道德風險幾錢斤？

7月24日，周日。Make or break，你賭邊瓣？上星期六答應過大家，為歐羅區「救市基金」升格為「護市基金」涉及的成本計計數。在數銀紙前，老畢想先講講對歐羅區峰會後的一些見解，make定break、buy定sell，玄機或在其中。

有兩點值得一提：①西方主流媒體過去評論歐債危機，最常用的不離kick the can down the road、 extend and pretend、plaster up the wounds一類嘲諷大國不求治本但求止血的句語，惟此次峰會聯合公報發表後，主流媒體不論左中右，由《金融時報》到《華爾街日報》到《經濟學人》，立場罕見地一致，讚多彈少，縱有微詞，皆從善意出發，擔心歐羅區領袖虎頭蛇尾，白白浪費得來不易的好開始之情，洋溢於字裏行間；②歐豬債息上周最後兩個交易日「大插水」，惟德法債息卻微升。這也許是資金從避險性強的核心國債券重新流入風險較高的邊緣國債券有以致之，並非什麼不尋常現象。然而，值得注意的是，核心國信貸違約掉期（CDS）價格並沒有隨着這份「有口皆碑」的聯合公報面世而回落，意味邊緣國與核心國債息收窄這個表面上反映恐慌紓緩的迹象，暗裏可能埋藏殺機。

德國負責近半擔保

兩點意見表過，是時候替歐洲金融穩定設施（EFSF）「加強版」計計數。歐羅區峰會成果令市場「側目」，EFSF今後將身兼多職，包括一發現有成員國勢色不對，馬上提供信貸防患未然；干預二手債市抗衡炒家；以折讓價在公開市場回購債券，以及向有需要的成員國提供貸款協助銀行重整資本。然而，歐羅區領袖定下眾多目標，惟對擴大EFSF規模卻隻字未提。每個人都在問，要一一滿足上述功能，成本到底多高？

獨立證券分析公司Bernstein Research在逐個項目點算後，開列了一張「清單」，初步估計，EFSF規模要從目前的4400億（歐羅．下同），擴大至1.45萬億；計入20％「超額抵押」（overcollateralization）要求後，總數是1.7萬億。

條數怎樣計出來？按照峰會聯合公報並考慮到擴大後的EFSF必須包括意大利、西班牙和比利時，始能有效發揮穩定歐羅區功效，Bernstein按希臘、葡萄牙、愛爾蘭、西班牙、意大利、比利時未償債務全數延期至2013年，而銀行則按7％比率重整資本，有效期同樣至2013年，得出擴大後的EFSF規模接近2.4萬億這個估算【表1】。

拯救歐羅區成員國一直是歐盟和IMF的協作工程，有鑑於此，在2.4萬億這條數中，必須扣除IMF承擔的金額，同時將「已出之數」（希臘的1100億）和2013年後代替EFSF擔當穩定基金的EFSM「將接之數」減除；得出的餘額，便是EFSF需要承擔的數目。經過七除八扣後，剛好是前面提到的1.45萬億【表2】。

由於已接受援助（在這個例子中包括意大利）國家無法為EFSF提供有效擔保，為了創造一個融資能力達到1.45萬億的金融設施（發債體），德國須提供約7910億的擔保，佔擴大後的EFSF（連同20％「超額抵押要求」，總數1.7萬億）整體規模近半。這個數字，約相當於德國去年GDP的32％！

7月22日，老畢在〈弱國多籮籮　EURO三條路〉一文中，提出歐羅要維持一體化，選擇不離「北水南調」（富國以不同形式向窮國提供財政補貼）和歐洲央行「印鈔」購債（實行歐洲版債務貨幣化）。換句話說，道德風險不是由政府便是由央行承擔。照目前情況判斷，「北水南調」大勢已成，德國騎虎難下，擴大EFSF事在必行，炒家跟政府對賭，短期風險甚高。然而，長貧難顧，投機者和評級機構重整旗鼓後，下一輪攻勢矛頭可能直指歐羅區核心國！

蘋果撐起IT板塊

蘋果威水，係人都知。有幾威？資訊科技是標普500指數十大板塊中純利率最高的行業，在各板塊大都調低今年下半年邊際利潤預測之際，資訊科技卻例外，下半年純利率估計擴大0.36個百分點。不過，那主要拜蘋果所賜，剔除該公司，資訊科技板塊賺錢能力馬上要打個折扣【圖】。

蘋果另一強項是現金多，最新數字顯示，該公司坐擁762億（美元．下同）現金、與現金相等的短期和長期投資，比標普500指數內38.9％（不包括金融機構）合共163家公司加起來的現金都要多。這163家公司合計擁有761億現金，比蘋果少1億，但加起來負債4120億。蘋果負債幾多？答案是零！

從歐羅歷史 看歐羅前景

「早在2月便在本欄說過，歐盟就像戰國時搞合縱的山東六國，『像雞綁在一起不能安寧』一樣，從前『歐豬』瘋狂借貸種下的禍根，現在就是整個歐羅區還債遊戲的開始。到今天獅子山學會的論調不變，更認為好戲在後頭。」──　這是我去年初對歐洲債務危機的評估。事隔一年，又參加過上月Property and Freedom Society（PFS）在土耳其舉行的學術會議，遇見年輕德國經濟學家Philipp Bagus，看過他的著作The Tragedy of the Euro後，對歐羅的前途，更不敢樂觀。

德貨幣曾兩次崩潰

原來，在普遍德國人眼中，既有強勁的馬克，就不須有歐羅，因為在沒有歐羅以前，德國央行打擊通脹的決心，源於其慘痛歷史：一戰後的德國央行因胡亂發鈔引發超級通脹，間接使希特拉上台發動二戰，死了過千萬人。所以德國在戰後痛定思痛，認為真正和平實有賴貨幣制度的穩定。

事實上，曾經有一代的德國人，一生經歷兩次貨幣制度崩潰而變得一無所有（1923年的惡性通貨膨脹和戰後1948年的貨幣改革），所以德國國民要求央行保衞貨幣購買力的執着是可以理解的，這亦解釋德國馬克一直在各歐洲貨幣中處於強勢的理由。

然而，歐洲大陸其他大國如意大利、西班牙和法國，她們的中央銀行可沒有德國央行對捍衞貨幣購買力的執着，獨立性也不如德國，以致在政府壓力下濫發鈔票為政府的債務融資；所以，自布雷頓森林協定瓦解以來，法國法郎、意大利里拉和西班牙比薩塔等貨幣定期對西德馬克貶值變成指定動作。

不過，貨幣定期貶值對這些高通脹國家的統治階層非常不利，因為一切的進口變得昂貴，收定額退休金的人士特別受到影響，也會使外國人不願意到該國投資，經濟受損，最終國民也會知道這是政府理財不擅的結果。

所以，自1979年起，歐洲各政府為免強馬克影響他們的威信，就一直企圖干預滙市，成立歐洲貨幣制度（European Monetary System，EMS），以西德馬克為錨，希望把成員國的滙率保持在2.25%的區間波動（Exchange Rate Mechanism，ERM）。

法視馬克為眼中釘

可是，ERM的問題在於，如果一國的貨幣對西德馬克升值，她的央行當然可以無限制地增發貨幣買入西德馬克壓止滙率上升；可是，如果是對西德馬克貶值，該國央行卻沒有無限的馬克買入自己的貨幣阻止滙率下跌。

因此，如果真的要滙率保持在2.25%的區間波動，就一定要西德央行配合干預滙市，可是德國人對抵禦通脹的執着，就是不肯配合，加上二戰的歷史傷痕，新仇舊恨，讓鄰國特別是法國非常不快。法國視西德馬克為眼中釘，不除不快，可以在傳言中前法國總統默特朗把馬克喻為「西德的核武」可以看到。

總之，ERM的結果有目共睹：1992年由索羅斯帶頭逐個擊破，英國和意大利於兩日內雙雙退出，貨幣大幅貶值；法國法郎在一年後再被狙擊，也無奈要把區間波動擴闊到15%。歐洲以政治為先不理經濟原則的第一次貨幣聯盟，其實早在十九年前已被證明徹底失敗。

既然第一次試驗已經失敗，德國人有為何會嘗試第二個更危險、更泥足深陷的歐羅計劃？近來德國便有報導，當年德國願意放棄其引以為傲的馬克，是基於法國的壓力：如果不加入歐羅，也別指望東西德統一。當然，有關政府官員予以否定，不過若傳言屬實，歐羅，一個讓德國不得不配合的EMS 2.0，其實只不過是一個新的凡爾賽和約，Germany will pay！

說了這些歐洲貨幣發展史，你對歐羅的前景，又會否有新的體會？

兩派「晒冷」，歐洲高危！

6月16日，周四。「恐慌」有傳染性，買時如此，沽時更加不必說。在波動性低風平浪靜的日子，歐洲邊緣國信貸評級一降再降，投資者視而不見，你有你降，我有我buy。然而，氣氛情緒話變就變，資產勢頭逆轉之速，可以好得人驚。

昨天講過，投資研究機構High Frequency Economics（HFE）擺了個大烏龍，在分析葡萄牙償付能力時，計漏了一條「大數」，結果得出葡國「違約在即」的錯誤結論。對此，老畢的觀感是，當市場焦點不在（或暫離）歐債時，莫說HFE這類影響力無法跟「大行」相提並論的研究機構，即使高盛大摩，要在投資者普遍視風險如無物、對沖被認為多此一舉的日子中，借一兩份報告引發連鎖反應，亦非話咁易。

心底恐懼被引出

HFE之所以被迫為其錯誤作出澄清並第一時間致歉，老畢看全因報告「郁」到個市；報告之所以「郁」到個市，並非HFE的「結論」（葡萄牙違約）真的石破天驚，而是咁啱咁橋，在環球焦點全面重返歐洲的此刻，這個與事實不符的「結論」，正好觸碰到投資者心底裏最大的恐懼──違約危機由希臘擴散至葡萄牙、西班牙、意大利、比利時……。

歐盟財長在領導人下周舉行峰會前，先於本周二召開了一次緊急會議，非但未能為二度打救希臘縮窄分歧，反而節外生枝，令月底就計劃拍板的機會大大降低。決策者的主要爭拗，在於持有大量希臘國債的歐洲銀行（包括希臘本身的金融機構），在歐盟與IMF挽救雅典的過程中，是否要接受某種形式的債務重組，與歐盟納稅人共同背負援希的包袱。值得一提的是，歐洲央行由始至終堅決反對任何形式的「私營部門參與」，法國亦強烈傾向讓銀行等私人投資者置身事外；站在對立面的一方（主要為德國、芬蘭、奧地利）則極力爭取把銀行「拖落水」，德國更為此提出具體建議，敦促私人投資者接受以新的希臘債券取代大部分現有債券（新債七年內毋須強制性償還）的計劃。

顯而易見，德國、芬蘭、奧地利有此主張，全因銀行等私營部門債權人若肯「自願」退讓，希臘還本付息壓力必然大減，歐盟和IMF向希臘提供的財政援助（貸款）便能相應減少，未始不能扭轉債務危機的惡性循環。如此一來，打救希臘的計劃非但在本國選民面前較易「促銷」，希臘推行緊縮政策以換取救援，亦難推三阻四。

自願vs強迫

能說服銀行「自願」參與新債換舊債或其他形式的債務重組，當然是最理想的結局。然而，「自願」意味銀行（其他私人投資者亦然）有選擇，是否參與有得揀。大家只須留意穆廸在歐盟財長緊急會議當天的行動，便知銀行若能對債務重組say no，是不會「自願」入局的。穆廸周二晚一口氣調低多家法國大銀行的信貸評級展望，如果有得揀，你認為新債換舊債計劃的「參與率」會多高？法國大力反對德國之議，底因還不呼之欲出嗎？換句話說，任何形式的債務重組要取得成功（私人投資者要有高參與率），都必然涉及程度不同的「強迫」（coercion）性質，亦即接受希臘實際上違約。

希臘前車可鑑，葡萄牙、西班牙、意大利以至比利時的國債投資者為免重蹈希臘債券持有人的覆轍，難保不會興起「先發制人」盡快減持之念，大大增加希臘危機向整個歐羅區擴散的風險。

然而，希臘危機的事態發展，亦可以有另一個可能性；德國、芬蘭、奧地利刻意延遲二次救希（原定6月底拍板，現在最快也要押後至7月），藉此一試雅典在國內巨大反抗壓力下，有沒有決心奉行緊縮政策。倘若希臘國會拒絕通過緊縮措施，在出售國家資產上亦無寸進，德國、芬蘭、奧地利在7月便有大條道理拒絕二度救希。到其時，壓力便會落在銀行等私人債權人身上。要麼接受名為自願實為強迫的債務重組，要麼在希臘崩潰違約動亂的恐慌環境中血本無歸。未來一月，歐洲高危【希臘五年期國債CDS和美滙指數分見圖1、圖2】！

自中東北非爆發動亂以來，布蘭特與紐約期油價格一直存在差距，前者溢價明顯。在油價節節上揚時，傳媒為突顯油市牛氣沖天，在報道中每多選擇性地採用布蘭特，以彰油市之「強」。近日避險情緒高漲，油價受壓，傳媒多見「轉軚」，選擇性地重投紐約期油懷抱，以彰油市之「弱」。

從【圖3】可見，布蘭特與紐約期油差價今年一直上升，目前每桶相距已多於20美元，布蘭特相對紐約期油溢價創出新高，相信很快就會引來套戥。理由？梗有幾個喺左近。

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G20會議召開 各國意見分歧 中國願考慮經常賬目標建議

二十國集團（G20）財長會議昨天在南韓慶州召開。在討論最激烈的滙率問題上，成員國談判的焦點似乎已落在美國公開提倡的經常賬目標，亦即各國要限制自己的貿易盈餘或赤字。此建議引起G20嚴重分歧，但取態最關鍵的中國據報願意考慮，以換取美國放棄直接針對其人民幣滙率政策。

美國財長蓋特納去信各國財金代表，表示持續擁有盈餘的國家應該透過結構性、財政及滙率政策來推動本土增長，而美國這些有龐大預算及貿易赤字的國家則應採納可持久的中期財政目標。他又說，G20成員不應刻意讓滙率貶值，來得到不公平的競爭優勢。

限制於GDP 4%以下

消息人士透露，蓋特納建議把各國經常賬盈餘或赤字限制在其國內生產總值（GDP）的4%以下。美國與G20會議東道主南韓都支持這措施。

分析指出，蓋特納的建議明顯是衝着中國而來，主要目的是迫使人民幣升值。消息人士昨天深夜透露，中國已明確表示，反對在今天公開的會後聲明提及經常賬目標，亦不能提及任何形式的外滙規範。這意味今天的聲明很大機會不會有重大宣布。

不過，與會人士透露，中國對此其實持開放態度。官員指出，聲明仍可以其他方式提及蓋特納的建議，令這建議可繼續納入各國考慮範圍之內。

《華爾街日報》引述法國央行一份內部文件指出，美國的建議給予政策彈性，確保各經濟體表現一致，既可緩和緊張關係，又可毋須要求任何國家推行特定的滙率政策。該文件說：「這可能解釋了為何中國和美國在現階段支持這個措施。」但文件又指出，其他有盈餘的經濟體的反對聲音很大。

日本德國強烈反對

南韓希望經常賬目標可調解中美分歧。南韓一名高級官員表示，如果只集中在滙率問題上，討論就會模糊了真正的焦點，那就是強勁而可持續增長，滙率只是其中一個工具。該官員表示，中國視之為眾多建議之一，並說這比單談論滙率好，因為這令中國可以繼續使用包括滙率在內的任何工具來達到其經濟目標。

經常賬目標對中國的影響相對較小，因為G20中，沙地阿拉伯、德國和俄羅斯的經常賬盈餘更大。而且，中國人民銀行副行長易綱上月曾表示，中國計劃推出政策，使經常賬盈餘相對GDP比率在3至5年內，從2009年的5.8%跌至4%以下。不過，大量G20成員國提出反對。正反兩大陣營主要是出口主導型經濟（即擁有龐大貿易盈餘）的國家和內需為主的國家，其中日本和德國的反對最強烈。

日本財務相野田佳彥表示，訂立具體目標數字是不切實際的。德國經濟部長布呂德勒警告，不要重回計劃經濟思維。日本和德國表示，政府無法製造這種宏觀經濟結果，因為貿易盈餘基本上是私人企業和個人經濟活動造成的。

不少新興國家亦反對。俄羅斯副財長潘金預期，今天公布的會後聲明不會有目標數字；但亦有國家表態支持，加拿大財長弗萊厄蒂說，美國的建議邁向正確方向。有法國官員私下說，此建議可以考慮。

蓋特納表示，如果訂下經常賬目標，國際貨幣基金組織（IMF）將擔當監管角色，每半年發表進展報告。有加拿大官員表示，未必真的定出實數目標，重點是龐大貿易順差和逆差的國家都要縮窄雙方之間的差距。

German stand on loan rates to Greece

By Gerrit Wiesmann in Berlin, Chris Bryant in Vienna and Kerin Hope in Athens

Published: April 5 2010 14:45 | Last updated: April 5 2010 14:45

Germany is at loggerheads with other eurozone countries over how much interest to charge debt-ridden Greece if it calls on the emergency loans package agreed in Brussels last month.

The dispute could hold up swift agreement about technical details of a safety net agreed by European leaders and seen as crucial to reducing the risk that Greece will need to call on the loans.

Eurozone leaders agreed at the end of March to offer Greece an emergency loan package from the International Monetary Fund and the eurozone if it was unable to raise debt in the market, but they insisted the interest rate on the European portion of a bail would be unsubsidised.

Most eurozone nations are prepared to offer loans at 4 to 4.5 per cent, the rate paid by the eurozone’s other other big debtors, Ireland and Portugal, EU officials told the Financial Times. But Germany says Athens should pay 6 to 6.5 per cent, the rate it pays on its 10-year bonds.

Donor nations would be able to refinance money lent to Athens at the lower rate without themselves losing money. Germany, these officials said, took the view “unsubsidised” rates meant Greece could only borrow at rates it last paid on the market. Berlin fears a veto from its Constitutional Court if it agrees to cheaper financing.

“If you say Greece’s whole consolidation effort is endangered by it paying such extremely high spreads [against German government bonds] you have to ensure the spread comes down,” one senior EU official told the FT.

“But the Germans say the Greeks have lived beyond their means, they must solve their problems themselves” – and thus pay 3 percentage points more in interest, or twice as much, as Berlin pays on its 10-year bonds.

Greece is pushing for an emergency-loan rate of 4 to 4.5 per cent. “A comparable rate to Portugal is what we’d like to see,” an official said – even as hope is growing in Athens that help might not be needed until later this year.

Like other eurozone capitals, including Berlin, Athens hopes that swift agreement about the details of emergency funding could push Greek rates down and reduce the likelihood of Greece having to tap the emergency reserve.

But even if Greece manages to raise €10bn for its budget in May – and billions more during the year – EU officials fear 2011 and 2012 will prove even tougher for a country with a meagre economic base that might fail to grow.

While officials in several countries said the sum of a package had not been officially set, they said the IMF portion could hit, but not exceed, €10bn – 10 times Greece’s so-called quota at the Washington institution.

Access to the IMF’s standby arrangements should allow Greece to borrow just under a third of this sum at 1.25 per cent, with interest most probably rising to 3.25 per cent for the remaining IMF amount, EU officials said.

Given that European Commission officials said in late March that the eurozone would shoulder two-thirds of any aid, this suggests that combined IMF-eurozone aid could hit €30bn. But EU officials said a total had not been set.

Why Germany cannot be a model for the eurozone

By Martin Wolf

Published: March 30 2010 22:47 | Last updated: March 31 2010 18:19

“The effort to bind states together may lead, instead, to a huge increase in frictions among them. If so, the event would meet the classical definition of tragedy: hubris (arrogance); Ate (folly); nemesis (destruction).” Thus, in December 1991, did I conclude an article on the rush to monetary union. I am aware of the commitment of Europe’s elite to the success of the European project. But the crisis is profound – for the eurozone, the European Union and the world. As Wolfgang Münchau has pointed out, last week’s European Council was not a solution but a fudge.

The immediate challenge is Greece. On this, the heads of government decided that “as part of a package involving substantial International Monetary Fund financing and a majority of European financing, euro area member states are ready to contribute to co-ordinated bilateral loans”. But, it continued: “Any disbursement ... would be decided by the euro member states by unanimity subject to strong conditionality and based on an assessment by the European Commission and the European Central Bank ... The objective of this mechanism will not be to provide financing at average euro area interest rates, but to set incentives to return to market financing as soon as possible.”

Germany, the most powerful eurozone member, got its way. But the outcome was unpopular elsewhere, not least in France, and with the ECB, which does not want the Fund to intervene in monetary policy. Nicolas Sarkozy, the French president, must look with horror on intervention by a Washington-based institution headed by Dominique Strauss-Kahn, a heavyweight potential rival for his job.

Yet it would be quite wrong to conclude that this is a big victory for the IMF or even for Germany. The outcome looks unworkable.

First, would this be an IMF or an EU programme? What happens if the IMF disagrees with the Commission? Such disagreement seems likely. The fiscal tightening agreed by Greece, of 10 per cent of gross domestic product over three years, looks impossible, given the absence of monetary policy or exchange rate flexibility. Maybe no programme would succeed given the unfavourable initial conditions.

Second, what are the chances that the eurozone would act unanimously in support of an IMF programme?

Finally, why should the envisaged “help” help? Greece’s immediate problem is the high interest rates it is paying (see chart). To offer liquidity at a penal rate, when Greece has no access to the market, would worsen its solvency problem. Moreover, by the time this assistance were offered, it would be far too late.

So far, so bad. It is when one looks at the big challenges that things look truly frightening. One worry is the unwillingness to accept default. More important, Germany’s views on how the eurozone should work are wrong.

Herman Van Rompuy, president of the European Council, stated after the meeting that “we hope it will reassure all the holders of Greek bonds that the eurozone will never let Greece fail”. Only two ways of meeting this commitment exist: either members write blank cheques in favour of one another or they take over the public finances – and so the government – of errant members. Germany would never permit the former; but politics would never permit the latter, particularly in the big countries. Thus, Mr Van Rompuy’s statement looks absurd.

Now turn to the bigger point. Last week’s statement also argued that “the current situation demonstrates the need to strengthen and complement the existing framework to ensure fiscal sustainability in the eurozone and enhance its capacity to act in times of crises. For the future, surveillance of economic and budgetary risks, and the instruments for their prevention, including the excessive deficit procedure, must be strengthened.”

The ruling idea here is that the weakening of fiscal positions in peripheral countries reflects a lack of fiscal discipline. That is true of Greece and, to a lesser extent, Portugal. But Ireland and Spain had what seemed to be rock-solid fiscal positions (see charts). Their weakness lay in private sector financial deficits. It was only when the private sector corrected after the crisis that the fiscal deficit exploded. Since the problem was in the private, not the public sector, monitoring must also focus on the private not just the public sector.

Yet the asset bubbles and private sector credit expansions in the periphery were also the mirror image of the absence of growth in real demand in the core (see chart). This was how the ECB’s monetary policy produced a more or less adequate rate of expansion of overall eurozone demand. So, as soon as we ask what was the underlying cause of the fiscal catastrophes of today, we must realise that they were ultimately the result of reliance on an accommodative monetary policy, employed to offset the feeble growth of demand in the eurozone’s core and, above all, in Germany.

Such a discussion of internal eurozone demand and imbalances is not one German policymakers wish to have. So long as that is the case, the prospect for the “improved economic co-ordination” mentioned in the Council statement is nil. Worse, Germany does wish to see a sharp move by its partners towards smaller fiscal deficits. The eurozone, the world’s second largest economy, would then be on its way to being a big Germany, with chronically weak internal demand. Germany and other similar economies might find a way out through increased exports to emerging countries. For its structurally weaker partners – especially those burdened by uncompetitive costs – the result would be years of stagnation, at best. Is this to be the vaunted “stability”?

The project of monetary union confronts a huge challenge. It has no easy way of resolving the Greek crisis. But the bigger issue is that the eurozone will not work as Germany wishes. As I have argued previously, the eurozone can become Germanic only by exporting huge excess supply or pushing large parts of the eurozone economy into prolonged slump, or, more likely, both. Germany could be Germany because others were not. If the eurozone itself became Germany, I cannot see how it would work.

Evidently, Germany can get its way in the short run, but it cannot make the eurozone succeed in the way it desires. Huge fiscal deficits are a symptom of the crisis, not a cause. Is there a satisfactory way out of the dilemma? Not so far as I can see. That is really frightening.

Germany’s Bank-Asset-Berg

Posted by Tracy Alloway on Mar 18 08:45.

The ABCP Matterhorn? Der Asset-Alps? Das Bank-Massiv?

Below is the net foreign asset position of banks in Germany, France, Italy and Spain.

The chart uses BIS data and was created by financial consultant Achim Dübel.

Put simply, net asset positions are assets minus liabilities — so you can see that German banks’ accumulation of foreign assets (or decrease in liabilities) has been growing substantially:

Much of that is probably down to developments in Landesbanken — Germany’s public sector banks — in the first half of the last decade. In 2001, the European Commission abolished state guarantees for the Landesbanks, but the institutions were granted a four-year adjustment period.

To counter, or prepare for the loss of the state guarantees, the Landesbanks went on something of a shopping spree — snapping up high-yield assets, the effect of which you can see in the chart.

During the financial crisis, Germany’s mountain of assets seems only to have gotten bigger.

Here’s what Dübel says:

The public Landesbanken must have issued several 100 billions in additional taxpayer debt between 2001-2005 . . . So that added to the ‘natural’ surplus by excess private sector savings an element of publicly sponsored autonomous capital investment . . .

In more detail:

There is ‘endogenous’ capital export stemming from foreign excess demand for German manufacturing goods and our ageing effects leading to higher savings ratios; but there has also been huge ‘autonomous’ capital export, such as the US investments of the Landesbanken with taxpayer money (estimates go to some 400bln . . . but you see the 2001-2005 issuance effect quite clearly in the net position; and there are of course follow-on effects as the ABCP consolidation took place in 2007 and 2008), such as the huge international state and commercial mortgage finance investments of mortgage banks, or ship investments of ship banks, with Pfandbriefe.

Now, autonomous capital exports come back as additional excess demand for German manufacturing goods; however they clearly created a bubble . . . Both Landesbanken and mortgage banks . . . only survive with government guarantees.

This . . . matches the huge German capital account surpluses on record and comes close to the implicit guarantee the German sovereign is shouldering;

Shadow (banking) debt anyone?

For German-speakers, a much longer version of the above here.

Related links:
Green shoots: artificial flowers - FT Alphaville
China and Germany unite to oppose deflation – Martin Wolf, FT
Don’t forget the German banks – FT Alphaville
Denial, coverup, and the blaming of others – International Economy

Reasons to be cheerful about Europe

By David Marsh

Published: March 24 2010 18:20 | Last updated: March 24 2010 18:20

There has been a great deal of gloom about Europe since the Greek debt crisis began. This has diverted attention from good news about the European economy. The clouds over Greece have been obscuring some fundamentally positive developments favouring European financial markets.

1. The euro has been falling rapidly against the dollar because of Greek debt worries – an enormous boost to export-orientated companies across Europe, especially in Germany and the Netherlands but also in hard-pressed peripheral states. The euro’s fall against the renminbi and other dollar-pegged Asian currencies also has a useful side-effect, indirectly helping the campaign of the US Congress for an overall appreciation of the Chinese currency.

2. At last, the euro area has had a crisis – after 10 years of waiting for one to happen. This is just what is needed to galvanise government leaders in countries such as Greece into action to correct disastrous policy shortcomings. Europe always responds best when it is in a tight spot. It is certainly in one now.

3. Germany is basically in charge of Europe. Other countries may not like it, but this underpins the future solidity of the euro and lowers the risk that the Greek imbroglio will turn into a catastrophe. However, Berlin does need to pay attention to its policy presentation skills. The German government’s inability to consult the Bundesbank over its recent recommendations for a “European Monetary Fund” has been somewhat alarming.

4. Emerging economies that are large buyers of European capital goods are recovering more rapidly than expected. This is good news for manufacturing leaders across Europe’s industrial heartlands. Over time, Asia and other developing regions will switch to much greater domestic consumption. There will be less eastern capital market fodder for debt-hungry western governments. But European companies exporting products ranging from escargots to excavators will have a field day.

5. The European Central Bank is highly unlikely to raise interest rates in the near future. A continuation of easy money will be good for equities.

6. The sense of impending doom surrounding Greece has acted as a useful reminder to other European governments of the dangers of Greek-style profligacy. This portends downward pressure on wages and government spending across Europe – great news for the corporate sector.

7. There have been some signs of a pick-up in consumption in Germany, which in Europe acts as a smaller version of China, with bloated savings, a large current account surplus, an ageing population and inadequate domestic demand. That may herald a more balanced European economy.

8. Disputes between Germany and France over running European policies may be less frequent in future. France is pleased that the German government has indicated it may help fund a Greek bail-out, while Germany is pleased that France is backing German-style budgetary and monetary stringency. That consensus may eventually turn out to be an illusion – but it suits nearly everyone for now and may hold for a while.

9. The increasing gap in economic growth between Europe and Asia is starting to make an impression on the public consciousness in the Old Continent. There is now much higher awareness that Europe needs a decisive strategy in areas such as research and development and education to rebuild economic prowess. European companies with strengths in science, technology and engineering can thus expect a more benevolent policy-making environment in the coming years.

10. Germany seems likely to secure the presidency of the European Central Bank next year for Axel Weber, currently head of the Bundesbank – Berlin’s prize for signing a modest number of cheques to help some errant members of the euro club balance their books. With a German at the ECB helm for an eight-year term, Germany will remain a full-hearted member of the single currency at least until 2019 – giving Europe a 10-year-stretch of Bundesbank-style discipline and predictability, from which investors and consumers in Europe will surely benefit.

‘Some useful things I’ve learned about Germany’s hyperinflation’

Posted by Tracy Alloway on Mar 01 10:25.

That’s from Dylan Grice — über-bear Albert Edwards’ sidekick at Societe Generale.

He’s done a review of inflation during the Weimar Republic inflation in his latest `Popular Delusions’ note. Prussian central banker Rudolf von Havenstein developed a habit of monetising Germany’s debt during the First World War, eventually leading to massive bouts of hyperinflation:

Amazingly, von Havenstein got away with the move largely because a school of economic thought at the time held that increasing money supply had nothing to do with the rate of inflation. Instead Germans were told the high rates of inflation were all down to external factors; foreigners to be exact, and the reparations Germany had to pay them. Oh, and a hefty portion of blame was laid on speculators too.

It’s an interesting historical economic rundown, but you can probably see where Grice is going with it:

I don’t want to overplay the parallels. In fact, there is one very clear difference between the hand Von Havenstein had to play then and those today’s central bankers have to play now, namely the stability of today’s political climate. Clearly this can change, but the class warfare, nationalistic xenophobia and revolutionary spirit poisoning the political atmosphere of 1920s Germany is at the very least dormant today, and certainly not meaningfully visible across the political landscape. But let’s not ignore the parallels either: as is the case for today’s central bankers, Von Havenstein was faced with horrible fiscal problems; as is the case for today’s central bankers, the distinction between fiscal and monetary policy had blurred; as is the case for today’s central bankers, the political difficulty of deflating was daunting令人怯步的;使人氣餒的; and as is the case for today’s QE-enthralled central bankers, apparently respectable economic theory reassured him that he was doing the right thing.

One might think that the big difference is that today we have a greater expertise. Surely we understand what happens when deficits are financed with printed money, and that it is only backward and corrupt states that don’t know any better, like Bolivia and Zimbabwe? But just a few years ago didn’t we think that it was only backward and corrupt states that suffered banking crises too?

And anyway, how could Von Havenstein not have known that the continued and escalating printing of money to fund government deficits would cause inflation? The United States experience of unrestrained money printing during the Civil War had been well documented, as had the hyperinflation of revolutionary France in the late 18th century. Isn’t it possible that, like today, he was overconfident in his ability to control his creation and in the economic theory which told him such control was possible? Certainly, in an article in the New York Times on the eve of the First World War, again from Liaquat Ahamed’s book, there seems to have been evidence of the general optimism that there would be no “unlimited issue of paper money and its steady depreciation … since monetary science is better understood at the present time than in those days.”

The fact is we do understand the economics of inflation. Despite what economists everywhere say about being in `uncharted territory’ with QE, we know that if you keep monetizing deficits eventually you get inflation, and we know that once you’re on that path it can be extremely difficult to get off it. But we knew that then. The real problem is that inflation is an inherently political variable and that concern over debt sustainability and unfunded welfare obligations leaves us more dependent on politicians than we have been in many decades. Frank Graham concluded his 1930 study of the Weimar hyperinflation with the following observation, which I think is as ominous as it is apt today:

“The mills of international finance grind slowly but their capacity is great. It is also flexible. The one condition is that the hoppers be not unduly loaded in the effort to get the whole grist from a single grinding. So much for the economics of the question. What politics has in store is, however, an inscrutable mystery. It can only be said that such financial difficulties as may occur will almost certainly arise from political rather than from economic sources.”

Related links:
Deflation dead and deader, Federal Reserve style – FT Alphaville
Of bonds and stocks and the Weimar Republic - FT Alphaville

Germany, France Back IMF Greek Role, Official Says

By James G. Neuger and Brian Parkin

March 24 (Bloomberg) -- Germany and France, paving the way for a European Union plan to aid Greece, agreed to involve the International Monetary Fund in any potential EU package for the debt-burdened nation, a German Finance Ministry official said.

The shift toward an IMF role before an EU summit that starts tomorrow came a week after euro-area finance ministers agreed to a European framework for a bailout. German Chancellor Angela Merkel, who says her taxpayers shouldn’t pay for the region’s biggest budget deficit, then pushed for a greater IMF involvement. That reversal put her at odds with French President Nicolas Sarkozy, who called for an EU solution.

“It seems like a U-turn but it’s a sensible solution,” said Julian Callow, chief European Economist for Barclays Capital in London. “The IMF brings credibility and transparency and anything that gives investors a degree of comfort is good. The situation has been from the outset that there is no European mechanism in place to deal with a situation like this. This is what the IMF is there for.”

Franck Louvrier, a spokesman for Sarkozy, wasn’t available to comment and didn’t respond to e-mails.

With allies dropping their resistance to IMF involvement, Merkel agreed to sign on to a statement at the Brussels summit March 25-26 to create a mechanism to aid indebted members, including Greece, Die Welt reported yesterday. A government spokesperson denied that Merkel had agreed to an EU plan.

Greek Bonds Gain

The euro dropped to a 10-month low against the dollar and declined to a record against the Swiss franc. Europe’s single currency slipped as much as 0.7 percent to $1.3407 and fell as low as 1.4233 francs, the lowest since the euro started in 1999. Greek bonds gained yesterday, with the yield on the benchmark 10-year note falling 14 basis points to 6.34 percent.

While German Finance Minister Wolfgang Schaeuble resisted IMF involvement, he told the Frankfurter Allgemeine Zeitung that turning to the Washington-based lender to help Greece “can and must only be an exception.”

Greek Prime Minister George Papandreou has been urging EU allies to give details of an aid package to shore up investor confidence and bring down borrowing costs. Greece’s 10-year bonds now yield twice comparable German debt. That financing premium led Papandreou to say on March 19 that Greece, which needs to sell about 10 billion euros ($14 billion) of bonds in coming weeks, is a step away from not being able to borrow and may need to turn to the IMF if European aid isn’t forthcoming.

Three Conditions

Merkel set three conditions for supporting EU assistance another German official said yesterday on condition of anonymity. Aid would be made available only if Greece couldn’t raise funds in financial markets, the IMF makes a substantial contribution and EU sanctions against deficit-limit violators are stiffened 使頑強,使堅定;使強硬.

“The euro area’s ability to impose the rules that it already has have been inadequate,” David Mackie, chief European economist at JPMorgan Chase & Co said. “In some sense you have to bring someone in who does a better job of it. The existing rule book has failed otherwise we wouldn’t be in this mess.”

French pleas for a European package led Michael Meister, parliamentary group finance spokesman for Merkel’s party, to say in an interview: “If France wants an agreement on aid for Greece at the summit then it should go it alone and supply aid itself and not expect Germany to do the same.”

‘Interpreted as Weakness’

Many European officials have resisted calling in the IMF. Falling back on the lender of last resort “could be interpreted as some sign of weakness of our institutions,” ECB Vice President-elect Vitor Constancio said yesterday. The euro has declined almost 6 percent this year on concern that Greece’s financial woes threatened the future of monetary union.

“Markets have considered the problems by individual member states as a de facto test for the single currency,” the Finnish central bank said in a report published in Helsinki today.

The agreement on the IMF role came as EU President Herman Van Rompuy pushed to bridge the differences an aid to Greece and after Sarkozy called for a meeting of euro-region leaders before the Brussels gathering to take up the issue.

Van Rompuy pursued a similar strategy last month, when he delayed the start of the Feb. 11 summit to broker an accord in principle “to take determined and coordinated action” to safeguard the euro area.

‘Positive’ Results

Greek Finance Minister George Papaconstantinou said that he expected “positive” results from the summit and preferred a European solution for any potential aid. “We want to borrow with better rates and believe this will happen with the implementation of the deficit plan,” he said at a conference in Athens yesterday.

Greece is banking on wage cuts and tax increases to shave the deficit to 8.7 percent of gross domestic product this year from 12.7 percent in 2009, the highest in the euro’s 11-year history. Papaconstantinou said that target is reachable even if the economy shrinks as much as 2 percent this year.