The Euro and Commodity Prices, Der Euro und die Rohstoffpreise

Great Graphic: The Euro and Commodity Prices Der Euro und die Rohstoffpreise
This Great Graphic, constructed on Bloomberg, shows the CRB Index (white line) and the euro (yellow line) over the past six month.  It is not meant to imply a causal relationship; as in weaker commodity prices cause the euro to fall.   Diese Grafik, entwickelt auf Bloomberg zeigt den CRB Rohstoffindex (weiße Linie) und dem Euro (gelbe Linie) der letzten sechs Monate.
What we are interested in here is the news today that while the preliminary August euro area headline inflation ticked lower, the core rate actually rose.  In our discussions of the lowflation in the euro area, we have emphasized a three considerations.   Wir sind hier in die heutigen Nachrichten interessiert dass die vorläufige Inflationsrate im August in der Eurozone niedriger tickt, während die Kernrate eigentlich stieg. In unseren Diskussionen über lowflation in der Euro Zone haben wir drei drei Faktoren hervorgehoben.
First, we argued that the disinflation/deflation in the periphery was the actually a sign that the system (monetary union) monetary union was working.  This can be understood as tantamount to an internal devaluation.  This is the alternative to the external devaluation that so many economists called for when they argued Greece, or Cyprus, or Portugal or Italy, or Spain should exit the EMU, devalue, and perhaps, re-join.   Als ersten Punkt argumentierten wir dass Inflation/Deflation am Rand ein Zeichen wäre, dass das System Währungsunion funktionieren würde. Dies kann auch gleichbedeutend mit einer internen Entwertung verstanden werden. Dies ist die Alternative zur externen Entwertung die so viele Volkswirtschaftler forderten und argumentierten dass Griechenland, Zypern, Portugal, Italien oder Spanien die EWU verlassen, entwerten und vielleicht wieder eintreten sollten.


different causes.many causes.similar effects.

Sprache erkennen » Hungarian

Greece. report. 10/21/2011

Report from the International Monetary Fund (IMF), European Central Bank (ECB) and European Commission.

Interne Begutachtung der Situation in Griechenland durch Internationalen Währungsfonds (IWF),  Europäische Zentralbank (EZB) und Europäische Kommission.

Recent developments call for a reassessment of the assumptions used for the debt
sustainability analysis.

To give the debt sustainability analysis a firmer foundation, the following set of
more likely policy and macroeconomic outcomes has been assumed

A slower recovery.

Lower privatization proceeds.

Reduced fiscal adjustment needs.

Delayed access to market financing.

Under these assumptions, Greece’s debt peaks at very high levels and would
decline at a very slow rate pointing to the need for further debt relief to ensure

Stress tests to this revised baseline illuminate further the problem with
sustainability, revealing that the downward debt trajectory would not be robust to
•  All else unchanged, significant shortfalls relative to the revised fiscal and
privatization targets would deteriorate debt dynamics even further:

Lower primary balances.

Shortfalls with privatization receipts.

Permanent growth and interest rates shocks can lead to unsustainable debt

A combined shock—to represent a scenario of strong internal devaluation
enforced by a much deeper recession—would sharply raise debt in the near-

Greece is assumed to return
to the market at spreads falling from 500 bps to 250 bps by 2020


ebrd.2012.forecasts. emerging Europe

Growth in Russia will remain reasonably strong particularly in the run-up to elections in 2012 and output there is expected to grow by 4 per cent in 2011 and by 4.2 per cent in 2012.

The 2012 growth forecast has been downgraded in this region most substantially for Hungary and the Slovak Republic, the two transition countries that are the most exposed to the eurozone.

Southern and eastern Europe is seen growing at 1.7 and 1.6 per cent in 2011 and 2012, respectively, with the 2012 growth rate more than 2 points below the July forecast.

The outlook has worsened the most in this area for Albania, Romania and Serbia, which are heavily exposed to the troubled Greek economy.

Turkey’s growth is expected to slow down significantly to 2.5 per cent as a result of declining capital inflows and credit growth, as well as weakening external demand.

Hungary. banks.loads

Both Standard & Poor’s and Moody’s are due to visit Hungary over the next few weeks, with Fitch due in the next six months, and all the signs point to a downgrade.


Government policies are making investors very uncomfortable. Last month Hungary announced a plan to allow currency-hit mortgage holders to offload some of their losses onto their banks (the central banks estimates Hungarians may owe some €20bn in foreign currency-denominated loans) and SocGen has voiced widely shared concerns that the policy will be extended:

There have been discussions lately that the current foreign-currency offer, which ends on December 30th, could be followed by similar measures in 2012 to further reduce the stock of foreign-currency denominated mortgages. Such measures would yet again put the Hungarian banking sector under scrutiny and increase concerns about the policy making process in Hungary.

French banks. raise Greek debt haircut

October 21, 2011 7:17 pm
French banks urged to raise Greek debt haircut

By FT reporters

The French stock market regulator has advised French banks to take bigger losses on their holdings of Greek government bonds, arguing that the relatively small writedowns announced in recent months were now seen as insufficient.

French banks have more cross-border exposure to Greece than any other country, mainly through subsidiaries owned by Crédit Agricole and Société Générale. BNP Paribas holds the most Greek sovereign bonds among private sector investors, with €4bn of exposure.

Many analysts expect the banks to take a bigger haircut when they report their third-quarter earnings next month. BNP Paribas has already said that a 55 per cent impairment would lead to a provisioning of €1.7bn, on top of the €534m taken at the end of the first half.

less lending

Across Asia, Eastern Europe, Latin America and elsewhere around the world, banks are tightening credit standards and facing an increase in bad loans, according to the survey to be released Friday by the Institute of International Finance, a global association of big banks.

nonperforming loans

In Latin America, … found that the deterioration in conditions had slowed as central banks either slowed their interest-rate increases or started cutting rates.

But banks in the region, as in emerging Europe, still faced an increase in nonperforming loans, an indication of trouble that could weigh on their economies in the coming months.

The number of nonperforming loans declined in Asia and in the Africa/Middle East region, though at a slower pace than in prior months.