Finance Monster

It is difficult not to feel deep sympathy for European leaders face a problem they did not see it coming, did not deal, but can not ignore. Back to the wall, they tell us that every state in the Eurozone will take steps to reduce potential budget deficits or excessive debt.

You feel the desperation with which they call all their wishes stabilizing the Euro. In various forms, they reaffirm what is at the heart of the device of the common currency. Their intentions are unquestionable and their appreciation for the work of the European Central Bank is moving. Nothing in their statement is questionable, but the question remains: the markets on Monday morning, they find in this effort of reason to trust al’Europe?

The quality of the statement is indisputable, but did reach a sufficiently concrete? Something Will it change that allows to believe that stability? Asking the question answers itself.

The call for financial regulation is pathetic. This week has u agreement between Democrats and Republicans on the financial reform in the United States. The 1,300 pages of this document are not a guarantee of high efficiency, but it exists, and it will be passed soon. In Europe, it does not, and when it will be proposed at least 18 months to put th application. It is also 18 months since the first summit of the G20 proclaimed the same thing: what has Europe done in this area for a year and a half? Where are the drafts? New structures are without power: the action is reserved for national supervisory authorities.

The President of the European Council in June will present a report on measures to reduce speculation in government bonds: What is it? Are there any specific sites? Credit Default Swaps (CDS)? The rating of sovereign debt? The organization of the bond markets? The transparency of information?

The impression that emerges from this statement is a form of fatigue government leaders. They are in Brussels for a summit or another every week. Yet their countries to manage public finance problems, problems of unemployment and social reforms under construction. The time is not it time to act in concert with the United States and can be coordinated financial reforms rather than reinventing the wire sliced bread?

As for the management of crises, one wonders if it will be the responsibility of the Commission, the Eurozone or the European Central Bank. Will it be a permanent structure? He does one allocate resources to intervene in markets or on recalcitrant states?

Greece will finally receive a substantial assistance. Even the German and Greek parliaments had approved, with necessary reform measures. To late it is, this intervention should reduce the pressure in global markets sour.

Because the crisis has now taken on global proportions. It will be difficult to reduce in perspective: a problem of indebtedness of a small country in the Eurozone. Was it to jeopardize the confidence in the European currency?

That Spain’s Prime Minister Jose Luis Rodriguez Zapatero is rather soft and take difficult steps when there is no other choice is not new. But it is far from alone.

The Spanish problem is totally different from that of Greece, and it is customary ignorance of the market which explains the panic of Tuesday.I must say it was caused by an irresponsible attitude of rating agencies that saw fit to reduce the grade of Spain for reasons related to the economic slowdown. This rating remains excellent at AA.

For three years, the Spanish property market overheating, and everyone knew that sooner or later the bubble would burst. The large Spanish banks, which had mostly avoided the ravages of the subprime crisis lie in a relatively robust against the economic recession and the real estate crisis.

But the bursting of the housing bubble, if it is assigned, has a much more serious on the number of students “cajas de ahorros” or “savings” regional or municipal. The latter as the initial granting of mortgage loans. They are now in trouble and must regroup. As these bases and political power for local politicians, they try by every means to delay the inevitable. Politics in the short term? Certainly, but it is not surprising.

It seems that the Spanish government, alarmed by the Greek crisis has finally decided to take the bull (!) By the horns al’approche major bullfights in San Isidro. Who spread the rumor this morning that Spain would have to borrow 280 billion euros to the IMF? Nobody knows, but short sellers are once again challenged. Such a rumor that the advantage is so hard not to blame that on which the crime benefits.

I shudder to write that I announced in my post on Monday that markets should be treated carefully because of the risk of contagion: nothing seems to have been made on this point.Markets, leads to themselves, did what they do naturally, even if it is not very beautiful, namely the work of dragons. Rising CDS, which guarantee the risk is far from Spanish wait Greek levels. (210 basis points against 750).

It is useless to attempt to change these behaviors or to announce sanctions against the markets who believe in these “wild rumors” as said Zapatero. We must let the markets set the inflection point and intervene only when the floor is solid. But this reminds us that a stabilization mechanism which needs the euro in more than one mechanism of crisis.

But it is also time to publish credible figures in real time. This is the only way we confront markets with reality. The idea of going directly to the IMF was absurd. It demonstrates the lack of basic education for investors and traders. Faced with such carelessness that is dependent on the system of rating agencies, the only weapon is information and facts.Denying the risk of infection as did the Spanish Prime Minister after visiting two of the five Presidents Europe is pointless. It must explain why. Or is the budget deficit? What is the actual ratio of debt? Do not ask investors deceived by Greece to Spain without believing in absolute transparency.

The over-reaction of markets is also a consequence of nervousness created by the slow response of the Eurozone. Only a clear explanation of the facts will stop the tornado on Tuesday on the steps of public debts.

The euro fell below $ 1.30. It will only improve when the Greek parliament will vote the austerity measures imposed Hellenic people.

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