We use cookies to help improve and maintain our site. More information.
close

May 29, 2018

Abandon all hope ye who enter the eurozone debate

With political developments in Italy keeping up tension in the financial markets, the German press has taken a look at the various eurozone countries' exposures to Italian debt, public and private. Data from the Bank for International Settlements shows that French banks are by far the most exposed to Italian debt. Whether Germany comes second at a distance, or third after Spain, depends on which data you look at. But what we found most remarkable about the quality of the discussion is the opening paragraph of this story by Frankfurter Allgemeine. Apparently, the reason why Emmanuel Macron has been pressing for a deal on a European deposit insurance scheme by June this year is so that Germany rescues French banks from their Italian exposure. With such a framing in the paper of record of the largest member state, abandon all hope ye who enter the eurozone debate.

According to BIS data quoted by FAZ, French banks' exposure to Italy is over $300m, of which a fifth is Italian government debt. Half of this exposure of is that of BNP Paribas, which owns Banca Nazionale del Lavoro, though its exposure to Italian government debt is only about a third of the total, or €17bn. FAZ takes comfort in the fact that German banks's exposure to Italian government debt - under $40bn - comes third after that of the Spanish banks. But the overall exposure to the whole Italian economy is the second largest. This chart tweeted by Holger Zschaepitz (@Schuldensuehner) illustrates that exposures have come down substantially from the peak around the time of the financial crisis a decade ago, and that German banks are exposed mostly to Italian corporate debt to the extent that their overall exposure to the Italian economy is the second largest after France's.

 

Show Comments Write a Comment

May 29, 2018

Italian political fallout for Macron

Emmanuel Macron made it his mission to relaunch Europe since he was on the presidential campaign trail. Events intruded, and today he seems more isolated than ever in the EU. Within one year he made four important speeches about Europe with the intention to do what he says. Today we know that none of this will happen. For all his talk about power-sharing, he still planned to single-handedly guide Europe. Now he stands empty-handed. 

There are hardly any allies left in Europe to back his agenda. The Germans had their short moment with Martin Schulz' pro-European agenda, but those good intentions went out the window once Martin Schulz left the scene. Germany will eventually come up with some compromise proposal, but it will be far from being called bold. The Italian elections produced a majority for parties that want to pursue a euro exit. And the Italian president's move to appoint a technocratic government pits the EU against a democratic decision, and plays into the hands of those who see Europe as part of the problem and not the solution. Marine Le Pen's tweeted:

"The European Union and the financial markets confiscated democracy once again. What is happening in Italy is a coup d'etat, a robbery of the Italian people by illegitimate institutions. Faced with this denial of democracy, the anger of the peoples grows everywhere in Europe!"

There is no doubt that the Italian case will give Le Pen ammunition for her campaign at home. The question is whether Laurent Wauquiez of Les Républicains will jump on this boat too.

L'Opinion questions how wise it was for Macron to lean so far out of the window on Europe. Did he have to give four speeches on Europe in just one year? Was it necessary to declare war on the European People's Party (EPP), the transmission channel for the German CDU in the European parliament? Was it a good idea to embody the European leadership as he did during his visit to Washington, only to come back empty-handed on the Iranian issue?

Yes, Macron might just be very unlucky, and Europe too, as the cascade of events produced some centrifugal forces that gets us more out of European integration than it pulls us towards it.

Show Comments Write a Comment

May 29, 2018

On the future of EU/Nato relations post-Brexit

Security never used to be part of what we consider our core reservation of eurozone-related issues. But the combination of Donald Trump and Brexit has changed that because it re-opens a set of inter-related issues about the EU’s architecture. The future of the eurozone is an important aspect of this debate, but it is now connected to other institutional reforms. 

Daniel Keohane makes a number of interesting observations about the future of the EU’s complex relationship with Nato after Brexit. For example, would the EU have shown the same degree of solidarity with the UK over the Skripal poisonings if the UK had already left the EU?

EU and Nato have overlapping memberships, with 21 EU members also being members of Nato. There are some areas of formal co-operation between the two bodies - on maritime policing, cyber-defence, strategic communication, and military mobility. But, as Keohane writes, these are small fry.

It is unclear whether Nato would help non-Nato members of the EU if under attack. Keohane believes that Vladimir Putin may be tempted to test the resolve of both institutions if an opportunity were to present itself. Russia’s style of hybrid warfare is best met with a combination of the strengths of both Nato and the EU. 

Brexit poses an existential challenge to that relationship. After Brexit, 80% of Nato’s defence spending will come from non-EU members. EU members will find themselves bypassed by ad-hoc relationships inside Nato or formal bilateral relationships between members. There is a clear danger of a split similar to the one during the Iraq War, with the US and UK on one side and France and Germany on the other.

And, with Trump in the White House, US politics can also no longer be taken for granted:

"It is time that everybody understands that the US youth can’t be expected forever to borrow money not just for student loans...but also to make the wealthy Europeans feel more secure. Unfortunately, even if they do, and their parents accept Social Security/Medicare cuts, and Puerto Rico waits for years to get electricity back, the EU NATO members will never feel protected enough. As civil society to civil society, will Europe ever accept that at one point a US president will look first home?"

Show Comments Write a Comment

This is the public section of the Eurointelligence Professional Briefing, which focuses on the geopolitical aspects of our news coverage. It appears daily at 2pm CET. The full briefing, which appears at 9am CET, is only available to subscribers. Please click here for a free trial, and here for the Eurointelligence home page.

 

Recent News

  • October 29, 2018
  • Why the EEA is no longer a Brexit option
  • Behold the rising superpower: post-catholic Ireland’s European miracle
  • July 27, 2017
  • Löfven's move
  • The nearing end of petrol and diesel engines
  • Why a second referendum in the UK won’t happen, and why it would be wrong
  • April 25, 2016
  • The death of the Grand Coalition
  • Insurrection against TTIP
  • Juppé to benefit from Macron hype
  • On optimal currency areas
  • Why the Artic region could be the next geopolitical troublespot
  • From a currency to a people
  • September 25, 2018
  • Be careful what you wish for - second referendum edition
  • July 10, 2017
  • EU in self-destruction mode
  • The EU's fault lines
  • Fake News and Fake views
  • April 25, 2016
  • The death of the Grand Coalition
  • Insurrection against TTIP
  • Juppé to benefit from Macron hype
  • On optimal currency areas
  • Why the Artic region could be the next geopolitical troublespot
  • From a currency to a people
  • August 20, 2018
  • ... and a subtle shift in EU policies towards both Russia and Turkey
  • Nothing to celebrate about the end of the bailout programme
  • Support for Brexit holding up
  • June 20, 2017
  • How to soften Brexit?
  • The deep roots of Brexit: Thatcher and the Germans
  • April 25, 2016
  • The death of the Grand Coalition
  • Insurrection against TTIP
  • Juppé to benefit from Macron hype
  • On optimal currency areas
  • Why the Artic region could be the next geopolitical troublespot
  • From a currency to a people
  • August 27, 2019
  • Remain’s narrowing pathway
  • Macron's diplomatic masterstroke
  • July 09, 2018
  • German panic about Target2
  • AfD level with SPD
  • How the EU could fail
  • May 31, 2017
  • Getting real in the debate on the euro's future
  • Russia's growing influence in Italy
  • April 25, 2016
  • The death of the Grand Coalition
  • Insurrection against TTIP
  • Juppé to benefit from Macron hype
  • On optimal currency areas
  • Why the Artic region could be the next geopolitical troublespot
  • From a currency to a people
  • June 18, 2019
  • Retaliation threats over drilling
  • May 28, 2018
  • A no-confidence motion that could backfire
  • The political repercussions of a historic referendum in Ireland
  • Why the lack of an international role for the euro matters
  • May 10, 2017
  • PSOE primary campaign in full swing
  • Czech government crisis escalates
  • Backroom dealing on electoral reform in Italy
  • April 25, 2016
  • The death of the Grand Coalition
  • Insurrection against TTIP
  • Juppé to benefit from Macron hype
  • On optimal currency areas
  • Why the Artic region could be the next geopolitical troublespot
  • From a currency to a people
  • April 09, 2019
  • What can go wrong now?
  • April 13, 2018
  • German support for eurozone reform next to zero...
  • ... and no support for France on Syria either
  • A French sermon
  • Why the euro endures
  • April 19, 2017
  • Shadows of money
  • Breppe Grillo vs Eurointelligence
  • April 25, 2016
  • The death of the Grand Coalition
  • Insurrection against TTIP
  • Juppé to benefit from Macron hype
  • On optimal currency areas
  • Why the Artic region could be the next geopolitical troublespot
  • From a currency to a people
  • January 29, 2019
  • What comes after plan B fails? Plan C, of course. C for cliff-edge
  • Gilets jaunes, how to structure a movement in free flow?
  • European Court of Auditors criticises Juncker’s investment fund
  • February 26, 2018
  • Angela Merkel's cabinet
  • March 27, 2017
  • Governing formation troubles - Northern Ireland edition
  • Did Trump present Merkel with a bill for Nato?
  • April 25, 2016
  • The death of the Grand Coalition
  • Insurrection against TTIP
  • Juppé to benefit from Macron hype
  • On optimal currency areas
  • Why the Artic region could be the next geopolitical troublespot
  • From a currency to a people
  • November 13, 2018
  • Peak Salvini?
  • Protest uberisation
  • January 05, 2018
  • Catalonia's government by Skype
  • The case for EEA membership
  • February 28, 2017
  • Is Hamon losing the right wing of his party?
  • Something we just don’t understand
  • Solve the problem
  • April 25, 2016
  • The death of the Grand Coalition
  • Insurrection against TTIP
  • Juppé to benefit from Macron hype
  • On optimal currency areas
  • Why the Artic region could be the next geopolitical troublespot
  • From a currency to a people
  • May 31, 2019
  • Salvini’s frightening strength
  • The significance of Corbyn’s latest flipflop on the referendum
  • August 20, 2018
  • ... and a subtle shift in EU policies towards both Russia and Turkey
  • Nothing to celebrate about the end of the bailout programme
  • Support for Brexit holding up
  • November 09, 2017
  • From street protests to road closures
  • What Russia wants
  • January 31, 2017
  • Project fear against Italexit
  • On how not to frustrate Brexit
  • April 25, 2016
  • The death of the Grand Coalition
  • Insurrection against TTIP
  • Juppé to benefit from Macron hype
  • On optimal currency areas
  • Why the Artic region could be the next geopolitical troublespot
  • From a currency to a people
  • February 07, 2019
  • Forget Tusk - the real action is elsewhere
  • On David Malpass and the Trump legacy
  • May 28, 2018
  • A no-confidence motion that could backfire
  • The political repercussions of a historic referendum in Ireland
  • Why the lack of an international role for the euro matters
  • September 15, 2017
  • Juncker dragged into the Catalan fray
  • What to say in Florence
  • How to fill the gap left by the British MEPs
  • January 05, 2017
  • French Socialist primaries - old wine in new bottles
  • Le Pen's hard ecu
  • Will Tusk get a second mandate?
  • Themes of 2017
  • April 25, 2016
  • The death of the Grand Coalition
  • Insurrection against TTIP
  • Juppé to benefit from Macron hype
  • On optimal currency areas
  • Why the Artic region could be the next geopolitical troublespot
  • From a currency to a people
  • April 26, 2019
  • How Brexit has given rise to different perceptions of reality
  • The EP, not Madrid, will boost Spanish clout
  • How realistic is a Gaullist Europe?
  • September 17, 2018
  • About the new partnership between Russia and China
  • EU ponders Irish backstop protocol to help May
  • February 07, 2018
  • A short note on bitcoin
  • July 04, 2017
  • On the CDU’s programme
  • Macron defines his presidential style
  • Why do we criticise modern macro?
  • November 28, 2016
  • And now what Monsieur Fillion?
  • The inescapable logic of an interim agreement
  • On Germany's foreign policy post-Trump
  • How to lose against the populists
  • April 25, 2016
  • The death of the Grand Coalition
  • Insurrection against TTIP
  • Juppé to benefit from Macron hype
  • On optimal currency areas
  • Why the Artic region could be the next geopolitical troublespot
  • From a currency to a people
  • April 01, 2019
  • Meaningful IV
  • Caputová elected: a turning point for central Europe?
  • October 02, 2018
  • Whatever it takes - diesel version
  • Is Macron's European discourse too simplistic?
  • April 06, 2018
  • Schleswig Holstein collapses Spain's strategy against Catalan separatism
  • On the implausibility of conspiracy theories in the Skripal case
  • October 09, 2017
  • UK is starting to prepare for a no-deal Brexit
  • Why Germany will resist meaningful eurozone reform
  • April 12, 2017
  • Macro in a state of denial
  • Where Schulz is vulnerable
  • Schäuble’s three party tricks
  • October 17, 2016
  • Ceta is dead for now
  • L’après-Hollande, c'est Hollande
  • SPD against Russia sanctions
  • Nissan to join customs union and other fanciful tales
  • April 25, 2016
  • The death of the Grand Coalition
  • Insurrection against TTIP
  • Juppé to benefit from Macron hype
  • On optimal currency areas
  • Why the Artic region could be the next geopolitical troublespot
  • From a currency to a people
  • June 18, 2019
  • Retaliation threats over drilling
  • February 04, 2019
  • Watch out for the resurgence in Tory unity
  • The gilets-jaunes' effect on the European elections
  • What did he possibly mean by that?
  • September 27, 2018
  • Two ways out of the Brexit impasse
  • May 22, 2018
  • A €60bn ESM credit line - is this what they call a backstop?
  • Will Nato survive Trump?
  • Northern Ireland's Brexit disillusion
  • Would Corbyn become prime minister if he accepted the single market?
  • January 15, 2018
  • Is the section on Europe for real?
  • Can Drahos upset Zeman?
  • September 11, 2017
  • Turkey issues travel warning for visitors to Germany
  • How nasty is the AfD?
  • May 08, 2017
  • A message of hope
  • Barnier's not so easily agreed Brexit principles
  • The rebirth of the paranoid conspiracy theory
  • January 05, 2017
  • French Socialist primaries - old wine in new bottles
  • Le Pen's hard ecu
  • Will Tusk get a second mandate?
  • Themes of 2017
  • August 24, 2016
  • Towards a hard Brexit
  • Is there a pact of Ventotene?
  • La rentrée
  • April 25, 2016
  • The death of the Grand Coalition
  • Insurrection against TTIP
  • Juppé to benefit from Macron hype
  • On optimal currency areas
  • Why the Artic region could be the next geopolitical troublespot
  • From a currency to a people
  • August 27, 2019
  • Remain’s narrowing pathway
  • Macron's diplomatic masterstroke
  • July 22, 2019
  • Will Johnson go for elections?
  • How will von der Leyen handle the east?
  • June 24, 2019
  • Economic reform has torn up the SPD - climate policy does the same for the CDU/CSU
  • Not intruding, not really
  • May 28, 2019
  • Greens in EP boosted by numbers and national politics
  • May 03, 2019
  • The pro-Brexit message from the local elections
  • Putin's silk road
  • April 08, 2019
  • Welcome to the new Brexit grand coalition
  • Waiting for Macron's next move
  • March 13, 2019
  • Not really all that meaningful
  • Will the EPP merely put Orban on probation?
  • Why AKKs riposte to Macron is deeply disturbing
  • February 18, 2019
  • How the splits on the left and the right will affect Brexit
  • January 25, 2019
  • Is this the beginning of the end of the gilets jaunes?
  • Kurz speculates about longer Brexit delay
  • January 04, 2019
  • Will the AfD become the Dexit party?
  • Romania's corruption problem in the spotlight of its EU presidency
  • December 11, 2018
  • The Brexit process will go down to the wire - all the way into 2019
  • How a German transport strike drives home the consequences of under-investment
  • November 23, 2018
  • Why this deal is very likely to be approved - in the end
  • What to make of the political declaration
  • The EU's spy school is no laughing matter
  • November 05, 2018
  • Macron trails behind Le Pen in European elections poll
  • How the CDU will organise leadership campaign
  • October 18, 2018
  • Disorder, disorder....
  • Tsipras sacrifices Kotzias - but what's the end game?
  • October 02, 2018
  • Whatever it takes - diesel version
  • Is Macron's European discourse too simplistic?
  • September 17, 2018
  • About the new partnership between Russia and China
  • EU ponders Irish backstop protocol to help May
  • September 03, 2018
  • Is the AfD an extremist party? Of course it is. Why do you ask?
  • August 20, 2018
  • ... and a subtle shift in EU policies towards both Russia and Turkey
  • Nothing to celebrate about the end of the bailout programme
  • Support for Brexit holding up
  • July 31, 2018
  • Much ado about nothing - French version
  • Eurozone reform: Purple bonds
  • July 20, 2018
  • Why preparations for no-deal Brexit are a positive development
  • On confirmation bias in the Brexit commentary
  • July 11, 2018
  • Trump is already succeeding in his goal to divide the EU
  • July 02, 2018
  • Is Trump out to destroy both Nato and the EU?
  • Salvini’s empire
  • Remembrance as a way forward?
  • June 25, 2018
  • Trump's car tariff to come early
  • On the lack of a sharp focus in the eurozone debate
  • June 18, 2018
  • Some thoughts on the future of Europe
  • The end of Spanish income moderation?
  • June 13, 2018
  • Macedonia - a deal hailed internationally and challenged at home
  • Macron - elusive to the left
  • What did Theresa May concede?
  • June 08, 2018
  • German car lobby in full panic mode - wants EU to cut car tariffs unilaterally
  • Turkey suspends migrant deal with Greece
  • Is Macron losing the left?
  • June 04, 2018
  • German discourse out of control
  • Wait for European disunity on US tariffs
  • May 31, 2018
  • Hans Werner Sinn demands German euro exit
  • The politics of the SPD’s links to Russia
  • May 30, 2018
  • Italian pro-Europeans repeat UK Remainers' error
  • Commission shakes up structural funds
  • Democracy lessons from the Irish referendum