In particular, the Long Term Refinancing Operation by the European Central Bank has stoked concerns European banks might be close to collapse, while unemployment on the continent continues to climb. The European Central Bank initiated its second loan scheme this week, called the Long Term Refinancing Operation (LTRO.) The scheme is intended to provide European banks unlimited loans for three years at just 1.00%, and since round one in December has been widely credited with preventing a credit crunch in Europe. In the event this second round proved more popular than the first, with 800 banks borrowing €529.5 billion. On the one hand this is testament to the willingness of the ECB to … [Read more...] about Pound to euro rate rises on ECB loan scheme
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UK to dodge the recession bullet?
(In case you don't know, the UK services PMI is a monthly measure of productivity in the UK services industry. It accounts for two thirds of economic output in Britain, and so is crucial in determining UK growth.) This month UK services took market forecasts, chopped them into small chunks with onions and carrots, fried them, and ate them for dinner. The PMI hit 56.0 (releases above 50.0 mean growth and the higher the better.) This compares to 54.0 the month before, and expectations of a slowdown to 53.5. It’s a 10 month high for UK services, and the biggest single jump on record. Great! Of course, before this, economists thought Britain would soon be re-entering recession. The economy … [Read more...] about UK to dodge the recession bullet?
Is Greece poised to give the euro a boost?
For almost eight months, bureaucrats in Athens have been negotiating to convince investors to take a voluntary loss on their bonds, arguing this is the only way Greece can get its debt onto a sustainable footing. Until just the last day or so bondholders have refused, for the good reason that volunteering to take a loss is like opening your wallet to strangers in the street! Somehow or other though EU officials have managed the impossible, and investors stand poised to accept a 50.0% loss on their existing Greek bonds, while accepting an interest rate of just 3.75% on replacements. How then might this help the euro? Because if Greek officials and bondholders had not reached agreement, … [Read more...] about Is Greece poised to give the euro a boost?