Tuesday, July 5, 2011

05/07/2011: Pre-ECB council meeting note

Here's my (cynical, but) concise summary of the pre-ECB call on rates this week:

We (Euro zone) have:
  • Greece being kept alive pretty much for its 'spare parts' (privatizations)
  • Porto just gone into coma with the latest downgrade of its bonds to junk,
  • IRL in an ICU on an artificial respirator (see the bottom line on Irish Exchequer expenditure here)
  • Spain feverish & fading out of consciousness on negative watch and with banks starting to implode (HT to Namawinelake, Spain is facing €660 billion of redemptions in 24 months ahead and with banks providing just 10% provisions cover on €450 billion worth of development loans)
  • Italy getting the first symptoms of the deadly debt/banks spiral virus (negative watch for ratings and latest signs of banks starting to slip)
  • Belgium on the trolly about to be wheeled into casualty department
In this environment, ECB raising rates this week will be equivalent to shutting off power supply to the entire hospital that is Euro zone.
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