Portugal in race against time to sort out BES

July 10, 2014

Despite a recent successful rights issue, the Iberian lender is exposed to its troubled major shareholder and has a large exposure to dodgy Angolan loans. Its owners face a difficult refinancing this year. Authorities should demand full transparency and a quick restructuring.

Capital crisis making Italy SpA stronger

July 10, 2014

Italian capitalism is undergoing Darwinian selection. Companies can no longer rely on the state, age-old shareholder pacts or even Mediobanca for capital. Firms are being forced to adapt to the rules of global finance to avoid extinction. The next generation looks fit to prosper.

Euro crisis 2.0 will need a new shock absorber

April 4, 2014

European banks kept yields in check by buying sovereign debt in 2010-13. Now that Basel III rules force losses to be deducted from capital, banks like BPI are shedding their holdings. It unpicks the notorious “doom loop,” but leaves the ECB explicitly on the hook in future.

Cyprus bond swap is good publicity, bad economics

July 2, 2013

The creditor banks of Cyprus “voluntarily” exchanged 1 bln euros worth of sovereign debt at cheap rates. That lowers the bailout bill for the euro zone, but the burden falls unevenly on the country’s banks. Exchanging all creditors’ debt would have been fairer - but messier.

Would the ECB downgrade France?

June 29, 2012

The European Central Bank is toying with using its own credit assessments when taking sovereign collateral. That would mark a big and welcome step in curbing the power of the ratings agencies. But it’s questionable whether it could exercise judgment free from meddling.

Asia’s bonds look shinier as Europe and China slump

May 16, 2012

The region’s robust finances have made its sovereign debt a safe haven as bigger economies stall. An indiscriminate sell-off will affect everyone, but Indonesia, Japan and the Philippines all have qualities that should leave them less hard hit.

Euro zone carry trade has limited shelf life

May 10, 2012

Spanish and Italian banks are still loading up on sovereign bonds with cheap ECB loans. There is room to buy more. But local banks can’t fund Madrid and Rome indefinitely, and with funding markets still dysfunctional, money could run out sooner than expected.

France is capable of wasting a good ratings crisis

January 18, 2012

Paris has been humbled by losing its triple-A. The chastened country will play second fiddle to über-leader Germany in the euro zone. The setback could be seized as an opportunity to address economic weaknesses and poor prospective growth. But not in this world.

Stalling German motor is Europe’s other difficulty

January 17, 2012

Germany the strong? Well, yes, fiscally. It was not downgraded by S&P because its fiscal deficit is just 1 percent of GDP. But German growth has stalled again. It depends too much on exports. The irony is that the EU’s biggest economy can’t propel itself – or the euro zone.

Euro zone’s New Year hopes hit triple downer

January 16, 2012

Standard & Poor’s has stripped France and Austria of their triple-A ratings, and cut Italy to the same level as Ireland. Greek debt talks have broken down. The ECB has criticised the region’s fiscal pact. After a brief lull, Europe’s debt crisis is back with a vengeance.