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Moody's downgraded France's credit rating by one division to Aa1

Moody Dwain Ross ★★★★★

Debt markets did not react to a downgrade. The French debt still demonstrates the dynamics characteristic ofrisk-freesecurities, the 10-year debt rates at 2.1% with a premium of only 1 percentage point. To similar German bonds.

France has already lost its second highest rating from the Big Three - S&P stripped the country of its AAA rating in January this year. By the way, last week S&P affirmed France’s rating of AA + with a negative outlook, and determined the likelihood of its decline next year at 33%. Another agency, Fitch, will review France’s rating in 2013.

A financial week was held in Frankfurt am Main on November 19-23, dedicated to both general prospects for the development of the financial sector, in particular in Europe, and special issues, for example, the tasks of the retail banking business, the prospects opened by the online business. A separate section was devoted to economic and financial stability in Europe, and, in particular, to the planned creation of a banking association - Banking Union. Important points that have received general agreement from the panelists:

Initially, a banking association should start with the formation of a single regulator. A single regulator is primarily a set of control methods, a set of indicators and data. The banking sector of the eurozone is extremely heterogeneous: national characteristics, types of business, and industry specialization of banks make it difficult to introduce a single regulator. The representative of the ECB noted, in particular, the difficulties of generating uniform statistics. So, the total capital of eurozone banks, calculated by two different national methods, gives a difference of 50 billion euros. Existing discrepancies also apply to bad credit data, also due to different methodologies. So comparisons should be treated with caution. And even after ten years of Eurozone history, the ECB has made little progress in unification.

At first, it is more expedient to introduce a regulator only in the eurozone, better starting conditions, less heterogeneity, then in the future EU countries outside the eurozone can also join the union.

It is worth continuing the merger with the creation of a unified deposit insurance fund, as well as with the creation of a unified fund for recapitalization, bank rehabilitation. The difficulties in introducing these institutions relate to problems with the right incentives for banks, so that there is no desire to take too much risk, knowing that they will save you and the formation of democratic procedures for controlling the expenditure of funds that would allow you to quickly allocate funds to the necessary banks. Most likely, the funds will be financed by the banks themselves, without the direct participation of taxpayer funds. Controversy erupted at a conference around the issue of the strengths and weaknesses of the ECB as a regulator. On the one hand, the ECB “has money”, which means that it may be less responsible for the regulatory process, hoping that the crisis will be able to “fill in with money”. On the other hand, the ECB is supranational and will be independent in making decisions regarding certain banks. However, this thesis was disputed: the ECB is more inclined to focus on cross-country effects and pay less attention to small banks, whose problems can still induce a crisis of the entire system. There was also no consensus on the number of banks regulated by the ECB: all banks in the system - 6,000 in the eurozone or only the largest? In half of the eurozone countries, more than 60% of all bank assets are owned by small banks.

In the whole eurozone, the share of small banks is 30%. Thus, the ECB must regulate all banks, but rely on national regulators familiar with the specifics of the national banking sector. In general, the discussion showed that it is still a long way to the final design of a single regulator, it will take a year or two, despite the fact that the first steps to create it will be taken already on January 01, 2013.

At an organized conference, for the reasons of the eurozone crisis, different points of view on the prospects of the monetary union were presented. The most radical belongs to the President of the Czech Republic, Vaclav Klaus, who believes that such different countries should not initially form a zone of one currency. Klaus noted that the history of all monetary unions turned out to be sad, not to avoid this fate and the eurozone. The former Chancellor of Germany Gerhard Schroeder was more optimistic. He noted that Germany had benefited from the Euro project and it was in her interests to preserve this project.

When asked by those present about the likelihood of the Eurozone remaining in 2013-2014, a majority of 30% noted that the probability is very high. A total of 26% was for the probability of maintaining the eurozone at a level of 0 to 50%. Interestingly, when asked about the priority measures to save the eurozone, 17% received write-offs of debts of the countries of the periphery, while the majority 30% was given for deeper structural reforms in these countries, 25% received the idea of deeper fiscal integration in the eurozone. The third place of the priority measure “debt cancellation” is especially surprising, given that the majority of the audience are representatives of the creditor country and Germany. On the other hand, for the fact that Germany could decide to leave the eurozone in a vote “about the possible first country to leave the eurozone”, a majority of 40% of the vote was cast. In second place with a large lag of 20% was Greece as the "first country".

The September decline in output in construction blocked growth over the previous two months. The quarterly release in the third quarter remained unchanged relative to the second quarter of 2012. Relative to the third quarter of 2011, construction decreased by 4.8%. At the same time, various dynamics are observed in the countries of the “periphery” and in the countries of the “core” for this indicator as well. In Germany, in the third quarter, construction added 2.2%, while in France it decreased by 1.1%, in Italy by 14.2%, in Spain by 6.3%, in Portugal by 17.9%, and in Greece, construction fell by a third from the level of the second quarter of 2011.

Mutually reinforcing negative trends in the financial sector of the “periphery”, in the dynamics of consumer sentiment and their income, are the reasons for the “vicious circle” of reduction in aggregate demand and de-distribution, observed in the private and public sectors of the troubled countries of the eurozone.

The assessment of the current situation has improved, as well as the expectations of the situation on the horizon in six months. Strongly added the index in wholesale trade, as well as in retail. However, assessments in the services sector were not so optimistic: the business climate deteriorated in November, the balance of responses decreased from 9.1 to 8.5, the assessment of the current situation did not change, and the prospects for the sector began to be more pessimistic.

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