Reuters blog archive
Today’s meeting of EU finance ministers will grapple with banking union and next year’s stress tests though with no German government in place, a leap forward is unlikely.
One German official seemed pretty clear yesterday, saying: “We don't want a mutualisation of bank risks.” That, some would argue, takes the union out of banking union and is certainly a very different approach to the one promised last year when EU leaders were scrambling to keep the euro zone together.
Some experts argue that with the European Central Bank pledging to support euro zone governments come what may, the urgency has been taken out of banking union and that next year’s health checks and cross-border supervision under the ECB is going far enough. Any holes in bank balance sheets can comfortably be filled by creditors and governments.
Others say that without a backstop fund underwritten by all euro zone member states as lenders of last resort, the currency bloc is in little better shape to withstand the next banking crisis, whenever that may come (history suggests it surely will). You certainly don’t hear any talk of a mutual deposit guarantee any more, which was billed as the third plank of banking union.
An alarming drop in euro zone inflation – to 0.7 percent from 1.1 percent – throws today’s European Central Bank policy meeting into very sharp relief. Not since the central bank cut interest rates in May has it been under such scrutiny.
No policy change is likely, and “sources familiar” are already talking down the threat of deflation. But the central bankers, who are mandated to target inflation at close to 2 percent, will be alarmed at the sight of price pressures evaporating. One need look no further than Japan to see the damage deflation can do, often for many years.
By Olaf Storbeck
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
Ryanair is well known for the cheapness of its flights. But its shares are expensive and that remains true even after a 12 percent dive on Nov. 4.
Next time you ask an economist a question about the euro zone, be sure to enquire where their head office is based.
London? New York? Expect a pessimistic response on euro zone matters.
Frankfurt? Paris? Happier days are coming soon for the currency union.
So that's oversimplifying matters slightly - but as we've seen time over, institutions based outside the euro zone are likely to be gloomier about its prospects, and those based inside it are more likely to look on the bright side.
The European Central Bank will announce the methodology which will underpin the stress tests of about 130 big European banks next year.
It is caught between the devil and the deep blue sea. Come up with a clean bill of health as previous discredited stress tests did and they will have no credibility. So it is likely to come down on the side of rigour but if in so doing it unearths serious financial gaps, fears about the euro zone would be rekindled and there is as yet no agreement on providing a common backstop for the financial sector.
It’s deadline day for euro zone member states to submit their 2014 budget plans to the European Commission for inspection and we’re waiting on Italy and Ireland.
Having survived Silvio Berlusconi’s attempt to pull the government down, Prime Minister Enrico Letta’s coalition has to overcome differences on tax and spending policy.
The aim is to agree a 2014 budget that reduces labour taxes by some 5 billion euros but also undercuts the EU’s 3 percent of GDP deficit limit, so spending cuts will be required.
Euro zone finance ministers meet today and will have one eye on budgetary matters given a Tuesday deadline for member states to send their draft budgets to the European Commission for inspection, and with protracted German coalition talks keeping other meaningful euro zone reform measures on hold.
Most draft budgets are in but we’re still waiting on Italy and Ireland. Dublin will unveil its programme on deadline day. Italy’s situation is more fluid so we may get something today.
from John Lloyd:
The British Isles are sentries in a turning world. The monarchy, pageantry, the mediaeval House of Lords, titles, accents, the established Church of England with the Queen at its head -- they all give the adroit illusion of continuity and the primacy of tradition over change.
But this summer there are diverse changes modernizing the Isles. These revolutions, small and large, will not be reversed, and will contribute significantly to a redefinition of what it is to be British (and Irish). The illusions of tradition will remain, as diligently served as ever. The core is hollowing out.
How to pull defeat from the jaws of victory in one easy lesson; look no further than Portugal.
After the resignation of both finance and foreign minister last week, Prime Minister Paolo Passos Coelho salvaged things by making the latter – Paulo Portas – his deputy and putting him in charge of dealing with the country’s EU/IMF/ECB lenders.
from Judgement Call:
“It’s not fair,” my younger son would rant when, as a 5-year-old, life did not go his way.