Carmen Reinhart said:
https://www.bloomberg.com/news/feat...ts-this-time-really-is-different?srnd=premium
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Carmen Reinhart said:...
We’ve not mentioned Italy, and that brings us to the euro zone. This is very, very destructive within the euro zone. If it drags on, the forces that are pulling the euro zone apart are going to grow stronger and stronger.
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I actually wanted to go back to the Italy issue. If you look back to 2008-09, nearly everybody had a banking crisis. But a couple of years later, the focus had moved from the banking problem to the debt problem. And it was the peripheral Europe debt problem with Portugal, Ireland, Iceland—most notoriously Greece—having the largest, by a huge margin, IMF programs in history. I would point out that Greece, Ireland, and Portugal combined are a little over a third of Italian GDP. And if there’s a shakeout that involves concerns about Italy’s growth, then we could have a transition again from the focus on the Covid-19 crisis this time to a debt crisis. But Italy, as I said, is on a different scale than the peripheral countries that got into the biggest trouble in the last crisis. It potentially also envelops Spain. So I think that if you were to ask me about an advanced economy debt issue, I think that is where it is most at the forefront.
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The ECB, as expected, boosted the size of its Pandemic Emergency Purchase Program on Thursday, saying the envelope for asset purchases was increased by €600 billion ($674.5 billion), to €1.35 trillion euros.
The PEPP is now set to run through at least the end of June 2021, versus the end of 2020, while maturing principal payments from assets purchased under the plan will be reinvested until at least the end of 2022, the ECB said.
The action comes after ECB President Christine Lagarde downgraded the central bank’s eurozone gross domestic product estimate to a decline between 8% and 12% this year. ...
Germany is ready and able to spend when it matters,
Mario Draghi has accepted the toughest job in European politics—prime minister of Italy—and he must now find out whether he will be supported by enough of the country’s many political parties to be able to count on a parliamentary majority. The former president of the European Central Bank, often dubbed as “the man who saved the euro” from its worst crisis back in 2012, is on paper the best qualified by far of the possible candidates.
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Draghi will be the best placed to explain to Italian politicians how to steer Italy out its current pandemic crisis, and beyond how to reform it and make it grow at last. He outlined a plan in an article published last year, calling for “a change of mind-set as necessary in this crisis as it would be in times of war.”
Governments, he wrote, should step up massively without concern at this stage for rising debt levels. “The alternative—a permanent destruction of productive capacity and therefore of the fiscal base—would be much more damaging to the economy and therefore to government credit,” he argued then.
The article was published nearly a year ago. Since then the pandemic has worsened. In its latest forecast, the International Monetary Fund saw the Italian economy growing 3% this year after slumping by 9% in 2020—one of the worst recessions in Europe one year, to be followed by one of the slowest rebound the next.
But if he succeeds in forming a government—for now, a big if—Draghi may be able not only to change Italy, but also the way the EU does business. The presence of an undisputed heavyweight in the meetings of EU heads of states and governments will change the EU balance of power, long dominated by the Franco-German duo. And his mastery of economics and monetary matters—which, to say the least, dwarfs that of German Chancellor Angela Merkel and French President Emmanuel Macron—could fast make him one of the most authoritative voices around the leaders’ table
Finally, Italy’s presidency of the G20 group of industrialized nations this year will give Draghi the exposure he needs to steer global economic cooperation. If party politics allow, Italy hasn’t only found a prime minister. Europe may also have found an influential leader.
The balance sheet of the European Central Bank (ECB) has risen to 77% of the Gross Domestic Product (GDP) of Eurozone which includes Germany, France, Italy and Spain.
ECB’s balance sheet has risen to €7,657,629 million, not far off from doubling in 2020 from about €4.7 trillion.
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Now more than a year on, the economy is not seeing much growth with ECB picking up the tab to monetize assets which eventually it may have to unload.
This €7.7 trillion in ECB’s balance sheet is debt that must be repaid, with the vast majority of the debt being government debt which is sold to commercial banks and then bought off them from the central bank.
Interest rates are near zero however currently, and in some euro states they are even negative, so this arrangement for now probably won’t cause any political problems.
However if interest rates need to be increased due to a rise in the velocity of money, and thus inflation, the funneling of taxpayer money to the private banking sector based on printed fiat from nothing by ECB may raise difficult equitable considerations.
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The eurozone credit crunch has begun in earnest. Lending conditions across the currency bloc are the tightest since late 2012, when the region was still crippled by the sovereign debt crisis.
The European Central Bank’s lending survey (BLS) is a leading indicator of what is to come. Both the supply and demand for credit definitively buckled in the third quarter, even if the eurozone economy eked out a last gasp of legacy growth. Lending is deteriorating most rapidly in Italy and Spain.
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Zero rates, QE, and targeted longer-term refinancing options during the deflationary era masked the fundamental clash of interests over eurozone destiny. Double-digit inflation has shattered the truce.
German-led hawks on the ECB’s governing council are demanding the start of quantitative tightening (QT) by January: the German government is digging in its heels over joint financing for the energy bailout, and it wants to reimpose strict limits on fiscal deficits under the Stability Pact.
This battle will determine whether or not the eurozone crosses the line into a full debt union, either via camouflaged ECB funding or via a fiscal merger that eviscerates the budgetary sovereignty of national parliaments. Inflation and the violent repricing of global yields make it impossible to fudge the matter for much longer.
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Europe is facing a mounting diesel crisis as a strike at one of the largest refineries on the continent begins, reported Bloomberg. The combination of a labor action - depleted crude product stockpiles - and the EU preparing to choke off Russian supplies might be a toxic cocktail for the EU and could worsen the energy crisis.
Dutch unions appear to have stopped the restart of production units at BP Plc's refinery in Rotterdam after a technical issue brought fuel production to a standstill last week. The refinery processes 400,000 barrels of oil annually and is a top supplier of diesel to Northern Europe.
A spokesperson for one of the unions, CNV Vakmensen, told Bloomberg that workers wouldn't restart production unless a pay dispute is resolved.
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All this esoteric banker talk... But what about Hans and Erika? They have no job, now. They cannot afford to heat their house because of the exploding costs.
Civilization is chained together. 100 people work in a factory, which supplies... oh, say, shoes or food or cars.
The factory cannot get the raw materials and the gas needed to manufacture their product, so they downsize or go out of business. Either way 80 to 100 people now have no income. That means they do not buy shoes, TV's, or eat out in restaurants.
The shoemakers and the TV sales stores and the restaurants close/cut back. More people are now out of the money-loop.
And people are smoothly talking about "basis points" as if it is an insulated world, far away from the gritty streets.
Take note: WINTER BEGAN on December 21. <-- This winter will be crushing for the German people. In every way.
Cuttin' down the fargin tree to get the apples on top.UK Oil Lobby Warns Financing May Dry Up After Windfall Tax
By William Mathis (Bloomberg) — Banks are set to trim billions of pounds in financing for oil and gas producers in the UK’s North Sea after a windfall tax was imposed...gcaptain.com
Energy giant ExxonMobil sues EU over windfall tax - BBC News
The US company says the levy on its profits will discourage future investment in Europe.www.bbc.com
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The 27-country bloc fears that Washington's $430 billion (400 billion euros) Inflation Reduction Act (IRA) with its generous tax breaks may lure away EU businesses and disadvantage European companies, from car manufacturers to makers of green technology.
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Prices still coming down:...
Price of nat gas still elevated over 5 year average before Russia-Ukraine war, but it has come down significantly from the high point.
The price of Dutch front-month TTF Natural Gas Futures – a benchmark for northwest Europe – plunged 15% today to €54.85 per megawatt-hour (MWh), and has now collapsed by 84% from the crazy spike in the summer of 2022. The price is now back where it had first been in early September 2021 ...
The average temperature in Dresden in February is 31F, snowing 24% of the time. February will arrive on schedule.
The avoidance of noticing the real pain can be seen in the still glib "they have successfully tightened their belts" advertisement stage; no longer mentioning the closing of the restaurants, etc. due to power costs.
If you have only listened to Reuters "Exclusive report" and did not live in a building that is heated tonight... and you (following their rules) have not had a bath this week, and you do not know how to pay the rent because you lost your business...
Why, if you did not actually LIVE IT, you might think Reuters is reporting that all is well and the problems are all in hand and solved.
The Ukrainians in Kyiv have also been successful in tightening their belts."they have successfully tightened their belts"
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