Bundesbank makes total power grab: wants supervision of banking and insurance

 

The Bundesbank now wants total control of the insurance sector, in addition to control over banking, both of which currently rest with the banking regulator Bafin. Under the Bundesbank’s latest proposal Bafin would only retain responsibility for the securities industries. Axel Weber said there would be no conflict of interest between monetary policy and banking supervision. Under the plan, the Bundesbank would not have the power to close down a bank, but would issue a recommendation to the government, FT Deutschland reports.

Poland may after all not ratify Lisbon Treaty soon

This is a hilarious story from EU Observer. A senior aide to President Lech Kaczynski said he will not sign the Lisbon Treaty anytime soon, and wants to use the delay to give the Polish parliament to extract new concessions from Brussels, and to install more co-decision rights for the Polish parliament, on similar line as happened in Germany after the verdict of the country’s Constitutional Court. The aide is also quoted as saying on Polish radio: "Let's squeeze as much as possible out of Brussels." Poland's EU affairs minister Mikolaj Dowgielewicz is quoted as saying that the president would take his constitutional duties more seriously than his aides.

 

US interest rates to remain low for a long time

Australia yesterday became the first of the OECD countries to start the exit from low interest rates, the FT reports, but in the US interest rates will remain low for a long time to come. The Wall Street Journal has some quotes from Bill Dudley, of the NY Fed, who said that the economy has so much slack, and the recovery is expected to be slow, that there is virtually no risk of inflation at least for the next year or two. Dudley said he is far more worried about deflation, as it would only take a small decline from the recent core PCE to get there.

 

 

Euro area service sector out of recession

The purchasing managers survey for the euro area service economy has registered its first expansion since May 2008, another sign that the economy is finally emerging from recession. The index rose from 49.9 to 50.9 in September. The increase was driven by France and Germany, while Spain and Italy lag behind. FT Deutschland also has the latest estimates from the Euroframe consortium of European research institutes according to which Q3 growth will be 1.5%, and Q4 a negative 0.4%.

 

No quick recovery in exports

The Kiel-based Institute for World Economics found that the export industry is not likely to recover to pre-crisis levels, as the financial crisis produced lasting and structural damage to the global supply chains, on which the export business relies. Furthermore, many exporters have closed down operations, and will need to reinvest before re-entering export markets. A further drag on the sector is the continued credit squeeze, FT Deutschland reports.

 

Conflicting views on Europe’s role in the world

Wolfgang Proissl

Writing in FT Deutschland, Wolfgang Proissl says the Treaty of Lisbon fixes a few problems, but it does not address the fundamental issues faced by the EU in the coming decade. The financial crisis has structurally damaged the EU more than other economies, and the shift from G7 to G20 in global economic governance has greatly reduced the European influence. The Treaty had nothing to say about the EU’s external representation, which is a key to assuring Europe’s continued influence.

 

Gideon Rachman

Writing in the FT, Gideon Rachman arrives at a completely different conclusion. He says the Europeans dominate the G20 proceedings, and the whole atmosphere there is eerily reminiscent of a European summit in Brussels. He draws a number of comparisons between the EU’s predecessors and today’s G20, and concludes that this is the beginning of a new global framework for policy coordination, whose effect will become evident only many years later.

 

A two-tier money market

Aurelio Maccario writes in Europe Economonitor about the long-term refinance operation by the ECB in June, as part of which €442bn in new liquidity was provided to the banking sector. A closer analysis suggests that it was mainly small and medium sized banks that participated, which suggests that there are quite a number of market participants in trouble.  The latest main refinancing operation, again at 1%, attracting bids of €67bn, while short-term money market rates are as low as 0.35%. He says that his impression is that a non-negligible part of the banking system is cut-off from market funding.

 

 

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