Archive for European Crisis

What is going on?

Looking at the status of the G20 economies, one might say nothing works. Keynesianism taken extreme has led to negative interest rates, moderate unemployment and no growth. Neo-liberalism generated uncontrolled banks, opinionated leadership and polarization of welfare. Trickle down economics do not work at all, especially if we look at the African or the Latam economics. Even the Chinese market-oriented communism is crumbling here and there. So now what?

European Bank’s Shares Shattered or Under-valued?

The last few days saw the European bank’s shares substantially going down. Deutsche’s Bank shares went down from around 25 EUR/share in December 2015 to 13,68 today (Feb 12th, 2016). Other German banks suffered also losses of 10-20% on their share prices, whilst French and Italian ones did not fare very well too. Most of the hit banks were from the invesmtent banking sector – but the traditional commercial ones have not been spared too. Unicredit, the biggest Italian bank, has seen a similar fate too (down from 6 EUR/share to 3).
This downfall share price trend is ggetting super-serious for the bank sector itself, badly hurt by multiple factors. Amid most concerns are the (relatively) capitalization rules, which requires the banks to maintain a higher capital-to-loans ratio – and most of these mammoths have failed on the stress tests. Of course, this is a measure of efficiency – and most of the investment banks are trying hard to keep as low a ratio as possible, since this means for them doing business with other’s (mostly central banks) money/funds. A nice business model indeed for the banks, who have become mostly asset managers, rather than loan-making machines. Read more

What Is The Perfect Profile Of A Central East And East Europe CFO?

Recently I was browsing a few articles on the CFO job in Central East and East Europe. Actually quite interesting readings, even if you are not a boring finance professional trying to make his/her way to the top. Whilst reading them, I had two major surprises:
– The articles on the topic were few and far in between, and quite old (we are in 2014, they were from 2007-2010, when probably the enthusiasm and the PR needed to recruit high-caliber professionals for CFO jobs were substantially higher);
– Surprise to surprise – despite their aging, the CFO blogs had some interesting insights which are still valid so far.
What were the key findings of these headhunter blogs related to the ideal CFO?:
– CFO’s in CEE need to have superior technical finance knowledge, especially related to the complexity of accounting standards, fiscal requirements, M&A’s and financial analysis (the Western Europe CFO’s who deal with much fewer and more developed countries need paradoxically less of such technical skills);
– Communication skills are highly priced in CEE for the senior financial leaders of the companies; Read more

Next Financial Crisis

I was reading these days several articles in the financial press. All is so quiet… dangerosuly quiet. Wall Street Journal, Financial Times, LA Times, Forbers etc they are all silent about what the banks are doing or what other financila insitutions are up to. To me, this means only trouble brewing.
Economic data for US looks slightly promissing and the real estate market is slowly growing. Not an accelerated pace (foreclosures in US declined to 650,000 in August, down from 1 million 1 year ago and 3 million 5 years ago), but still… EU is stalling, with Germany and France almost to a halt (industrial production -0.1% to LY, first time in recent history when Germany stumbles a bit). Usually US profits from these moves.
So what next? Read more

Eurozone Crisis – Cyprus Now, Malta and Luxembourg Next?

Finally everybody had a sigh of relief when Cyprus announced the bailout plan. Painful as it might be for the above-100,000 EUR depositors, it is still a sign that the European Union wants to stay united and is decided to do whatever it takes for this.

But what about the other fiscal paradises which are its members? Are they really worth rescuing? After all, Cyprus proved a valuable point – that even the small countries have their own role in the European financial ecosystem. They act not only as depositors for outside EU countries, but also as gates of entry for investors who want a low-tax route to Europe. From this perspective, EU is wise. Cyprus might not be huge, but still worth keeping for security and taxation reasons…

Eurozone Crisis Update – France’s Suffering is Good for Shares

As they say, one man’s plight is another joy. Recently Moody downgraded France to Aa1, on concerns that the public deficit of 90% of GDP might slow growth considerably. My first reaction was – “What growth?”. In France, this is a long term discussion, yet there is no end in sight – neither is there a program for sustained growth in this country.
As a consequence, most French companies are now eying major cost reductions. It is well known that France lags behind the other major Eurozone economies in terms of productivity – the 35 hour workweek, together with the increased power of unions for sure cannot help here.
As said, this was good for shares. Global European Indices went up – “the FTSE Eurofirst 300, which had its biggest one-day gain for 10 weeks on Monday, recouped most of its early losses and was down 0.1 per cent at 1,089.71.” (quoted from Financial Times). This is only natural – if government bonds are not longer trustworthy, it means that money will flow to other investment vehicles, the most in hand being shares. Companies are also much more likely to reduce costs than the socialist Hollande government, which now faces more and more tough demands from both its electors and from the companies, all in suffering. And by the way, Moody’s threatened it can downgrade further France’s investment rating, if it fails to implement reforms.

Eurozone Crisis – Greece Relieved with a 5 Billion Loan

Good news hit the markets as fast as bad news and this is what happened with the recent announcement that Greece managed to secure another EUR 5 billion loan these days via a public auction. Not great, but critical news were these. Without the new bonds issue, Greece would have defaulted the next week’s repayments.
Unfortunately, the story is far from over. The Eurozone decision makers have failed to reach an agreement on how to tackle Greece’s huge debt. Some minister’s proposal to cap the public debt at 120% of the country’s GDP was strongly opposed by other countries (mostly the Nordics), especially because this would mean a haircut on the loans. Borrowers never want to lose money. Read more