Seven EU banks fail stress tests

According to the BBC:

"They include five Spanish banks - Diada, Espiga, Bianca Civica, Unnim and Cajasur.

The other two were Germany's Hypo Real Estate and Greece's ATEBank."

Here´s what the European Commission has to say about it, and here´s what the CEBS (Committee of European Banking Supervisors) has to say about it.

These stress tests and the transparency they endow the banking industry with are relevant to the extent that they decrease asymmetries of information, and the ensuing uncertainties about the quality of the EU´s banks´ balance sheets. They should thus revive investor confidence in EU banks, and the industry, if as expected they are, overall, good.

For those banks who fail to pass these tests, recapitalization awaits; either through a private take-over(Germany and Greece?) or through public lending (Spain?).

No contagion: The irrelevance of greek debt restructure to healthcare service suppliers

John Dizard of the FT warns us that "Greece is restructuring debt". Now this is misleading but it is well written. It is misleading, because Greece is not restructuring all of its debt, only the debt of the healthcare system. It's a well written title because the author only refers to debt, which implies some debt, not all. It's beautiful when the media uses semantics to say one thing while subliminarly implying its hyperbole. Anyway, this news seems to have been picked up by Yves Smith at naked capitalism who has some further comments on it. Moreover this restructuring is happening despite it's fantastic performance, according to the IMF (via Tony Barber of the FT). Is this horrible? Well its not good, particularly if you are the relevant pharma companies. However I would guess that this is debt that Greece can afford to restructure and that the rest of the EU can afford to let it restructure. I would suppose that Greece's small size makes it a fairly small customer and thus it would have little effect on the world market for health care products. Alternatively, and because I know nothing of the market and regulations of healthcare in the EU, other than what this article tells me, if healthcare is a protected industry then whatever economic hailments may befal the pharma companies will be limited to such Greek companies. In conclusion, there cannot be much or any contagion from this restructuring. This reality of healthcare suppliers is clearly opposed to the contagion that would happen if central government would default to banks . This implies that Greece can restructure all debt that will not affect its economy to a large extent or spread to the economy of its neighbours. As a result, I would expect markets to not react much to this recent revelation as according to the logic I have just outlined central government's agencies' bonds are not the same as central government's bonds. Therefore the restructuring of one should not imply the restructuring of the other. At the same time, according to John Dizard "What the pharmas do [when payment stops or slows] is supply only the basics like penicillin or insulin. At the end they stop doing even that." Now as you'll see from his original post this was said in the context of the Soviet Union, so I don't think that that insight is transferable to Greece, and that we won't see patients dying because the state cannot pay for their medicines. Naked capitalism has some very "inspired" comment on what would happen if this were to happen in Greece... But it seems rather inappropriate to compare Greece to the USSR.

Markets, Information, Communication and the Euro-zone Fiscal crisis

Above you can see a segment from an extremely good article by Carmassi and Micossi which can be found at VoxEU. It is about the chronology of the fiscal crisis in Greece and how miscommunication between the European Commission and Germany may have made a mess. To be honest it should be said that they do survey a very limited and rather biased sample of newspapers (Thompson-Reuters and the FT), but it is a fairly acceptable simplification from constructing a weight matrix for a larger number of newspapers that would provide a rather limited improvement of the explanation. A "must read" nonetheless!

Jean Quatremer interviews the Greek finance minister

The full article as it was published online in his blog at the website of Libération, can be found here. I've excluded the introduction. I am impressed by the apparent serenity of the Greek official. Please check ou the original website for more content. There's a particularly intriguing article about British disinformation and the Greek isles of the Aegen sea... You do however need to read French to follow the article. Alternatively run it through google translate. Here it is:

VoxEU and Policies for a Europe in a Fiscal Crisis

VoxEU, that "not-for-profit" beakon of economic thinking, has released a very good eBook on the ongoing fiscal crisis, edited by Richard Baldwin and Daniel Gros. I take the liberty of pasting the table of contents from the link above. If you have any interest in economic policy and the future of the EU, you can't miss this.

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The eBook’s Table of Contents

Completing the Eurozone rescue: What more needs to be done? Edited by Richard Baldwin and Daniel Gros

Introduction: The euro in crisis – What to do? Richard Baldwin and Daniel Gros

Drawing a line under Europe’s crisis Barry Eichengreen

The Eurozone needs a political union, or at least elements of one Paul De Grauwe

The Eurozone's levitation Charles Wyplosz

Eurozone governance: What went wrong and how to repair it Jean Pisani-Ferry

The European bicycle must accelerate Angel Ubide

What more do European governments need to do to save the Eurozone in the medium run? Thomas Mayer

The narrative outside of Europe about Europe’s fiscal crisis is wrong Avinash D. Persaud

Rethinking national fiscal policies in Europe Philip R Lane

A credible Stability and Growth Pact: Raising the bar for budgetary transparency Michael C. Burda and Stefan Gerlach

Fiscal policy at a crossroads: The need for constrained discretion Antonio Fatás and Ilian Mihov

Fiscal consolidation as a policy strategy to exit the global crisis Giancarlo Corsetti

German spending is not the cure Alberto Alesina and Roberto Perotti

The long shadow of the fall of the wall Daniel Gros