Landesbanken consolidation off the agenda

 

Some bad, but unsurprising news from Germany. The country’s state premiers seemed to have prevailed with their insistence to allow each Landesbank to set up its own “bad bank”, which if agreed by the Grand Coalition would deprive the finance ministry of the quid-pro quo deal they had proposed earlier, under which the seven Landesbanken should be allowed to offload their toxic assets in exchange for future consolidation into one or two institutions. If every state is now able to pursue its own solutions, the pressure for consolidation is off the agenda.

 

Germany’s constitutional court will decide on Lisbon Treaty today

FT Deutschland has a nice portrait/analysis piece on German constitutional justice Udo di Fabio, a known eurosceptic, who is the leading justice in the case brought by a group of parliamentarian against the Lisbon Treaty. The issue is whether the treaty possibly reduces liberties for German citizens in the long run. The article says if the court could declares essential passages anti-constitutional, it would require a new round of negotiations (and probably the death of the project). Alternatively (and more likely in our view), the court could impose  some conditions, which could be inserted as a protocol, and which do not require new negotiations. Di Fabio has already stated publically in a previous hearing that he had deep reservations about this treaty, so that the outcome of the case is genuinely uncertain.

Der Spiegel has a detailed scenario analysis. It says a simple approval is most unlikely, but so is a simple No. The most probable outcome would be a conditional Yes.

 

BIS wants to subject financial products to “prescriptions”

An interesting proposal came from the Bank for International Settlements yesterday, which suggested that the trade in financial products should be regulated similarly to the trade in pharmaceuticals. Certain products should be freely available, other should be limited through an equivalent of a pharmacy, while others again should be outlawed, FT Deutschland reports.

 

Euro area confidence is up

Euro area economic confidence recovered more than expected this month, the FT writes, citing a survey from the European Commission, which reported that its eurozone “economic sentiment indicator” rose 3.1 points to 73.3 in June, the highest since last November. Optimism rose among consumers, in the service sector and to a lesser extent in industry. It was the third consecutive increase from the low reached in March, but the Commission pointed out that the indicator remained below the level reached at the end of the last trough in late 1992.

 

Jury still out on ECB’s repo action

The FT writes that Euro Libor has fallen to new lows after the ECB’s €442bn cash injection last week, but the jury is still out. Most of that money - €236bn – was parked back at the ECB’s deposit facility, which suggests that the banks are hoarding a large part of the funds. It is still not clear whether this new money will ultimately lead to more lending, which is the goal of this exercise.

 

 Why is the oil price rising?

Oil future hit $70pb, the Wall Street Journal noted, but why? It surely is not demand. The International Energy Agency has cut its forecast for world oil demand over the next five years to an an average of 87.9m bpd in 2013, 7% fewer than it expected last July. Oil consumption is forecast to by 3% this year, the sharpest decline in a quarter-century. But if it is not demand, then the reason may be a lot more sinister, the Journal noted. Two possibilities are supply constraints, and speculation.

 

7% fiscal deficit in France

The government expects the French deficit to reach €125bn-€130bn (7% of GDP) in 2009, reports Les Echos. Two third is a consequence of the crisis, says the government note for the Parliamentary budget debate this week. For 2008 the budget is €56.3bn, €14.6bn more than in the initial budget, and €4.8bn more than forecasted last December.

 

Black economy to boost Greek economy

When it comes to raising GDP growth, Greeks become inventive. Kathemerini  recommends the government to use the black economy to stimulate economic growth and reduce the fiscal deficit. In particular the article proposes the government to permitthe purchases of homes without requiring ‘pothen eshes,’ the proof from buyers of where they found the money.  It is said that the underground economy looks for alternatives to stocks, government bonds and other investments. Deposits at banks are growing at a satisfactory single-digit rate, partly due to money from non-reported activities. The article calls on the government to dare such an unorthodox devise because it has no choice.

 

The end of the Arts, Sports and Tourism ministry?

A leaked report from the “cost-cutting committee” headed by the University of Dublin recommends prime minister Brian Cowen to axe 4 minister posts, reports the Irish Independent.  The government is asked to “review” the entire operation of the Department of Arts, Sport and Tourism and the Department of Community, Rural and Gaeltacht Affairs. The article goes on saying if Cowen doesn’t  accept the recommendations, it sends the dangerous signal of lack of courage. Latest statistics show that average weekly earnings in the public sector (excluding health) rose by 3.4% in the 12 months to March despite the worst recession in living memory.

 

 

 

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