MacroScope

Spain will auction up to three billion euros of a mixture of debt having enjoyed sharply lower borrowing costs at a T-bill auction earlier in the week. However, with 10-year yields still perilously close to 7 percent, it’s pretty clear that the latest austerity drive by Prime Minister Mariano Rajoy – which will take 65 billion euros out of the economy by the end of 2014 – seems to have achieved little more than settling the bond market slightly.

All the efforts of the past few weeks – the bank bailout, the fresh austerity measures and the leeway on deficit targets from the euro zone – appear aimed at keeping a full Spanish sovereign bailout at bay. But it’s quite possible that all these efforts are actually hastening a full bailout rather than warding it off by driving Spain deeper into recession and cutting state revenues.  That is something the euro zone rescue funds with a maximum of 500 billion euros at their disposal, 100 billion of which is earmarked for Spain’s banks, cannot really afford.
We’ll get the final, firm details of the Spanish bank rescue on Friday.

Secondary markets prices suggest the yields on the two-, five- and seven-year bonds will all rise from the last time these maturities were sold and Spain’s advantage of having front-loaded debt issuance in the first half of the year has evaporated as looser deficit targets agreed with Brussels and Madrid’s commitment to help its debt-laden regions have added more than 20 billion euros to the amount it thought it would have to raise in 2012.

France will auction debt worth a whopping 10 billion euros or more. The difference with Spain could not be more stark. Whether France, given its debt levels and unreformed working practices, should be viewed as “core” is a matter for debate. But it is, at least for now. While Spain has to pay 7 percent to borrow over 10 years, Paris can do so at little over two percent. Germany sold two-year debt at negative yields for the first time yesterday.

 
Ultra-low borrowing costs could be hoped to boost consumption but are a disaster for savers and institutions such as pension funds, so people may have to save even more and spend less to try and avoid an old age in poverty. Ergo, the net effect could be a further drag on economic recovery. The paradox is that further central bank stimulus to ward off a global slump will drive the borrowing costs of “safe havens” yet lower, compounding the problem. So could more QE do more harm than good? That’s a question to ponder since it’s pretty much the only policy lever left to pull.

“I’d be Carrie, I guess, since I like to write,” he told the Finnish newspaper Helsingin Sanomat when asked about which character in the show he most resembles.

In the TV series, the promiscuous Bradshaw searched for true love and its meaning in the contemporary world in her newspaper column.

But while Bradshaw — played by Sarah Jessica Parker — thought her native New York was the centre of world and felt out of place in Paris, Rehn set her straight.  “The world revolves around Mikkeli,” Rehn said, referring to his hometown with a population of 49,000 in southeastern Finland.

In Finland, public service messages have turned to pleading with people to consume more to stave off the recession.

The “Ala ruoki lamaa“, or “Don’t feed the recession”, campaign says being too cautious in consumption is one factor feeding the recession, and it seeks to make people understand the importance of private consumption to the economy.

Posters of a piggy bank equipped with fangs and horns greet travellers on tram stops in Helsinki, and television viewers see spots showing consumers feeding the recession by curbing consumption.

How well is your finance minister doing as the global economy comes tumbling around your ears? Finns, at least, can hold their heads up with pride: Jyrki Katainen (pictured on ice) has topped The Financial Times’ annual rankings of European finance ministers.

Nineteen ministers were judged on their economic performance, political performance and their country’s financial stability. The latter was based on the cost of buying insurance against default on money borrowed by the government, politics on what a panel of economists saw as lucidity, leadership and so on, and economics on a wide range of macro factors. Katainen triumphed primarily on economics with the FT citing a projected healthy budget surplus next year.

Results for the G7 members of the group were mixed. Germany’s Peer Steinbruck came second, despite a poor showing on politics, and France’s Christine Lagarde was seventh. Britain and Italy languished at 14 and 16, respectively, although at least UK Chancellor of the Exchequer Alistair Darling can boast of coming first in politics. Something to do with élan, apparently.