http://www.zerohedge.com/news/2013-05-17/europes-eur-500-billion-ticking-npltime-bomb
Submitted by Tyler Durden on 05/17/2013 20:14 -0400
Not only is the Hollande in praise of competitive currency debasement which mathematically cannot work if every country does it (not that it can work anyway without long-term consequences), he also wants to sell France government holdings "without ceding state control or influence over vital companies".
Good luck with that. No one in their right mind would want to buy companies under such conditions.
The French media called it François Hollande's "grand oral exam". The French President has just held a big press conference at the Elysée palace marking his first year in office. And he said a couple of very interesting things about his vision for the eurozone and Europe.
Hollande pledged to launch an "offensive" to "drag Europe out of its lethargy".
He called for an "economic government" for the eurozone,
The French President concluded the EU-related part of his keynote speech by saying,
It will be extremely interesting to see what the response from Berlin will be. For the moment, Hollande's press conference is another reminder of how distant France and Germany are in the debate over the way ahead for the eurozone - with Paris sticking to its 'solidarity/integration first and supervision/discipline later' line, and Berlin insisting that things should evolve the other way around.
Europe's EUR 500 Billion Ticking NPLTime Bomb
Europe's non-performing loan problem is such an issue that there is increasing bluster that the ECB may take this garbage on to its balance sheet since policymakers realize that bad debts and non-performing loans (NPLs) reduce the capacity of banks to lend, hindering the monetary policy transmission mechanism. Bad debts consume capital and make banks more risk averse, especially with respect to lending to higher risk borrowers such as SMEs. With Italy (NPLs 13.4%) now following the same dismal trajectory of Spain's bad debts, the situation is rapidly escalating (at an average of around 2.5% increase per year).
As we discussed in detail here, the bottom line is that at its core, it is all simply a bad-debt problem, and the more the bad debt, the greater the ultimate liability impairments become, including deposits. As we answered at the time - the real question in Europe is: how much impairment capacity is there in the various European nations before deposits have to be haircut? With Periphery non-performing loans totaling EUR 720bn across the whole of the Euro area in 2012 and EUR 500bn of which were with Peripheral banks, it seems the Cyprus deposit haircut non-template may indeed become the key template.
Simply put, the greater the unemployment the more the strain on banks to generate "profits" by any means possible (GGBS?) to cover the capitalization shortfall from NPLs until at some point liability haircuts have to begin...
Non-performing loans as % of total loans across the Euro area
Unemployment rates across Euro area countries
Via JPMorgan:
It is not surprising that the periphery is exhibiting a rising pattern in terms of NPL ratios.What is worrying is the speed of increase, at 2.5% per year. Within the periphery, Greece is the outlier with a NPL ratio of 25%, and no signs of abating yet. Ireland follows with a NPL ratio of 19%. Italy (at 13.4%) is above Spain and Portugal (at close to 10%)...The German divergence is making the task of the ECB very difficult both in terms of setting monetary policy for the whole region, but also in terms of dealing with an impaired transmission outside Germany. Draghi clarified in its latest press conference that it is not the ECB’s role to clean up banks’ balance sheets, meaning that the ECB is unlikely to deal itself with the €500bn large non-performing loan problem in periphery.
Friday, May 17, 2013 1:44 PM
Hollande Asks ECB to Engage in Japanese Style Currency Debasement
French president Francois has had enough of austerity but claims he "cannot do it alone". The Financial Times reports François Hollande goes on ‘offensive’ over stalled EU economy.
François Hollande promised an “offensive” to bring “more growth and less austerity” to Europe as he launched a bid to resurrect his presidency.Economic Illiteracy
Mr Hollande said the first priority of his second-year “offensive” was a four-point plan to “get Europe out of its torpor” – concentrating on combating youth unemployment and a strategy of investment. “The number one objective is changing Europe’s direction to have more growth and less austerity,” he said.
“I cannot do it alone,” he said, adding that the European Central Bank could “put in liquidity, as is happening in Japan, which has allowed a fall in the yen and helped exports”.
The president promised a 10-year investment programme in digital, energy, health and infrastructure sectors to regenerate growth, saying that it could in part be financed by the sale of some of France’s big state corporate holdings, which have a total market capitalisation of about €60bn. But he made clear that any sales would not be at the expense of ceding state control or influence over vital companies.
Not only is the Hollande in praise of competitive currency debasement which mathematically cannot work if every country does it (not that it can work anyway without long-term consequences), he also wants to sell France government holdings "without ceding state control or influence over vital companies".
Good luck with that. No one in their right mind would want to buy companies under such conditions.
Thursday, May 16, 2013
Hollande goes on the offensive - two years to achieve political union in Europe
Hollande pledged to launch an "offensive" to "drag Europe out of its lethargy".
He called for an "economic government" for the eurozone,
"which would meet every month, with a real president appointed for a long term and who would be assigned this as his only task."According to Hollande,
"This economic government would discuss the main economic policy decisions to be taken by the member states, would harmonise taxation, would start convergence in the social [policy] domain...and would launch a plan to fight tax fraud."As if these remarks weren't controversial enough, Hollande re-stated his belief that the eurozone should have its own "budgetary capacity" and "the possibility to, gradually, borrow money". In the Q&A session he also suggested the ECB could be doing more on liquidity.
The French President concluded the EU-related part of his keynote speech by saying,
"Germany has said several times that it is ready to move to a political union, to a new stage of [European] integration. France is willing to provide the content to this political union."With a real coup de théâtre, Hollande gave himself "two years to achieve" this political union.
It will be extremely interesting to see what the response from Berlin will be. For the moment, Hollande's press conference is another reminder of how distant France and Germany are in the debate over the way ahead for the eurozone - with Paris sticking to its 'solidarity/integration first and supervision/discipline later' line, and Berlin insisting that things should evolve the other way around.
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