Neil's Feed
May 22, 2012
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Direct bank recaps won’t give Spain quick fix

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By Neil Unmack and Fiona Maharg-Bravo

The authors are Reuters Breakingviews columnists. The opinions expressed are their own

If Greece quits the euro, Spain’s banks will be the next weak link in the single currency. Hence, the frantic search for ways to prop them up. One solution, advocated in recent days by France’s president and Ireland’s central bank governor among others, involves the direct injection of capital by a euro zone fund into Spain’s lenders. The appeal is obvious: Spain’s banks would be recapitalised but Madrid’s own debts wouldn’t rise. The country would therefore avoid the fate of Ireland which was dragged down by bailing out its lenders – even though its financial system is proportionately a lot smaller.

May 10, 2012
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Euro zone carry trade has limited shelf life

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By Neil Unmack and Fiona Maharg-Bravo

The authors are Reuters Breakingviews columnists. The opinions expressed are their own.

The carry trade is alive and well in Spain and Italy. Banks are loading up on sovereign debt, thanks to the wave of liquidity from the European Central Bank’s cheap three-year loans. But local lenders can’t fund Madrid and Rome indefinitely, and with markets still dysfunctional, money could run out sooner than expected.

Apr 19, 2012
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Ackman gets closer to permanent capital grail

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By Neil Unmack and Jeffrey Goldfarb
The authors are Reuters Breakingviews columnists. The opinions expressed are their own.

Bill Ackman looks decidedly closer to the holy grail of permanent capital. The founder of activist U.S. hedge fund Pershing Square Capital Management is planning a London-listed vehicle with a market value of at least $4 billion. That would dwarf other public funds, many of which trade at a big discount to net asset value. Ackman’s scale, plus some fee sweeteners, may give him an edge. And his focus on easily priced bets could minimize the NAV problem.

The initial public offering of a new fund, which would invest in Pershing Square’s offshore hedge funds, next year is designed to let Ackman do more of what he does best. The bulk of his 22 percent annualized net return over the last eight years comes from successfully agitating at companies like JCPenney and Fortune Brands. By tapping the market, he wouldn’t need to keep half his assets in cash and other liquid investments, as he does now to accommodate investors who want to exit.

Apr 17, 2012
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Portugal doesn’t require Greek remedy for now

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By Neil Unmack

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Portugal can avoid becoming a new Greece. There’s a strong likelihood that Lisbon won’t be able to fund itself on financial markets in the second half 2013 – contrary to the timetable agreed in the country’s May 2011 bailout plan. Yet when it turns to its euro zone partners for help, there’s a chance Portugal won’t have to force losses on its private creditors, like Greece did. Still, no one can rule out a worsening of the economic outlook that would tip it into Greek territory.

Apr 5, 2012
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Spain reveals holes in Europe’s crisis plan

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By Neil Unmack

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Rising Spanish yields have thrust Europe back into crisis mode. Policymakers thought the European Central Bank’s three-year loans had bought the euro zone some time, but markets are catching up fast.

Apr 5, 2012
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Greece faces new taboo: not defaulting

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By Neil Unmack

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Greece’s debt restructuring has been a total success – almost. A small number of bondholders have rejected the debt swap. The holdouts could drag Athens through international courts. But paying them off would be difficult too.

Mar 26, 2012
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Europe needs to ease on firewall obsession

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By Neil Unmack

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

How big should Europe’s firewall be? Some analysts reckon the euro zone needs as much as two trillion euros, enough to bail out Italy, Spain, and some others if need be. By comparison, the size of the planned 500 billion euros of the European Stabilisation Mechanism (ESM), the euro zone’s permanent bailout mechanism, looks paltry. Unless it includes the unused funds of the European Financial Stability Facility (EFSF), the temporary structure put in place in the wake of the Greek fiasco.

Mar 13, 2012

Austro-Greek blow-up is eyesore for CDS market

(The author is a Reuters Breakingviews columnist. The opinions
expressed are his own)

By Neil Unmack

LONDON, March 13 (Reuters Breakingviews) – It seems not
everyone was ready for a Greek default. Although most investors
have been braced for a hit for well over a year, Austrian lender
KA Finanz announced on March 9 that it will write down up to 1
billion euros of Greek exposure, partly because of losses on
credit default swaps. The loss is largely due to accounting. But
it’s a setback for those hoping an orderly payout would show
credit derivatives in a good light.

Mar 9, 2012
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Euro zone first default gives few reasons to cheer

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By Neil Unmack

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

It could have been worse: that’s the best thing to be said about the Greek debt swap. The euro zone’s first restructuring will not be chaotic. But it has done away with the pretence that a euro zone sovereign’s signature is golden. And Greece will still struggle with a heavy debt load.

Mar 8, 2012
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Greek debt threat won’t trigger Armageddon

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By Neil Unmack

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Athens is threatening not to pay holdouts in its debt swap, dispelling any pretence that the restructuring will be “voluntary”. The sabre-rattling is spooking markets, but an outbreak of minor chaos should help bring stragglers on board. A disorderly default still looks remote.