Bruegel blog

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  A black market in Cyprus? Lessons from Venezuela

  30th April 2013 by Carlos De Sousa

  Wherever the government builds fences the market will place stairs to climb them. On March 28^th, the Cypriot government imposed capital controls as a measure to avoid bank runs and financial instability in the small euro zone country, but so far there is very little evidence on the existence of a well-functioning black market in Cyprus. Read more

  • Sections: Comment
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  Has the European Central Bank transformed itself into a hedge fund?

  8th March 2013 by Carlos De Sousa, Francesco Papadia

  Some observers have accused the European Central Bank (ECB) of having transformed itself into a hedge fund because of the purchases of government securities from stressed countries under the Securities Market Program (SMP). Read more

  • Sections: Comment
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  SNS Reaal expropriation: Should Senior bondholders carry the burden on future bank resolutions?

  6th February 2013 by Carlos De Sousa

  Last week the Dutch government announced the full expropriation of SNS Reaal, the 4^th largest Dutch bank and decided to write-off shareholders and junior bondholders while senior bondholders where left untouched. Read more

  • Sections: Comment
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  Charts of the week: funding costs keep coming down in the wave of euro optimism

  31st January 2013 by Carlos De Sousa

  Funding costs in the euro area have continued to decrease since Mario Draghi’s July announcement. This blog post updates our previous data covering the insurance cost of the 5 major financial and non-financial corporations and the governments of France, Germany, Italy and Spain. Read more

  • Sections: Chart of the Week
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  Banking union for non-EA countries

  8th January 2013 by Carlos De Sousa, Guntram B. Wolff

  In a recent blog entry we estimated the total assets and number of banks in the euro area underdirect ECB supervision according to the agreed criteria of the Single Supervisory Mechanism. We now extend the research to all EU countries. In this blog, we start with the statistics before discussing the more complicated home-host issues and how they are treated in the new compromise legislative text. Read more
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  A banking union of 180 or 91%?

  13th December 2012 by Guntram B. Wolff, Carlos De Sousa

  The European finance ministers have agreed on a deal for the banking union. According to the deal, the ECB would be directly responsible for banks with assets exceeding 30bn euro or 20% of GDP, or at least the 3 largest banks of each country member for those nations where fewer than three fulfil the previous criteria. In this chart of the week, we applied the two criteria to the Banker dataset, which includes 754 banks in the euro zone, so 14% of the 5404 banks. In terms of assets, a comparison between the Banker database and ECB aggregate statistics shows a good overall coverage of the banking system. Read more

  • Sections: Chart of the Week
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  Where did smart money go in 2012?

  11th December 2012 by Francesco Papadia, Carlos De Sousa

  The short answer is: into the periphery of Europe. Read more

  • Sections: Comment
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  Chart of the week: updated monthly real effective exchange rates for 153 countries and the euro area

  29th November 2012 by Zsolt Darvas, Carlos De Sousa

  Bruegel Working Paper 2012/06 includes data for 178 countries and the euro area, while the monthly database includes 153 countries and the euro area. We have updated the monthly database up to November 2012. November is not yet over and therefore we approximated the nominal exchange rate with the average during 2 to 26 November. Data of the last few days of the month may change this average, but presumably by not much. Consumer price indices are available till October for most countries and for a number of countries one or more earlier months are also missing. Similarly to the procedure of the Working Paper, we projected the missing data up to October 2012 and the not-yet available data of… Read more

  • Sections: Chart of the Week
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  Chart of the week: Funding costs are coming down

  29th October 2012 by Carlos De Sousa, Guntram B. Wolff

  At the end of July when sovereign yields of the troubled euro area economies were reaching a peak, we highlighted in a chart of the week the Emergency on funding costs for sovereigns, financial and non-financial corporations. The piece emphasized that: ·         Funding cost for financial and non-financial corporations are highly correlated with sovereign risk and have reached very high levels leading to a real fragmentation of the euro area ·         Top financial corporations were borrowing at higher rates than sovereigns and non-financial corporates ·         In Spain the market pressure over the sovereign risk was so high that the top 5 Spanish non-financial corporations were borrowing at lower interest rates than their sovereign, hinting at some decoupling of sovereign from… Read more

  • Sections: Chart of the Week
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  Chart of the week: Wage stickiness and painful adjustment

  1st October 2012 by Carlos De Sousa, Guntram B. Wolff

  This blog entry studies labour cost adjustment in the euro area. We find that wages are sticky and nominal wages rarely fall except in the most severe crisis circumstances. Second, unit labour cost (ULC) reductions are often associated with significant increases in unemployment. Third, the relative adjustment is forecast to continue and accelerate during 2012/13 despite a drop in the average euro area labour compensation. The fall in the average calls for a comprehensive response at the euro area level. Read more

  • Sections: Chart of the Week