European Reality Check

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LONDON, April 20 (Reuters) - European banks appear better positioned than U.S. peers to weather any stress from commercial property after an interest rate surge, but that does not mean Europe is out of the danger zone.

Aggressive rate hikes, still working their way through the system, follows a pandemic that hurt foot traffic to bricks-and-mortar retail locations and structurally changed work habits, with office occupancy rates still below pre-COVID levels.

 
BERLIN, April 20 (Reuters) - Airports in Dusseldorf, Hamburg and Cologne Bonn were virtually empty on Thursday in the first of another round of strikes called by Germany's Verdi trade union over the cost of living crisis.

Nearly 100,000 people will be affected by aviation security worker strikes on Thursday and Friday at the three airports, airport association ADV said, with around 700 departing flights to be cancelled.

 
LONDON, April 25 (Reuters) - An initiative to offer an instant payments service in Europe from the end of 2023 said on Tuesday it has acquired two payment firms and obtained the backing of more banks after scaling back ambitions to take on U.S. payments giants Visa and Mastercard.

The European Payments Initiative (EPI) said it planned to acquire Dutch payments scheme Currence iDEAL, and PQI, a Luxembourg-based payment solutions provider that services iDEAL.

 
FRANKFURT, April 24 (Reuters) - The European Central Bank could inject cash into the banking system if the introduction of a digital euro were to cause an outflow of deposits, ECB board member Fabio Panetta said on Monday.

Ahead of the ECB's decision about developing a digital euro in October, European banking lobbies have warned that a central bank-backed currency could take deposits and business away from commercial lenders.

 
In March, UK inflation continued to hover in the double-digit range as households grappled with the persistently high cost of living. Among the various expenses challenging British consumers' wallets, the price of an English breakfast has notably soared.

Economic data from the Office for National Statistics showed the consumer price index last month rose by an annual 10.1%, above a consensus forecast of 9.8%. This is a slight dip from 10.4% in February and still at four-decade highs.

 

Joint gas purchasing: AggregateEU mechanism to increase energy security for Europe​

25 April 2023
by eub2 -- last modified 25 April 2023

The European Commission launched on 25 April 2023 a first-of-a-kind process for European companies to register their gas purchase needs via the AggregateEU mechanism, to prepare for the joint purchasing of gas at EU level.

1. What is AggregateEU and how is it linked to the EU Energy Platform?​

AggregateEU is the new EU mechanism enabling demand aggregation and joint gas purchasing at the European level. It was set up following the adoption of Council Regulation (EU) 2022/2576 (the so-called "Solidarity Regulation") which introduced EU-level gas demand aggregation and joint purchasing for the first time.

This piece of legislation was proposed by the Commission on 18 October 2022, agreed by Energy Ministers on 24 November, and formally adopted on 19 December as part of the EU's toolkit to tackle the energy crisis. The Regulation obliges Member States to aggregate demand for volumes of gas equivalent to at least 15% of their respective storage filling obligations.

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LONDON/DUBLIN, May 4 (Reuters) - European savers are pulling more of their money from banks, looking for a better deal as lenders resist paying up to hold on to deposits some feel they can currently live without.

The trend emerged as some of the region's biggest lenders outlined a profitable start to the year in results that also offered a glimpse of a phenomenon dubbed a "bank walk" - a slow but notable outflow of customer cash.

 
So the EU is starting to face the same banking stress hurting regional banks in the USA. Hopefully the have better balance sheets/liquidity than their American counterparts.
 
LONDON, May 10 (Reuters) - Britain must not get left behind in rapid financial innovation and it was getting closer to deciding "when, rather than if" it would issue a digital version of sterling, its financial services minister said on Wednesday.

The finance ministry and Bank of England launched a public consultation in February on preparing the ground for a possible digital pound that was likely to enter into circulation in the second half of this decade.

 
From the link:

British lawmakers launched an investigation on Friday into the fairness of the country's food supply chain, seeking to understand why households are facing the highest levels of food price inflation since the 1970s, reported Reuters.

The cross-party Environment, Food and Rural Affairs (EFRA) Committee of the House of Commons, the lower chamber of parliament, said it would examine how profits and risks are shared from "farm to fork", and the level of regulation.

It will also examine the impact of external factors on the supply chain, such as imported food and global commodity prices.

 

 
Eleven years on, bilateral cooperation has progressed, particularly under the BRI, which has boosted trade, revived growth and sparked new possibilities across the CEECs and beyond through increased connectivity and cooperation.

BEIJING -- China and Central and Eastern European Countries (CEECs) have just concluded a key trade and commerce expo in Ningbo, east China, unleashing new potential for practical cooperation and deeper ties.

This year marks the beginning of the second decade of China-CEEC cooperation. Since 2012, China's trade with CEECs has grown at an average annual rate of 8.1 percent, and China's imports from CEECs have increased at an average rate of 9.2 percent annually. In the first quarter of this year, two-way trade totaled 33.3 billion U.S. dollars, up 1.6 percent yearly.

 
Car manufacturers are attempting to push back against the EU-UK Trade and Cooperation Agreement (TCA) which would require at least 45% local-content for electric cars, and 60% for batteries, from 2024.

The TCA, agreed between the European Commission and then-UK prime minister Boris Johnson, is part of an effort to encourage carmakers to re-shore battery production and supply chains closer to home, stimulating competitive production within Europe.

 

US Treasuries Blacklisted by German State as ESG Law Takes Hold​

For an illustration of how wildly different the debate around ESG is in Europe and the US, look no further than the German state of Baden-Württemberg.

One of the richest regions in Europe’s biggest economy, and the home of Mercedes-Benz Group AG as well as Robert Bosch GmbH, adopted a law this year that puts investing sustainably on par with more traditional criteria such as profitability and liquidity. It’s a decision that may affect as much as a fifth of the state’s €17 billion ($18 billion) of holdings, as it pivots away from ESG laggards.

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A 25bp rate hike looks like a done deal for next week’s European Central Bank meeting. However, with growth disappointing, the economic outlook getting gloomier and inflation dropping, arguments for several more rate hikes are becoming weaker. That said, the ECB is likely to ignore this

 
From the link:

PARIS (Reuters) - French Finance Minister Bruno Le Maire said last week he had secured a pledge from 75 top food companies to cut prices on hundreds of products next month to reflect a fall in raw material costs.

Supply disruptions exacerbated by Russia's invasion of Ukraine last year boosted commodity costs and fuelled a global surge in inflation. But food prices have continued to climb in France and many other countries even after energy and agricultural commodity costs fell sharply.

 
  • ECB to raise rates for 8th straight time
  • Seen leaving door open to more hikes
  • Forecast to show lower inflation in 2024
 
...
While markets widely expected Thursday's decision, investors argue that a lot of uncertainty remains about what the ECB might do beyond the summer.

"The Governing Council's future decisions will ensure that the key ECB interest rates will be brought to levels sufficiently restrictive to achieve a timely return of inflation to the 2% medium-term target and will be kept at those levels for as long as necessary," the ECB said in a statement.

Despite the recent cooling in inflation, the ECB actually raised its headline and core expectations for this and next year. It now expects headline inflation at 5.4% this year, at 3% in 2024 and at 2.2% in 2025.
...


So, reading between the lines, the ECB plans to continue raising rates for at least the next year to year and a half.
 
FRANKFURT, June 19 (Reuters) - The European Central Bank should err on the side of further interest rate hikes as inflation could come in even higher than it expects, two ECB policymakers said on Monday, even as the bank's chief economist opened the door to a pause.

The ECB has raised rates by a combined four percentage points over the past year to stem a historic surge in inflation and said it would likely increase them again in July after its new forecasts put price growth above its 2% target through 2025.

"We need to remain highly data-dependent and err on the side of doing too much rather than too little," ECB board member Isabel Schnabel, an outspoken conservative, or "hawk," said in a speech.

 
  • Minimum wage to rise to 12.41 euros in 2024, 12.82 in 2025
  • Increase comes on top of 15% raise last year
  • Minimum Wage Commission shows divisions for the first time
 
SINTRA, Portugal, June 27 (Reuters) - European Central Bank policymakers don't generally expect evidence that stubborn inflation is easing to be clear enough for them to pause the longest streak of interest rate hikes in the ECB's history this summer, sources told Reuters.

Conversations with seven rate-setters at the ECB's annual forum in Sintra, Portugal, showed most expected to increase borrowing costs again at both its July and September meetings despite signs the euro zone economy is flagging.

 
LONDON, June 28 (Reuters) - UK law can accommodate crypto assets by creating a new category of personal property that would include digital assets, independent body the Law Commission said on Wednesday.

In a report commissioned by the government, the Law Commission said digital assets such as cryptocurrencies and non-fungible tokens (NFTs) do not fit within the traditional categories of personal property.

As expected, the Commission proposed adding a third category of "digital objects" to the existing categories of personal property, which are "things in possession" (tangible assets like gold) and "things in action" (such as debt or shares in a company).

 

Banking sector: Provisional agreement reached on the implementation of Basel III reforms​

The EU is about to boost the resilience of banks operating in the Union and strengthen their supervision and risk management by finalising the implementation of the globally agreed Basel III regulatory reforms. Today, negotiators from the Council presidency and the European Parliament reached a provisional agreement on amendments to the Capital Requirements Regulation and the Capital Requirements Directive.

Read the rest:

 
So they agreed how they plan to implement/comply with Basel III. There was no change to the Basel III itself.
 
Climate change, maritime & supply chain issues..............

The Rhine River, a vital lifeline of transportation and trade in Europe, is currently grappling with the pressing challenge of falling water levels.

Barge transports passing through the measuring point at "Kaub" are particularly impacted due to draft restrictions, and there is a looming possibility of other locations facing similar consequences in the near future.

At Container xChange, we are closely monitoring the situation and its impact on the shipping industry, particularly in northern and central areas where the river has become too shallow to accommodate fully loaded containerships at the choke point of Kaub and around Cologne and Duisburg.

 
European Central Bank President Christine Lagarde said Friday the bank will not “stand idly by” if there is a simultaneous increase in profits and wages given persistently high inflation in the region.

The euro zone has been battling high inflation for around a year given firstly, record-high energy costs, and more recently, soaring food prices.

 
Corporate profits have been the biggest contributor to inflation in Europe since 2021.

This is according to a study published by the International Monetary Fund (IMF).

Rising corporate profits account for almost half the increase in Europe’s inflation over the past two years as companies increased prices by more than spiking costs of imported energy”, wrote IMF economists this June.

 
According to the Spanish think tank, the Elcano Royal Institute, China controls some 37 per cent of global rare earth reserves, which increases its geopolitical power. While these minerals are not mined in China, they are shipped there for processing and are fundamental for producing batteries, wind turbines and solar panels.

Chinese-made electric vehicles are in growing demand on the European continent. In November 2022 alone, exports of Chinese-made EVs to Europe were valued at €2.85 billion.

While the majority of these exports consisted of parts and vehicles designed by European automakers, they were all manufactured in China. Audit and assurance giant PwC estimates that up to 800,000 Chinese-built cars could be exported to Europe by 2025.

 
Processing rare earths is environmentally problematic. That's why the world lets China do it. They are poisoning themselves for the sake of market dominence.
 
Originally posted on Fortune

In panic mode after ruble plunges below a penny, Russia rescues Vladimir Putin from humiliating currency collapse with emergency hike​


Not even Fed chair Jay Powell can be accused of ever moving that far this fast.

In an emergency meeting on Tuesday, Russia's central bank governing board decided to increase interest rates by 3.5 percentage points, reaching 12%. This action aims to prop up the ruble, which has been significantly impacted by Western sanctions in response to the conflict in Ukraine.

“This decision is aimed at limiting price stability risk,” it said in a statement, justifying its second hike in less than a month by citing “substantial” upside risks to inflation from the collapsing currency.

Just four days prior, a deputy governor had dismissed concerns around the exchange rate in comments to the state news agency TASS.

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