Category Archives: Economy


Translated from the French by Tim Gupwell.

In the Wall Street Journal today:

Since the beginning of the crisis in 2007, one thing has become clear in European politics: the outgoing parties are not voted back in. Confronted by the incapacity of the governments and the majorities in place to resolve the problems of the moment, the electors – at least, those increasingly few and far between who still go to the trouble of travelling to the urns – vote for the opposition, whoever it may be.

In these conditions, the merry go-round can only make a restricted number of turns before passing to national unity governments, which are really warm-ups for some kind of dictatorship.

The French Government has only just celebrated its first 100 days in power, but it is not too early for it to start thinking about this new trend which is starting to emerge in the European electorates.

“What we need is audacity, more audacity and then yet more audacity!” This is exactly what is needed if we are to get out of the rut we are stuck in; even more so when this rut is merely symptomatic of the immense quagmire that the Eurozone has now become in its entirety.

Nonetheless, the European treaty which France has to ratify in October is anything but audacious. The famous balanced budget offers a false sense of security when things are going well – if indeed this could ever go well again– and it dramatically worsens the situation when things are going badly.

A nation’s expenses are not measured in Gross Domestic Product points; they are measured rather more mundanely by its fiscal receipts. The GDP is a poor yardstick at the best of times since the more it contributes to the destruction of the planet, the better it seems. But that isn’t even the point: in a world where jobs are fast disappearing and where the concentration of capital is scaling new heights due to the excessive manner in which the wealth created is distributed (and which we tolerate) the GDP of nations nowadays are like bodies attacked by a fever, and it seems therefore a very inappropriate moment to use it as a thermometer.

If, since 2007, those leaving power are no longer being re-elected in Europe, it is because they have kept a low profile, gone with the flow, waited for things to sort themselves out. However, unfortunately things won’t sort themselves out any more: the crisis we have endured since 2007 – a crisis stemming from substituting leveraging and easy credit for salary – is within a whisker of being transformed into a full-blown depression. This is what all this is about; this is what needs to be attacked, since there has already been a tremendous delay – five years in fact.

“The means must be commensurate with the gravity of the situation” said Barroso a few years ago. But neither him, nor any of his European colleagues, nor anyone at the head of one of the 17 nations making up the Eurozone, has really understood the true meaning of these words. Those who in the future speak as members of government, or as representatives of the French nation, need to bear these words in mind.

Marching in perfect unison works well for a regiment which is progressing calmly through the countryside, but here there is something else at stake: saving one’s skin as the bombs rain down!


BEHIND THE SCENES, by François Leclerc

Guest post. Translated from the French by Tim Gupwell

There are some sinister goings-on behind the scenes of the European financial system, which are hardly being proclaimed from the rooftops! Even Mario Draghi himself is preoccupied by it, drawing attention to vague manifestations of “fragmentation” which are developing at the heart of the Eurozone. What was he alluding to?

It is occurring in three stages: an ongoing capital flight from countries on the verge of the abyss, leading to their banks becoming increasingly dependent on ECB loans, with the liquidities then supplied by the latter being used to buy state-issued debt, in order, for the time being, to prop up the whole edifice.

The way to put an end to this ultimately destabilizing process would be to renew confidence in the continuity of the Eurozone. This explains the plan to put together a fiscal union, then a banking one, and finally a political union. But all this takes time, and there is precious little of that available. All the more so as the regulators themselves are pushing for a reduction in these financial establishments’ cross-border exposures so as to reduce systemic risk, thus accentuating a process that people are trying to stop elsewhere ….

Continue reading BEHIND THE SCENES, by François Leclerc


Guest post. Translated from the French by Tim Gupwell

As people return from their holidays, the convergence of internal political tensions in Germany, the attempt by the Greek Government to obtain a two year period of grace for its bail-out plan, and the ever-approaching Spanish derailment, have rendered the options for a European rescue even more problematic. An intervention from the ECB in order to make good its declarations and play the role of saviour is anticipated even more keenly; the risk being that it doesn’t go far enough.

Attempts to win over a German government that has dug its heels in have misfired. It is caught in a dilemma and refuses to take the plunge, unable to extricate itself on its own but unwilling to run any further risks. Successive half-hearted European agreements, passed as a matter of urgency as we lurch from one crisis to another, have not solved anything. This is less due to their very limited financial means and more due to the fact that they continue to deny the very nature of the ongoing crisis, which they are unable to check.

Continue reading KNOCKING IT OFF ITS PEDESTAL, by François Leclerc


Translated from the French by Tim Gupwell.

We learned on Tuesday that the fifth largest British bank, Standard Chartered, had promised the New York State regulator that it would pay a fine of 340 million Dollars for illegal transactions with Iran. The matter is not yet closed, as four other American regulatory bodies continue to pursue their enquiries on this subject.

There was a danger that the affair, dating back to last week, would get bogged down, and it had already started to poison relations between British and American financial authorities (to which I alluded in my article on the 12th August: The Goldman Sachs Affair: Corrupted Justice, or an Untouchable Financial Sector? )

What is the cause of this sudden urgency from Standard Chartered? Its image in the eyes of the public!

Similarly, on Tuesday, a Financial Times article informed us that a wide array of banks: the German Deutsche Bank, Commerzbank and the Austrian Volksbanken have stopped selling products to their clients which speculate on food commodities. Not – they chant in unison – because speculation has an impact on prices (“ALL research proves the contrary!”), but because the poorly informed perception of the public leads them to imagine all sorts of underhand goings-on, and this need to be taken into consideration.

Once again: an image problem.

What does all this prove? That ‘poorly-informed’ public opinion is starting to make waves and to have some effect.

I read all this yesterday during the brief pause for Assumption, and it made me want to get up early this morning and talk to you about it: after all, it is not every day that the financial world offers us some crumbs of comfort!!…and in particular that our unceasing efforts to contribute our penny’s worth of malicious gossip to “the badly informed public perception” is at least starting to bear some fruit


Guest post. Translated from the French by Tim Gupwell

The U.S. Federal Reserve’s Open Market Committee is due to meet on Tuesday and Wednesday, in the context of a renewed slow-down in the country’s growth  (+1.5% in the second quarter), which has been apparent since the beginning of the year. What will be decided upon this time?

Two successive quantitative easing operations, nicknamed QE1 and QE2, have enabled the Fed to inject some 2.3 trillion Dollars into the purchase of Treasury bonds or securities issued by mortgage refinancing organizations. In the light of the mixed results of the two previous ones, a third operation of monetary creation has yet to be confirmed.

Continue reading WE ARE EXPECTING THE ECB, BUT WILL WE GET THE FED INSTEAD ?, by François Leclerc


Guest post. Translated from the French by Tim Gupwell

While the parties in the Greek Coalition government are trying to come to an agreement on a plan to make savings of 11.6 billion Euros over the coming two years, which is going to be painful even though they have to present it as a pledge of good faith, the European experts are working on a rescue plan, called the “last chance plan”. They are revisiting the issue from a perspective that has already been tackled. A new write-down of Greek debt is being looked into, which will be easier to sell from a political point of view than more new loans.

This time around, the suspended sentence will not be imposed upon the private banks, but upon the ECB and the central banks of the Eurosystem who had escaped hitherto. Together they hold great quantities of Greek debt securities, purchased in the context of the sovereign debt acquisition programme on the secondary markets. The objective is supposedly to reduce the country’s debt exposure in this way, something that successive governments have failed to achieve in spite of all the austerity measures adopted.

Continue reading LAST CHANCE FOR THE EUROSYSTEM, by François Leclerc


Translated from the French by Tim Gupwel.

A short while ago, I was taking a siesta, sleeping with a sound conscience, when I woke up with a start, my heart beating wildly, my forehead soaked with sweat and prey to a strong emotion: what if we had completely misunderstood the words of Mario Draghi, President of the European Central Bank, the day before yesterday? What if he had actually said something completely different to what we had heard him say?

This is far from impossible: during the period from 1997 – 2006, I conscientiously read every single speech made by Alan Greenspan, who was head of the Fed at the time, and I very often heard him say things of which subsequently not a trace was to be found in the Press, which believed nonetheless that it was conscientiously reporting his remarks. Some examples of this are to be found in my book La crise du capitalisme américain (2007) *

Everyone thought they heard Mario Draghi say on Thursday that the ECB would purchase as much Spanish and Italian debt as necessary to ensure that the lending rates charged by the capital markets returned to a reasonable level.

This is what I believed I had heard myself, and I  droned on in my video yesterday, in unison with the International Press, that Draghi would keep the European money printing press running for as long as necessary.

But this makes no sense, if one bears in mind that Jens Weidmann, the head of the Bundesbank, would never accept such a monetary heresy.

Of course, Weidmann’s predecessor at the head of this venerable institution, Axel Weber had resigned in April 2011 rather than continue suffering from affronts of this kind, and Jürgen Stark, the Chief Economist of the Bundesbank, had also resigned for the same reason, and this in September of last year.

Hence without doubt the reason why I suddenly woke up in a cold sweat: Draghi was not talking about printing money, but about convertibility. He uttered the words, “these premiums are, as I have already said, to do with liquidity issues, but also, and increasingly so, to do with convertibility and with convertibility risk”!

To do with convertibility! Due to the fact that the extraordinary rates charged by the capital markets for Spain and Italy – right up until the moment he pronounced his reassuring words on Thursday – were not due to a risk premium for non-repayment but to a convertibility premium: for the loss that lenders would suffer in the event of a return to the peseta and to the lira!

To forestall this, all Draghi needed to do was to declare ‘we will do everything in our power to save the Euro’, and to convince everyone of what he was affirming by the firmness of his voice. To hell with ECB acquisitions of Italian and Spanish debt! To hell with Jens Weidmann and his monetary orthodoxy! To hell with the German Constitutional Court in Karlsruhe, reflecting on the beaches until September on whether the ESM is constitutional or not!

Nobody had heard what Mario Draghi had actually said: “Trust me: we will never abandon the Euro – and what I am saying here should be enough to make sure the convertibility premium falls back to zero, because there is no way there will be a return to the peseta and the lira, you have my word for it as President of the ECB”

“We will never abandon the Euro!” “We”? Let’s hope these “We”s really know what they are doing! Otherwise the Spanish debt will rapidly shot back over the 7% mark, as soon as everybody realizes that unfortunately these “We”s really didn’t know what they are doing…

* ‘The Crisis of American Capitalism’


Guest post. Translated from the French by Tim Gupwell

Whenever monetary creation, or the famous concept of printing money, is alluded to, the idea of hyperinflation is never far away. Subsequently, reference is made to history to predict a return to these episodes that left such an indelible mark in people’s memories. The conclusion immediately drawn is that the same cause will have the same effect.

However, the crisis we are living through might well lead us to a more nuanced picture. The first thing that needs to be considered is that we are seeing an inflation of financial assets, not of the prices of consumer products. The next remark that needs to be made is that this latter type of inflation has not been seen in the United States, in Japan or in Great Britain, all countries whose central banks have not held back when it comes to monetary creation.

Of course, it can always be countered that it is only a matter of time, and that the next flurry of snow will trigger the avalanche. But is this really a satisfactory argument? Looking at it another way, it seems that the liquidities lavishly distributed by the central banks do not actually trickle down into the real economy and are notoriously used to other ends, which do not lead to an increase in consumer prices. The heavy downward pressure on wages constitutes an additional obstacle to the appearance of the dreaded phenomenon.

Continue reading THREE STRATEGIES FOR REDUCING THE DEBT, by François Leclerc


Guest post. Translated from the French by Tim Gupwell

It is not just Italy and Spain causing problems, after the decisions taken during the last summit suffered a setback, in view of the spectacle of great confusion and nervousness we have witnessed with regard to the joint press release – which wasn’t one – from Spain, Italy and France demanding immediate implementation. Simultaneously, Greece is providing an example of the strategic retreat of the European authorities and of the IMF.

It is now the ECB and the Eurosystem which hold the vast majority of the Greek debt, a fact which has allowed the commercial banks to consider the countdown which has already begun with a far greater degree of equanimity. The same cannot be said for the European authorities.

Continue reading SURRENDER, YOU ARE SURROUNDED!, by François Leclerc


Guest post. Translated from the French by Tim Gupwell

Once again, the European stock and bond markets have sounded the alarm. The fall in stock values has been accompanied by an increase in bond rates for the countries in the firing line. The capacities of the banks and of the states to fulfill their commitments are being simultaneously called into question.

For the time being, the means of supporting those who need it are just not there, and it is hoped that Italy does not go down the same path. Patience is needed because the ESM is not yet close to being operational. It is not possible to establish whether the decisions have already been taken to attempt to sacrifice a part of it as a means of preventing the flames from spreading further, or if it is simply a matter of indecision and disarray winning the day. In Germany, public declarations have been blowing hot and cold, though more often cold over recent hours. Whatever it is, waiting is not a viable policy, just a temporary solution.

Continue reading WAITING IS NO LONGER A VIABLE POLICY, by François Leclerc


Translated from the French by Tim Gupwell

In my articles here, I generally address myself to anyone who wants to read me, but just this once, I would like to direct my address to my fellow financial engineers, and moreover in a tone – also just this once – of provocation which is blatant but, let us hope, efficient as well.

Here we go: a monetary zone has to be able to default in its entirety and restructure its debt (namely, to be able to say, “I can only pay back X centimes for every Euro I have borrowed”) and it also has to be able to re-evaluate its currency, and, in particular, to be able to devalue it.

The Eurozone has deprived itself of these two medicines. Hardly surprising then that today it is terminally ill.

The Solution: next Sunday evening (before Tokyo opens), the entire debt for all 17 countries in the Eurozone will be re-baptized Eurodebt (French OAT bonds, German Bunds, etc.) and the following minute, the Eurozone as a whole will default.

On Monday morning, the Eurodebt will be restructured (in one go) and the exchange rate between the Euro and other currencies will be allowed to adjust naturally.

The Eurozone will have carried out its metamorphosis. It will now be able to function like any other ordinary monetary zone. It will have been saved.

PS. Would all those commentators who are likely to say that we would be better off not saving the Euro please take your comments elsewhere; I am not talking here of either a ‘for’ or an ‘against’.


Translated from the French by Tim Gupwell

Exceeding 6% on 10 year debt is already dangerous. According to the terms of the balanced budget rule, this signifies that a nation will require growth of around the same amount, whereas in fact Spain has registered a negative growth since the beginning of the year! So, 7.567% at 10.15  this morning! As the German 10 year Bund stands at 1.255%, this means that for Spain over 10 years there is a risk premium (for the possibility of the debt not being repaid) which can be reckoned at 6.312%.

© Bloomberg

Welcome to a world of mistrust! Moreover, when the risk premiums in rates for shorter term maturities reach, or even exceed, those maturing at later dates, it signifies that the capital markets presume that something is going to happen soon, and something not very pleasant. This morning the rate for 5 year Spanish debt is rivaling the rate for 10 year debt: 7.543% at 10.16. The 5 year German rate stands at 0.334% ; which means that in this case the risk premium for Spain is 7.209%. Translation: the danger over five years is considered as being greater than over ten. In other words, according to the capital markets, there will soon be new developments.

© Bloomberg

QUIET ON THE SET, AND… INACTION!, by François Leclerc

Guest post. Translated from the French by Tim Gupwell

Events are moving fast. We were expecting it of Greece, but Spain is overtaking it. Yesterday evening, a human tidal wave invaded Spanish town streets, which these days have become virtually permanent places of mini-demonstrations at midday or after work. Today, at the very moment when the Eurogroup ministers were adopting the bail-out plan for the Spanish banks, the bond rate had edged up to 7.20% and the Madrid Stock Market plunged more than 5%. Instead of falling as had been predicted, the government has announced that the official unemployment rate is going to reach 24.6% by the end of 2012. A bona fide rescue package will soon be required, something the Bundesbank and the Members of the Bundestag have been advocating, seeing an opportunity to carry out yet another brilliant demonstration, associated with another round of austerity measures. Time will tell soon tell us which one will be first.  

Italy is likely to be the next domino to fall. Major stock values fell by around 5% on the Milan stock market, since the Italian banks are saturated with debt securities whose value is gradually falling as bond rates increase in line with Spain’s. The Spanish scenario is repeating itself due to the increasingly interconnected links between public and private debt which have developed over recent months. Italy may not have the colossal property bubble, but it has a public debt situation that is just as bad.

Continue reading QUIET ON THE SET, AND… INACTION!, by François Leclerc


Guest post. Translated from the French by Tim Gupwell

“I can’t see any time soon when…the pressure will be off” replied David Cameron, the British Prime-Minister, in an interview with The Daily Telegraph. He continued, “this is a period for all countries, not just in Europe but I think you will see it in America too, where we have to deal with our deficits and we have to have sustainable debts”. In conclusion, his austerity policies are likely to continue beyond 2020, as the situation is “a lot tougher than the forecasters were expecting”. Georges Osborne, the Chancellor of the Exchequer, has already extended to 2017 the austerity plan of 2010, which was initially intended to last five years.

The prolongation of the schedule which is taking shape is now being referred to, in veiled terms, within the Eurozone, a good example being Jérôme Cahuzac, the French Budget Minister, when he announced that “ I’m afraid that reducing the debt may take a little longer” in reply to a journalist who was talking of one, two or three years.

In its annual report, the IMF has just outlined a road map for the Eurozone, advocating – when it actually makes any concrete proposals – measures which focus on pooling the debt, an issue which radically divides politicians. The continuing crisis, it now says, is raising questions about the viability of the monetary union because “its root causes remain unaddressed” and “the adverse links between sovereigns, banks, and the real economy are stronger than ever”.



Guest post. Translated from the French by Tim Gupwell

The case is clear-cut judging by the current climate! The banks are behaving like louts, the regulators supervising them are looking the other way, and the politicians are covering their backs. Indeed, it is difficult to draw up a full list of the scandals which have just come to the fore without missing some of them.

Of course there is Barclays, not to mention all the other megabanks waiting for their fate to be made known, in a context spiraling out of control, hoping to escape from public condemnation, fines and judicial pursuits. There is the virtuous BNP Paribas, prosecuted in France for complicated mortgage loans based on the parity between the Euro and the Swiss Franc. Or indeed the French-Belgian bank Dexia, with its structured loans made to local collectivities and hospitals that one no longer hears about. The British bank HSBC is a big blow, involved according to the American Senate in money laundering operations for Mexican drug-trafficking cartels, and with direct links to organized crime, including the Russian mafia. The pearl of Asia has even achieved a double whammy thanks to secret financial transactions between 2001 and 2007 with Iran – forbidden in the USA – for an amount of 16 billion Dollars.



Guest post. Translated from the French by Tim Gupwell

François Hollande has confirmed that the Government is going to propose for adoption an organic law (which a simple law cannot undo) in order to have the balanced budget rule adopted, on the advantageous pretext that it is provisional. There have been many occasions in recent French history when special measures have been adopted for their presumed importance, without ever leaving good memories behind.

At the same time, the debate in Europe continues to move on, focusing once again on the reduction of the banks’ debts. Thanks to the Wall Street Journal, we have learnt that during their latest meeting, the ECB advised the European Finance Ministers to force the senior debt-holders to participate in the bail-out of the Spanish banks. A 180° U-turn which was not actually followed, since the draft of the memorandum which is supposed to be adopted during the next Eurogroup meeting on the 20th July makes no mention of it.

According to the newspaper’s sources, the ministers did not wish to follow Mario Draghi’s proposals at the meeting, as they were afraid of how the markets would react. It was also out of fear that the Irish government would demand equal treatment, since to save the European banks – in particular the British ones – the Irish Government had to borrow money to pay off the senior creditors of their country’s banks. Nor would the Greek and Portuguese Governments have failed to jump on the bandwagon.


LE MONDE-ÉCONOMIE, The LIBOR affair…… a scandal postponed from 2008, Monday 16 – Tuesday 17 July 2012

My most recent column in the French daily paper Le Monde : Le scandale du Libor, c’était en 2008. Translated from the French by Tim Gupwell.

When the LIBOR affair first broke in April 2008, the press comments were laconic to say the least. Last month, when the fire that had been smouldering flared up again with the conviction of Barclays for having manipulated the rates that govern the loans (in dollars) that banks contract amongst themselves, we saw media fireworks. At the time Barclays was one of the 16 banks (which number 18 today) responsible for submitting the data which allows the rates to be calculated.

An event which had led to little more than raised eyebrows in the spring of 2008 is now rocking the very foundations not only of the City but also of the entire world of finance. One has to wonder how the principle governing the dynamics of indignation works, when, at two distinct moments, public reactions to the same event can be of such differing orders of magnitude.

How could there be such indifference at the time when the facts emerged, and yet such a seismic shock over recent weeks that it lead to the resignation of three senior Barclays managers, as well as casting suspicion upon the candidate expected to take over as head of the Bank of England, and by association, on the British Government at the time. George Osborne, Chancellor of the Exchequer, declared that the facts revealed were symptomatic of a financial system that elevated greed above all other concerns and brought our economy to its knees” and added that “fraud is a crime in ordinary business; why shouldn’t it be so in banking?”

The payment of a sizeable fine by Barclays (365 million Euros) ought to have been a way of turning the page on events that already dated back several years. All the more so since it is clear that, of the sixteen banks, Barclays was certainly one of the lesser offenders in the LIBOR affair, and had shown good faith by cooperating with the authorities, something which explains why it benefited from a 30% reduction in its fine in Great Britain.

It would be over-simplistic to talk of a simple communications exercise gone wrong since we are talking here about judicial decisions, but the regulators might have hoped that the end of the affair would be received by the public with the same sort of indifference they exhibited when the story first broke in April 2008. It was nothing of the sort. But why did it take four years for this public indignation to finally be ignited?

The explanation requires an allusion to what physicists would call a ‘non-linear’ effect: the very act of crossing the threshold suddenly causes the nature of a situation to change. One thinks of the Wizard of Oz (1900) of Frank Baum, where the accidental opening of a curtain leads to the discovery that the enchanted world (which could be seen as a metaphor for the American monetary system) is nothing more than an artifice produced by an old man pushing levers.

The thing that brutally lifted the curtain for the British and showed them in what light the LIBOR affair should be viewed, was of course the Rupert Murdoch affair.

The British were to make the discovery in 2011 that 4000 of them had had their voicemails hacked into by The News of the World, part of the gutter press belonging to the media empire of Rupert Murdoch, an American citizen of Australian origin. Amongst his victims were celebrities, members of the Royal Family, but also ordinary people: soldiers back from Afghanistan and survivors of the London bombings.

The affair came to prominence when the telephone of a murdered teenage girl was hacked into, and certain messages deleted, by a News of the World journalist, giving her closest family false hopes that she was still alive. The victims’ complaints never came to anything, because, at the time, Murdoch was also corrupting the police services who therefore attempted to cover the affairs up. As public opinion exploded into anger attention quickly switched to the revolving doors policy which existed between Murdoch’s cronies and members of the British Government. The relations between David Cameron, the Prime-Minister, and Rupert Murdoch himself, were undoubtedly a little too close for comfort.

Under this new light, Barclays short-sighted fraud, revealed in the explanations given by the FSA (Financial Services Authority), the British regulatory body, could no longer be seen as everyday dishonesty and instead came to be seen as just one more revelation amongst many others of an arrogant managing class, which does not trouble itself with rules, and organizes its affairs as it sees fit, whilst still maintaining a bare minimum of appearances

The LIBOR affair is the story of the devotee who has always accepted as gospel truth the preaching of his priest, but who suddenly stops believing everything he has heard because he has accidentally discovered that the beard his priest wears is false.

The question which needs to be asked now is the following: if the fall of the least guilty of the banks responsible for the LIBOR has already provoked such a dramatic collapse, what can we expect when the punishment reserved for the others is revealed?

PROGRESS, TOO GOOD TO BE TRUE, by François Leclerc

Guest post. Translated from the French by Tim Gupwell

When there seems no way out, and the future seems unclear, it is then that promising visions of the future seem to abound.

The Bundesbank, accompanied by all those who take their cues from it, never miss an opportunity to remind us of the formula they stick to so stubbornly: their promise of growth at a later date once labour costs have been reduced and a renewed competiveness in the international markets.

Jens Weidmann, its enlightened president, has even suggested immediately extending the European aid provided to Spanish banks to the whole of the country’s economy, pursuing yet another triumphant march forward, complete with new additional austerity measures. Without even waiting, Mariano Rajoy’s Government has just announced that the latest set of measures will not bring in 65 billion Euros, as had been suggested just a few days before, but only 56.4 billion (perhaps it was a miscalculation?). Naturally, new measures will have to be found to compensate.

Continue reading PROGRESS, TOO GOOD TO BE TRUE, by François Leclerc

PERPLEXING MATTERS, by François Leclerc

Guest post. Translated from the French by Tim Gupwell

Two days ago, Christian Noyer, the Governor of the Bank of France, confidently commented on the decision taken by the BCE to put an end to all remuneration on the liquidities parked in the Eurosystem by the commercial banks. The banks prefer placing their holdings in a sure location, rather than lending it out to their peers. 800 billion Euros have recently taken this route – an unprecedented level. As one can see, there is no lack of liquidity in the market, the problem is the use it is put to, or rather not put to.

“We have taken an important step towards discouraging banks from bringing their liquidities to us, and encouraging them to be more active in distributing credit and in terms of investments in the securities markets,” explained Christian Noyer subsequently, who is also a member of the Executive Board of the ECB, expressing the hope that the “banks help revive the interbank market” – the key to the problem in his opinion.

Continue reading PERPLEXING MATTERS, by François Leclerc

WELL SPOTTED, BRAVO!, by François Leclerc

Guest post. Translated from the French by Tim Gupwell

As already highlighted the Spanish government is already benefitting from a de facto rescue plan under another name. To save appearances, the new austerity measures put forward for vote in parliament have not been the object of a memorandum jointly signed with those providing the funds, as had previously been the case for other countries. In fact, the announcement of these measures came the day before that of the banking bail-out!

One major difference with the preceding rescue plans can be observed: the entirety of the 100 billion Euros loans provided – whose planned repayment schedule is staggered until June 2013 – is destined for the banks. The State will merely pass on the funds, something which has not prevented the Government from imposing austerity measures on the Spanish, even though the two things are not strictly connected.

Continue reading WELL SPOTTED, BRAVO!, by François Leclerc