Euro Zone

Europe’s bank supervisor constricted by slump

18 Dec 2014

The ECB wants to follow its stress test with further harmonisation of European lenders. But as the central bank toys with QE, financial stability may take a back seat. The reform agenda of supervisory chair Danièle Nouy will have to accommodate fears for the area’s growth. 

EU insurers’ solvency is shakier than it looks

16 Dec 2014

A quarter of Europe’s insurers would fail to meet a basic gauge of capital health if Japan-style low-yield conditions were to persist, recent stress tests found. But actual euro zone yields are even lower. With the bloc on the brink of deflation, that’s not a reassuring sign. 

Technip’s M&A ambitions need firmer foundations

15 Dec 2014

The French oil services company has dropped plans to buy rival CGG. Relieved shareholders pushed the thwarted bidder’s shares up 7 pct: scepticism about pairing an engineer with a marine surveyor was rife. Technip still wants to diversify. It will have to make a better case. 

Hugo Dixon: Greece still several steps from chaos

15 Dec 2014

Athens has entered a period of political instability, which could lead to an election won by Syriza. This radical left group’s policies could prompt Greece’s exit from the euro if fully implemented. But this is unlikely, as Syriza will struggle to execute its plan.

Euro zone lassitude likely to endure

28 Nov 2014

The sharp oil price decline effectively crushes any hope of an inflation revival, even if the ECB eases, yet again. Fiscal caution, sluggish banks and mild reforms will restrain job creation in key economies. The prognosis is very slow progress with a high chance of crisis. 

Time for ECB to overhaul its secret weapon

21 Nov 2014

Leaked central bank correspondence from the recent Cypriot crisis underlines how emergency liquidity assistance to weak banks had become ad hoc and political. Now that the ECB is supervising euro zone banks, it should take over - with ELA risks shared by all member states. 

Booming euro zone surplus is sign of sick economy

19 Nov 2014

The single currency region has a higher current account surplus than China, and it’s rising. Credit German export strength and recovering periphery economies, but blame weak domestic demand. That creates a major global imbalance. There’s nothing to celebrate.

EU needs more confidence for big investment push

18 Nov 2014

There is conceptual agreement on a 300 bln euro investment plan, but a spat on funding. The idea is to rally private investors around public seed money. Governments are willing to take first losses but outsiders will stay away unless politicians put on a better show.

Fragile demand syndrome isn’t Japan-only

18 Nov 2014

The sharp demand slowdown after a small tax increase shows how sensitive consumption in ageing and rich countries can be. Japan’s lack of immigrants makes it especially vulnerable, but Europe and the U.S. are not exempt. Demand stimulus will always be on the agenda. 

Euro zone stuck between health and healing crisis

14 Nov 2014

The dreary 0.2 pct quarterly increase in GDP is a reminder of the region’s inability to shake off its long-standing malaise. But the news is nowhere near bad enough to spur any of the radical policy changes which might make a substantial difference. 

Unrepentant Draghi rams message home

6 Nov 2014

The European Central Bank president has resisted hardliners’ efforts to rein him in and slow down monetary easing. His press conference comments were clear: other tools will be used if the euro zone economy needs them. The euro fell as soon as investors saw hawks in full retreat.

Rising ECB opposition could be Draghi’s albatross

5 Nov 2014

Some members of the ECB’s governing council are frustrated at Mario Draghi’s policies and personal style, Reuters has revealed. Divergences are normal within central banks, and the ECB president is still backed by a solid majority. But from now on he’ll have to be more careful.

Draghi can only dream of moving like BOJ’s Kuroda

31 Oct 2014

The ECB chief might fantasise about taking big decisions with a one-vote margin, as the Bank of Japan leader just did. But realpolitik requires a goodly majority. The euro zone’s inevitable compromises complicate Draghi’s fight against stubbornly low inflation. 

EU bank stress-test winners still short of capital

27 Oct 2014

Most European banks passed the exam, at least on a headline level. But the accompanying disclosures make them look less robust up close. Investors can use the new clarity to push for extra capital buffers. These would help lenders cope with the risks of euro zone deflation. 

Italy’s bank debacle could be useful for Renzi

27 Oct 2014

Italian banks’ poor showing in Europe’s stress test has sparked protest from the Bank of Italy. But for reforming Prime Minister Matteo Renzi, shocks to the system aren’t unhelpful. He can use the mess to reform ailing lenders so they can support the shaky economy.

EU bank tests: the good, the bad and the ugly

23 Oct 2014

The best European lenders will pass Sunday’s exercise outright based on their Dec. 31 balance sheet. Potentially some big names will fail that test, but pass on capital raised since. As for banks still deemed outright failures today, their bosses cannot expect to keep their jobs.

EU bank resolution pain fairer than it looks

22 Oct 2014

Large lenders in France face shouldering the biggest chunk of a new fund to resolve trouble-hit European banks. But the larger the contributions, the more clout their state has over deploying the funds. That should cut the chance of profligate banks in other states getting a free ride. 

Hugo Dixon: Markets right to worry about euro zone

20 Oct 2014

The epicentre of last week’s fright was the 18-nation currency bloc, whose three big economies – Germany, France and Italy – are in their own ways stuck. There is a grand bargain sketched out by Mario Draghi that might shift the malaise. But it won’t materialise soon, if at all.

Weaker euro won’t do much to stoke inflation

16 Oct 2014

The ECB not-so-secretly hopes a cheaper currency will boost euro zone inflation. Good luck. The fall in dollar-denominated commodity prices is deflationary. And with demand weak, firms will struggle to pass on higher import prices. Only a huge euro slump would bring real relief.

European "lowflation" stays on its dire path

14 Oct 2014

Even the UK is succumbing, although its 1.2 percent rate remains high by European standards. Trends in France, Spain and Italy are all weak. With prices almost flat, wage rises will be poor and government finances will stay strained. A BoE rise may not come until 2016.