The financial turmoil still dogging Europe is most often described as a debt crisis. But sovereign debt is only part of the problem, according to new research from Jay Shambaugh, economist at Georgetown’s McDonough School of Business. The other two prongs of what he describes as three coexisting crises are the region’s troubled banks and the prospect of an imminent recession.
The euro zone economy looks to have contracted at a faster pace in March, according to the latest purchasing managers’ data, hours after ECB President Mario Draghi declared the worst of the debt crisis to be over. A mild recession appears to be in prospect with the probable exception of Germany.
There’s a sense of relief among European policymakers that the worst of the euro zone’s crisis appears to have passed. Olli Rehn, the EU’s top economic officials, talked this week of a “turning of the tide in the coming months”. Mario Draghi, the president of the European Central Bank, speaks of “sizeable progress” and “a reassuring picture”.
There was a time when 500 billion euros in cash was truly spectacular.
But investors and speculators hoping for an even more eye-popping cash injection at the European Central Bank’s second and most likely last three-year money operation on Wednesday are likely to be disappointed, based on past Reuters polls of expectations.
from Mike Dolan:
Just one look at the whoosh higher in global markets in January and you'd be forgiven smug faith in the hoary old market adage of "Don't fight the Fed" -- or to update the phrase less pithily for the modern, globalised marketplace: "Don't fight the world's central banks". (or "Don't Battle the Banks", maybe?)
The words “European bailout” normally conjure up images of inefficient public sectors, bloated pensions, corrupt governments. But market analyst John Hussman, in a recent research note cited here by Barry Ritholtz, says the reality is a bit more complicated:
By Robert-Jan Bartunek and Robin Emmott
French statesman Charles De Gaulle once famously said “Treaties are like roses and young girls — they last while they last.” Germany seems to have decided that the European Union’s Lisbon Treaty, which only entered into force after a fair amount of upheaval in December 2009, has lost its perfumes and must be reworked to ensure the euro zone’s debt crisis can never be repeated.