Europe’s debt woes
The parent company of Portugalâs Banco EspĂrito SantoÂ suspendedÂ trading this morning after shares fell 17% (its market value has declined 32% in this week alone). The bank â the countryâs second-largest lender â missed interest payments on some short-term securities to âa few clientsâÂ earlier this week. Things havenât been great for the Portuguese bank since December, when an audit revealed seriousÂ accounting irregularitiesÂ in its parent company.
âLisbon needs to sort out Banco EspĂrito Santo â fast,â sayÂ BreakingviewsâÂ George Hay and Neil Unmack. âThe EspĂrito Santo group has managed to create a national crisis out of a family drama,â they add. Specifically, Portuguese regulators need to keep a closer watch on the bank, which has traditionally been run by the EspĂrito Santo family, and step up to manage the fallout of whatâs already done, âpushing through an orderly restructuring, and making sure it is equitable for creditors,â they write. However, Bloomberg ViewÂ editorsÂ say that âPortugal can’t easily afford to support the bank, should support be needed.â This is a problem, they say, because while recent reforms in Europe were supposed to break the ties between bank finances and sovereigns, it hasnât really happened yet, leaving the Portuguese government on the hook.
The bad news from southern Europe wasnât contained to Portugal today. From theWSJ:
In Spain, a bank and a construction company each called off planned bond sales. In Italy, a drug company pulled its stock offering. In Greece, a government-bond sale came in smaller than expected. And stock markets across the continent fell, along with the euro.
John JansenÂ points out that southern European bond spreads are a lot wider against German bunds than they were a month ago. Toward the core of the eurozone, things arenât great either.Â Sam RoÂ reports that Pantheon Macroeconomics’ Claus Vistesen said today, “we are running out of downbeat adjectives to describe the data in France,â after the news that industrial production is down 3.7% year-over-year.
âItâs âGroundhog Dayâ for those who remember 2011â˛s European debt crisis,â writes BarronâsÂ Brendan Conway. However,Â Simon KennedyÂ at Bloomberg says this definitely isnât a return of the euro crisis. âEven Greece sold bonds today, though at yields higher than some analysts predicted amid the skittishness,â he writes, suggesting that Mario Draghiâs promise that the ECB will do âwhatever it takesâ to save the euro may be keeping the market relatively stable.Â Blonde BankerÂ says itâs just another day in Europe. âHigh debt â both sovereign and personal. High unemployment. Weak economic growth. Deflation… Carry on.â âÂ Shane Ferro
On to todayâs links:
Stuff Weâre Not Linking To
âWhen you marry for money, you work for it every day” -Â Amanda Gordon