The European Central Bank is rumored to fail 25 banks in the Eurozone based on a lack of capital and liquidity, according to a leaked draft communique. At the same time, disinflation and weak demand has caused economic growth in the UK to fall 22% sequentially in the third quarter of 2014.
The targeted long-term repo operations had not even been launched when the ECB announced its intention to buy asset-backed securities and covered bonds. It then began to buy covered bonds before the conclusion of the Asset Quality Review and bank stress tests.
The British pound saw the heaviest losses in a year as all European equity indices fell as the looming vote for Scottish independence uncovers a hidden counter-trend to European unionization.
The S&P 500 hit 2,000 in intraday trading Monday morning after mixed results in Asia and a strong rise in European equity markets. Investors and traders are helping stocks rally as European Central Bank President Mario Draghi hints at a looser monetary policy in Europe aimed at targeting deflationary threats in the core of the EU.
Official figures from Brussels are expected to show on Wednesday a return to modest growth in the second quarter, ending a recession that has gripped the eurozone since late 2011.
On Wednesday, official data is expected to show that economic growth among the 17 countries that use the euro climbed 0.2 percent in the quarter.
The International Monetary Fund on Thursday warned that eurozone recovery remains highly elusive and called on its governments to do more to end the region’s crisis, adding that further cuts to interest rates by the European Central Bank may be necessary to boost growth.
Acknowledging that austerity measures across Europe are “painful”, head of International Monetary Fund Christine Lagarde said she hopes that the Fund’s work will one day be appreciated and be judged over the longer term, noting the IMF’s policy success during the Asian crisis in the late 1990s.
In a climate of fierce opposition to austerity measures in Europe, Lagarde said that only time will allow the merits of the International Monetary Fund’s role in the region, where it is engaged in four state bailouts, to be understood.
The European Union on Wednesday agreed to reform the Common Agricultural Policy to favour small farms over big businesses which now stand to lose up to 30 percent of their current subsidies.
Details of Wednesday’s deal have not been disclosed, but under a previous draft agreement member states would have to ensure that by 2019 each farmer receive at least 60 percent of the average national or regional subsidy per hectare.
Migration from countries worst hit by the financial crisis has risen 45 percent from 2009 – 2011, with Southern Europeans in particular fleeing up north to escape recession and record-high unemployment at home, said the Organisation for Economic Cooperation and Development on Thursday.
As monetary policy across the eurozone was made to fit German needs, excess German liquidity – accumulated from years of trade surpluses and policy controls – was easily exported into Spain and other peripheral European countries which all saw their trade deficits expand dramatically. In fact, the subsequent imbalance became so large that it led almost inevitably to the European crisis in which we are today.
