Forced de-leveraging by european banks (Basle III, limited access to scarce liquidity, 480bn euros in refinancing needs in 2012) + synchronized Austerity Measures in european countries + wait and see attitude in consumer and companies behaviour = a perfect storm for a recession in Europe.
Please wash, rinse, repeat... No new news till now...
Don't forget that 60% of the european economy if financed through the banking sector (traditional universal banking model). The fact that the european funding pipeline slows to a trickle is rather frightening, all the more as most of refinancing needs for european banks are concentrated on the Q1 2012.
The scale of refinancing is immense. Europe's banks have raised about 295 bn euros in the capital markets so far this year according to Dealogic data. At the same time, the banks have 485 bn euros of debt due to mature next year, meaning Europe's lenders wiil have to scramble simply to replace their bonds....
With investors backing off, Europe's banks are left with two options: they can turn to ECB for funding or simply shrink their Balance Sheets, cutting unprofitable lending or exiting business.
From a good sense point of view, what could be the immediate effect of a global de-leveraging process on the economy? European States are endorsing pro cyclical policies (austerity) whereas they are at the verge of a recession (we need structural reforms, no short term medications...); companies are adopting a wait and see attitude from a capex point of view; global banks are de-leveraging (cutting the financing source for the already low european growth), consumers are depressed.
When all the economic agents are de-leveraging at the same time....... you know what we are facing...
We are lucky... We can draw lessons from the japanese experience!!! Here is an interesting and entertaining (!!!) video from Nomura Richard Koo.
Happy Thanksgiving to all american readers!
READ MORE - Thanksgiving dessert: What happens when all economic agents are de-leveraging at the same time?
Please wash, rinse, repeat... No new news till now...
Don't forget that 60% of the european economy if financed through the banking sector (traditional universal banking model). The fact that the european funding pipeline slows to a trickle is rather frightening, all the more as most of refinancing needs for european banks are concentrated on the Q1 2012.
The scale of refinancing is immense. Europe's banks have raised about 295 bn euros in the capital markets so far this year according to Dealogic data. At the same time, the banks have 485 bn euros of debt due to mature next year, meaning Europe's lenders wiil have to scramble simply to replace their bonds....
With investors backing off, Europe's banks are left with two options: they can turn to ECB for funding or simply shrink their Balance Sheets, cutting unprofitable lending or exiting business.
From a good sense point of view, what could be the immediate effect of a global de-leveraging process on the economy? European States are endorsing pro cyclical policies (austerity) whereas they are at the verge of a recession (we need structural reforms, no short term medications...); companies are adopting a wait and see attitude from a capex point of view; global banks are de-leveraging (cutting the financing source for the already low european growth), consumers are depressed.
When all the economic agents are de-leveraging at the same time....... you know what we are facing...
We are lucky... We can draw lessons from the japanese experience!!! Here is an interesting and entertaining (!!!) video from Nomura Richard Koo.
Happy Thanksgiving to all american readers!
