Robert Kennedy College

Will Ukraine Default?

Dr. David Costa, Dean at Robert Kennedy College, share his views on a possible default of Ukraine and the possible impact it might have on European Markets.

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European Banks preparing for stress tests

European Banks preparing for the stress tests

The latest comments of Ms Nouy, the Single Supervisory Mechanism Chair, picture a new scenario for European banks. The new pan-European regulator certainly wants to establish an high degree of credibility and is sending a clear message to the banks: act now or fail.

Overall the new stress tests will strengthen the banking sector that faces several challenges.
One of these challenges is the intimate link between banks and sovereign bonds that the SSM is trying to break.

Several European banks still rely on the profitable carry trade that lead to an increase of EU Government-debt holding to 4.3% of last December from a 3.5% of June 2012.

Said increase underlines how the ECB financing is not always used to lend and relaunch the economy. The upcoming stress tests will apparently use leverage ratio as a "crucial measure" that creates some disparity with the way U.S. banks are assessed.

Some failures are to be expected and can be positive to reinforce the European banking sector but several unpredicted failures might create a sense of insecurity to both investors and the public.

It seems that banks that have recently received state aid would have to pass a mo...

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Europe to return to growth in 2014 - Whatever it takes

Europe to return to growth in 2014 - Whatever it takes

The ECB renewed commitment to maintain an accommodative monetary policy will be among the factors that will help Europe to continue the path to recovery that should result in positive GDP growth this year. While Mario Draghi was cautious in calling the end of the crisis his firmer language echoes the famous 2012 speech that drove the return of investors confidence in Europe. Valuations in Europe remain attractive and there are several investment opportunities both in the broad indices and specific sectors like financials and consumer discretionary.

This does not mean that the challenges are over:
- Unemployment remains at very high levels of 12.1% (particularly in the periphery)
What is particularly concerning is the level of youth unemployment that reached very high levels (36.8% in Portugal, 41.6% in Italy, 57.7% in Spain).
- The monetary transmission system of passing the high liquidity provided to banks is not functioning properly.
Small and mid size companies are still seeing limited financing opportunities and the same is true for consumers.

With the industrial production improvement in Germany (Nov data) and the economic sentiment at a 29 mo...

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