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IMF Global Financial Stability Report - September 2011: Europe bank's exposure to the eurozone debt crisis increased to €300bn

 

Europe bank's exposure to the eurozone debt crisis has increased to €300bn (£263bn).

Cumulative spillovers from high spread euro area sovereigns to the EU banking system - 300 bn euros

The epicenter of sovereign risk has been Greece, which generated the first of four waves of spillover to European banks. The analysis suggests that, first, spillovers on European bank exposures to the Greek sovereign have amounted to almost €60 billion (Figure 1.17). Second, as sovereign risks spread to other governments, the spillovers to banks have mounted. If the sovereign stresses in Ireland and Portugal are included, the total spillover rises to €80 billion. Third, the governments in Belgium, Italy, and Spain have also come under market pressure; incorporating credit risks from these sovereigns into the analysis further raises the total estimated spillover, to about €200 billion. Fourth, bank asset prices in the high-spread euro area have fallen in concert with sovereign stresses, leading to a rise in the credit risk of interbank exposures; including those exposures increases the total estimated spillover to €300 billion overall. Although these numbers are based on market assessments of credit risk, which may reflect a degree of overshooting, the underlying problems that they highlight are real.

The ECB's crisis response and government-bond purchases have sparked opposition in Germany

A sequence model of German / ECB relations 2010 thru 2011 from the WSJ

 

EU Economic Governance: Lunatix 2

updated for the bank holiday and rentree coincidence August 2011,

porto man

 

 

Lunatix Two: A European Stabilisation Bank & the Dysfunctional European Commission Economic Policy development process

 

 

 

A EUROPEAN MONETARY FUND MORPHED OUT OF THE EFSF

A set of references to the nascent European Monetary Fund are below

(but we @ asymptotix think that we thought of it 1st) - see the link to the ESB proposal below

UL icons asymptotix 2

 

FT LEXICON

"European Monetary Fund"

$229 Billion in New Greek Aid

EU leaders look to expanded bailout fund to stave off crisis

European debt crisis: As it happened

Sarkozy's take on debt crisis

That eurozone summit draft - annotated

Eurozone debt crisis summit: as it happened

 

A EUROPEAN MONETARY FUND [EMF] = the ESB (EUROPEAN STABILISATION BANK) CONCEPT

 

Let me summarise what is going on here on this page, above is the Euro Summit of summer 2011; Merkozy-sphere; Van Rompuy & Barosso are the puppets; here is how the process works; Lunatix2 ; the EMF or ESB idea is progressing through the DYSFUNCTIONAL GROUNDHOG SUMMITRY of the 2010 - 2012 period, announcements at 5am - thing! The initial partial proposal of summer 2010 is below with an explanation [allegedly] of why that proposal was so over complex and half baked & some links to further contempraneous analysis. The summits of 2012 are opaque to say the least; we still have van Rompuy the Harlequin announcing 'peace with honour' but we don not have a solution which remains credible and stable in terms of the markets for longer that 48 hours; see Lunatix3 . We are watching a Darwinian inevitability proceed at the pace of a car crash; guided by Lunatix, with Hidden Agendas; in the end the solution is inevitable, an EMF or ESB in all but name & with a banking license. It looks as complex as a modern ballet, that is the way they like it in Brussels; the process has become publicly narcissistic; it has gone too far, the politicians (elected & unelected) are loosing their audience. Now it looks as though in the end the Germans will have to pay;-

ECB - Lorenzo Bini Smaghi: Private sector involvement: From (good) theory to (bad) practice

Speech by Lorenzo Bini Smaghi, Member of the Executive Board of the ECB,
at the Reinventing Bretton Woods Committee
Berlin, 6 June 2011

The title of this first session of the conference is: “Policy responses within countries and inside the eurozone since 2010: an appraisal”. The topic is very broad and I cannot cover it in such a short time span unless I am selective and focus on some specific issues.

Euro-Zone Ministers Stall on Bailout Details

Euro-zone finance ministers reached no agreement Monday on precisely how the bloc's 17 members will share the burden of enlarging bailout funds, and put off discussions until next week.

But despite the unresolved details, markets reacted warmly to Saturday morning's announcement of a pact to expand the euro zone's current bailout capacity. In trading Monday, the prices of Spanish, Portuguese and Greek bonds jumped, bringing down their interest rates and reflecting improved investor confidence.

Europe Has to Stop Appearing Like a Headless Chicken - German views

The good news is that Portugal and Spain have both held successful bond sales this week. The bad news is that the European Commission and euro-zone leaders appear hopelessly divided on the size of the euro-zone rescue fund. German papers on Thursday decry the continuing lack of unity in the midst of the debt crisis.

There was a small glimmer of hope amidst Europe's economic gloom this week as first Portugal and then Spain managed to sell bonds at lower than expected interest rates. Yet uncertainty over the extent of the euro zone's debt crisis and division within the currency union's leadership about how to address it means that investors are still nervous.

EU in talks for a 1.5 tn euro crisis fund: Belgium

 

The European Union is in talks to double the eurozone debt crisis fund to 1.5 trillion euros (two trillion dollars), Belgian Finance Minister Didier Reynders told AFP on Thursday.

"I think that doubling the resources would be a reasonable objective,"

Reynders said in a telephone interview, adding that talks were ongoing.

"It must be noted that this does not mean taking money out of our budgets, these are guarantees that we are giving," he said.

 

How euro bonds would work

Help from above: European countries with debt problems currently have to pay high interest rates on the government bonds they issue. In order to avert the threat of sovereign debt defaults, Jean Claude Juncker, the chairman of the euro group, has proposed the introduction of EU bonds.

European Stability Bank - Take 2 - Asymptotix analysis ahead of the EU summit tomorrow

It will be interesting to see how this European summit on rescue funds and euro bonds pans out John and I have had another one of my logic stream thought processes late in the night as to how to deal with the Euro zone mess far more effectively and permanently than currently is proposed anywhere.

To keep you up-to-date with our position in this field I recommend you also read:

http://www.asymptotix.eu/content/lunatix-are-grass-new-bretton-woods-proposition-europe-now and

http://www.asymptotix.eu/content/european-stabilisation-bank-proposal-asymptotix

Given the differences between the 750 billion fund (less the Ireland bailout costs of course) and the doubling to 1,500 billion proposed by the IMF and the utter rejection of this by Merkel and Zarkozy who cant afford it despite the crowing from Deutschland to mask the reality of their exposure to sovereign debt and debt to gdp ratio and the peripheral exposure of a number of their banks to PD and sovereign default as recently mentioned, it will be interesting to see what is finally decided.

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