Skip to main content

Eurozone Banks

Eurozone Banks - Jim O'Neill, probably the most influential thinker at Goldman Sachs (as current head of its asset management division and erstwhile chief economist), has this morning written that "European Monetary Union (EMU) will probably survive, but it is likely to remain very messy".

Which is hardly a ringing endorsement by the world's most powerful investment bank of the most ambitious economic and financial project in Europe of our age.

And, let us not forget, Goldman Sachs is not famous for issuing public statements that rile the world's most powerful governments - which tend to be its customers.

For O'Neill, the issue is about the governance of the eurozone, not about the magnitude of the debts of Europe's financially stretched economies. He points out that the sovereign indebtedness of Greece, Ireland and Portugal is huge relative to the size of their respective economies but almost de minimis in relation to the size of the eurozone as a whole.

Even Spanish debt represents "only" 5.3% of eurozone GDP, he points out.

So if Germany, France and the Netherlands were to properly underwrite the debt of their over-stretched neighbours, Europe would (in theory) have little more difficulty borrowing than the US - whose overall ratio of debt to GDP, at 80%, is more-or-less the same as the eurozone's would be, on a pro forma basis.

The verdict of the markets this morning, following last night's agreement on the structure of a bail-out for Ireland and on a new framework for eurozone financial rescues, is that Germany, France and the Netherlands are a long way from being prepared to properly guarantee the indebtedness of Greece, Ireland, Portugal, Spain and Italy.

The prices of Irish, Portguese, Spanish, Italian and Greek government bonds have hardly moved this morning. The implied interest rate that they would have to pay to borrow for 10 years remains way above normal levels, and a mile above what Germany pays: it's 9.12% for Ireland, just under 7% for Portugal, 5.2% for Spain, 4.45% for Italy, and 11.9% for Greece.

Eurozone Banks

Comments

Popular posts from this blog

Urban Meyer Stepping Down

Urban Meyer Stepping Down - Well, it appears as if it’s deja vu all over again.

Less than 12 months after retiring and then un-retiring, Urban Meyer is apparently stepping down as Florida’s head coach. There’s no word on if he will be stepping back up tomorrow.

Urban Meyer Stepping Down

According to Todd Wright of Sporting News radio, GatorUpdates.com and AOL Fanhouse‘s Brett McMurphy Meyer will announce at a 5 p.m. ET press conference Wednesday that he is resigning/retiring as the Gators’ head coach. There are no further details available at this time, other than GatorUpdates reporting over the weekend that Meyer checked into a hospital the week of the UGA game and has been undergoing tests since.

Obviously, we’ll have more on this story throughout the day and well into the night…

Urban Meyer Stepping Down

Matt Cassel Undergoes Appendectomy

Matt Cassel Undergoes Appendectomy - The mystery of Matt Cassel missing practice Wednesday coupled with the Kansas City Chiefs promoting quarterback Tyler Palko has been solved.

The team has announced that Cassel underwent an appendectomy on Wednesday morning. The Chiefs say they expect Cassel to return to work this week. Returning to work and being ready to perform well in the team’s biggest game of the season on Sunday against San Diego are two different things. ESPN’s Adam Schefter is reporting the Chiefs are viewing Cassel as being questionable to play in the game.

Clearly, this is terrible timing. The Chiefs are 8-4 and would take a major step toward the playoffs with a win over the Chargers. Cassel has played very well for the past two months. If he can’t play, the brittle Brodie Croyle would face the Chiefs in his first action of the season. Croyle last played in Week 13 of the 2009 season.

Matt Cassel Undergoes Appendectomy

Cassel’s availability will come down to whether he…

100-calorie Packs Diet

100-calorie Packs Diet - Did you know recent studies show chronic dieters tend to consume more calories when foods and packages are smaller? Consumer behavior was observed in the study regarding "mini-packs," 100-calorie food packages that are marketed to help people control calorie intake.

The study revealed that one group that over-consumes the mini-packs is chronic dieters - individuals making a conscious effort in trying to manage their weight and food intake.

This shows that the distorted perception of small packages may actually undermine dieters' attempts to limit calories.

Consider this: Consumers perceive the mini-packs to be a generous portion of food - numerous small food morsels in each pack and multiple mini-packs in each box - while on the other hand, consumers perceive the mini-packs to be diet food. For chronic dieters, this perceptual dilemma causes a tendency to overeat, due to their emotion-laden relationship with food.

In a series of focus group studi…