European Zombie Banks ?
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The LTRO success in calming the markets has, at least for now, vaned. While European banks benefitted from the easy carry trade in accumulating Sovereign Bonds they have also tied their destiny to their Governments debt.

The problem is that European banks are not lending enough to businesses to foster growth and have not taken the necessary recapitalization and restructuring. This has make many European banks dependent on the LTRO without a long term solution.

There will not be enough growth in Europe unless banks start lending again to business and not just to their home Governments.

Perhaps the ECBE intervention as a lender of last resort should have been stronger from the beginning and not channeled in the forms of loans to banks. Another weakness of European banks is their very limited growth prospectives for years to come. More downgrades are also possible as early of May.

The performance difference between the German and Spanish market since the beginning of the year highlight an even bigger gap between European countries.

European Competitiveness
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Austerity measures do not usually leave much space for growth. In this case these heavy auster...

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The European Recipe for Recession
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The drop in the PMI to 48.7% in March is just a signal of a bigger European issue. While the LTRO has worked in attracting banks to the irresistible carry trade with some Sovereigns and has eliminated uncertainties on bank re-financing it has, up to now, failed to increase lending from banks to businesses.

Banks in Italy, Portugal and Spain have increased mortgage rates between 1 and 2%. Interbank lending has not increased and this creates further uncertainties for mortgages as the LTRO is limited to 3 years. This situation is particularly worrying for Spain where housing prices fell 11.2% and yet mortgage rate is growing.

In Portugal new house loans are down 75% from last year. Funding issues are spreading to the UK too.

With austerity programmes throughout Europe and increasing rates the consumer will certainly not be the engine for growth. Similarly, small and midsize companies have insofar not benefitted from the ECB "largesse" that seems to be used by banks to delevearage and not to increase loans.

In summary what we have at the moment is high unemployment, austerity measures, limited lending between banks and to new businesses. This might well become the European recipe for recession.

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Investing in the Innovative Europe
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Investors that think that the whole of Europe is becoming uncompetitive and low growth are not entirely right. Yes some areas of Europe are facing difficulties but the innovative countries are finding ways to grow by creating the ideal environment for innovative companies to thrive. For example both Ireland and Iceland have seen growth in the IT sector, particularly data and support centers. Amazon and Microsoft have established their base for the European cloud operations in Ireland. Similarly Advania has recently opened in Iceland the greenest data centers in the world with zero carbon footprint and that benefits from hydro and geo-thermical power.

In summary, even in a difficult situation, innovative European countries will find ways to thrive through a number of pro-innovation and pro-growh measures that will make them more competitive and create new jobs.

Hunting for Growth in the Cloud
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Following innovation as a key differentiator among the interesting opportunities for investors I see cloud computing and software as a service as one of the high growth area that will change the way both consumers and companies use computers. Companies like Amazon, IBM, Apple and Microsoft have the le...

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