bank recapitalisation by the ESM until at least 2014 These are some of the questions we still have:” Is the €30bn a fixed nominal sum, will it get adjusted over time? Will banks automatically switch regime once they exceed the total? How and when this is determined? Does the threshold include off-balance sheet vehicles? If No, then the arrangement would give banks an incentive to circumvent the rule; Can the ECB decide whether to usurp authority over a smaller bank on its own, or does it need approval of any other body? Do banks have legal redress to such a decision under national law? Can the SSM give, and enforce, instructions to national supervisors? Does the SSM have full access to all information held by national supervisors? (At the first sight, the €30bn threshold – if upheld in nominal terms – would capture not only large banks, but also medium-sized banks that expand their balance during a boom. For example, the German IKB, one of the first banks to hit trouble during the crisis, would have passed that threshold, and fallen under ECB supervision. On the other hand, one of Germany’s dodgiest banks, the Sparkasse of Cologne and Bonn, has total assets of €29.6bn, and falls just under threshold. The problem with thresholds is that banks can, and do, take evasive action.) No discussion on fiscal capacity at EU leaders’ summit today The agreement leaves today’s EU summit to deal with other issues, most notably on broader economic policy coordination and economic convergence (the soft bits like R&D spending). Germany has pushed any discussions on a fiscal capacity from the agenda, which Herman van Rompuy had planned for this summit. And we should remember that a banking union is mostly meaningless without a joint fiscal capacity – so this issue remains critical. Berlusconi hands Monti a poisoned chalice Silvio Berlusconi said that he may go away if Mario Monti agreed to head a new centrist coalition without the Left. Il Corriere della Sera reports, Berlusconi has added more confusion to his electoral campaign. First he said he would include the Northern League party in his coalition. Then he talked about Monti, then about Angelino Alfano, the Popolo della Libertà party secretary, as a possible candidate as PM. At last, Berlusconi remarks he remains the frontrunner for the Italian centre-right. In addition, Berlusconi repeated that the Italian bond spread was a “con” and suggested it did not matter. (There seems to be some method to the madness. He wants to capture some of the residual popularity of Monti, which would be lost to him if Monti became the leader of a centre-left coalition. We doubt, however, that this last manoeuvre has any legs.) Mario Monti will unveil what he plans to do by the end of the week, according to La Stampa. He said yesterday that the Berlusconi government had passed some economic reforms, but left much to do. Monti also remarked that the winner of general elections would have to follow up on the reforms passed by his technical administration. Rajoy worries about Berlusconi Presseurop has a translated piece from ABC about the Spanish government’s displeasure at the return of Silvio Berlusconi to frontline Italian politics. The impression of the Spanish government is that the uncertainty resulting from Berlusconi precipitating Mario Monti’s resignation as Italian Prime Minister is going to negatively affect Spain. The Spanish government hoped to ride the relative calm in the financial markets and ultimately avoid having to apply for a European Union rescue. PM Mariano Rajoy was hoping that the mere existence of the OMT as a possibility would keep Spain’s risk premium under control. Now, this ‘Draghi effect’ might well go away. Nevertheless, some hope that the Italian crisis will shake the European Council out of its complacency and that the ongoing summit will make more progress than previously expected towards meaningful banking union. The housing market collapses in Italy in the second quarter of the year… The Italian housing market saw a fresh collapse in the second quarter with sales down 23.6% and mortgages down 41.2%, Istat said in his latest report. As Il Messaggero reports, they were the deepest drops since the first quarter of 2008. The housing starts and mortgages have been hit hard by Italy’s deepening recession. According to the Italian newspaper, one of the biggest risk is a downside spiral like what happened in Spain. … but international tourism goes well for Italy While the crisis has been hitting families and firms, tourism is the sector that does relatively well. As Milano Finanza writes, international tourists spent almost 3% more in the country this year, the Bank of Italy said in a report. However, the global economic slowdown has led to fall in the number of foreign tourist by 1.6% in 2012, and a fall in overnight stays by 1.8%. (That suggests that the Italian tourist managed to increase the amount spent by the average tourist.) Italy needs a clear path for reforms, Gentili says There are two ways to approach the upcoming elections, Guido Gentili writes on Il Sole 24 Ore. One is to close your eyes and focus on non-issues, and get what he calls a poisonous mush. The outcome will be more confusion in a country that still does not understand the meaning of the word spread. In contrast, the second approach is to open your eyes and tackle directly facts and problems – the biggest of which is a country going through a severe recession with no recovery in sight until 2014. According to Gentili, Italy needs a clear path of reforms, concrete and not full of illusion. Catalonia likely to have a referendum and higher taxes The negotiations between incumbent CiU and left nationalist ERC to allow Artur Mas to form a government in Catalonia with ERC outside support are nearing their conclusion, writes Publico. It is reported by sources familiar with the negotiations that there is a political agreement to hold an independence referendum during 2014, though the exact date is not specified, possibly to allow the other nationalist parties ICV and CUP a say at a later stage. Negotiations are on-going on an austerity budget. While ERC accepts the need for deficit reduction, they demand a `social turn’ involving new taxes. ERC is reported to be willing to delay approval of the agreement as a way to pressure CiU to accept its demands on the budget. Eurogroup expected to agree on Greek loan payments, may ask for more measures Euro-zone finance ministers, Christine Lagarde from the IMF and representatives from the ECB will meet Thursday, expecting to agree on details of the loan disbursements to Greece, even if the bond buyback operation fell short of expectations and Greece would require more funds to accept all offers and further measures to achieve its debt targets. European Commission spokesman Simon O’Connor, as well as several eurozone finance ministers, including those of Germany, Finland and France, said they expected loans for Greece to be approved, though some “additional contingent measures” might be required to meet the original debt targets, Dow Jones cites from troika documents. According to a document obtained by Reuters, the 1.4% of GDP reduction in debt – the amount by which the buyback fell short of earlier expectations – could be obtained through a buyback of bonds still held by investors who refused to participate in the Greek debt restructuring earlier this year. There is also a suggested timeline on how a total of €49.1bn in new loans is scheduled to be provided to Greece by March. After the payout of €34.4bn in December, Greece should receive €9.2bn in January, €2.8bn in February and an additional €2.8bn in March. Stournaras to present tax bill to troika for approval amid political infighting at home The Greek finance minister will also present the new tax bill to his colleagues for approval. The draft legislation was due to be approved by the Athens parliament in advance of the Eurogroup meeting in Brussels on Wednesday, but was delayed due to objections from coalition partners and concerns from the IMF over the workability of the bill, Kathimerini reports. A finance ministry official said the bill would go to parliament on Friday including “whatever last-minute additions and changes” were agreed with the European Commission and the IMF, according to the FT. Antonis Samaras’s decision to seek final approval for the bill from troika lenders without consulting his two coalition parties reflects a growing impatience with political foot-dragging over implementing reform, writes the FT, and also highlights the extent to which Greece has surrendered responsibility for fiscal and structural policy-making to the international lenders. Varoufakis sober verdict on the Greek bond buyback In a very interesting blog entry Yanis Varoufakis shows why the bond buyback was in fact a nothing to celebrate at all. With this debt buyback Greek have lost all potential gains from a future recovery of their government bonds, all the anticipated interest-coupon payments, plus their day-to-day liquidity they received by holding those bonds as collateral with the ESCB (via ELA). These sum up to a haircut of up to €16bn, in present value terms, just to get the €24bn of EFSF loans that will be passed over to the same banks. All in all, there will be a net rise in public debt, €24bn new loans against €19.5bn in net debt reduction for the state, while the nation’s banking system will remain zombified ad infinitum, he concludes. 10-Y Spreads, Forex, ZC Swaps and Euribor-Ois sideways, mostly. 10-year spreads Previous day Yesterday This Morning France 0.641 0.623 0.641 Italy 3.397 3.339 3.322 Spain 4.139 4.002 4.106 Portugal 6.016 5.908 6.244 Greece 11.800 11.852 -1.37 Ireland 3.463 3.293 3.441 Belgium 0.801 0.779 0.818 Bund Yield 1.322 1.35 1.367 Euro Bilateral Exchange Rate Previous This morning Dollar 1.300 1.308 Yen 107.700 109.38 Pound 0.807 0.8101 Swiss Franc 1.212 1.2119 ZC Inflation Swaps previous last close 1 yr 1.58 1.44 2 yr 1.66 1.51 5 yr 1.77 1.66 10 yr 2.03 1.91 Euribor-OIS Spread previous last close 1 Week -5.700 -5.6 1 Month -3.071 -2.571 3 Months 6.186 5.886 1 Year 41.500 41.7 Source: Reuters Share this: Share on Facebook (Opens in new window) Facebook Share on X (Opens in new window) X Share on LinkedIn (Opens in new window) LinkedIn Share on WhatsApp (Opens in new window) WhatsApp Email a link to a friend (Opens in new window) Email More Print (Opens in new window) Print Like this:Like Loading...
