Eurozona 02.10.12 (Dokument v AJ)

8/3/2019 Eurozona 02.10.12 (Dokument v AJ)

http://slidepdf.com/reader/full/eurozona-021012-dokument-v-aj 1/5

Market Economics 10 February 2012

Eurozone: Fiscal Update

www.GlobalMarkets.bnpparibas.com Please refer to important information found at the end of the report.

The most recent fiscal news from the eurozone…

Ahead of the Eurogroup meeting yesterday, the leaders of the three political parties in theGreek coalition government reached a final agreement on the additional austeritymeasures demanded by the Troika as a prerequisite to the second rescue package. Therewas, however, no agreement on a deal for Greece at the Eurogroup meeting.

It seems to us that the eurozone officials are frustrated with the way Greece has approachedthe issue so far. The fact that there were many delays in the agreement of the new austerity

measures due to political resistance makes eurozone officials worry about whether Greece issincere in its promises. This was strictly put by the Eurogroup President Jean-ClaudeJuncker yesterday, when he said “in short: no disbursement without implementation”.

There has been talk in recent days of a proposal for the interim government to serve a longerterm, until 2013, rather than the country hold an election in April. However, there is noconsensus on this proposal. One of the members of the coalition government, NewDemocracy party, continues to reiterate its demand for general elections as soon as possible.

Therefore, before Greece has a new government, the Greek parliament’s approval of the newausterity measures before the deal is endorsed is crucial. Eurozone finance ministers made itclear that they would only move forward if at least: (i) the government sets out precisely how itwill find EUR 325mn of savings this year so that pensions are not cut beyond the EUR 300

limit set by the New Democracy leader and supported by LAOS leader, (ii) the Greek MPsapprove the loan agreement in a vote on Sunday and (iii) all the members of the coalitiongovernment give a clear commitment that they would stick to the agreement even aftergeneral elections.

Against this backdrop, the new loan agreement is due to be submitted to the parliamenttoday, with the vote to take place on Sunday. A decision is needed by 15 February, when theEurogroup is expected to convene again on the issue. Given the majority of the coalitiongovernment in the parliament, we believe that the deal is likely to be passed. However, this isnot without risks. The latest press reports suggest some coalition MPs already said they willvote against the agreement.

The resolution of the situation depends on Greece, as most other aspects of the deal seem tohave been finalised. Yesterday, the EU Economic Affairs Commissioner, Olli Rehn, said that“the draft agreement on private sector involvement to decrease the Greek debt burden ispractically finalized…It will help substantially to reduce the Greek debt burden towards 120percent of GDP by 2020” and added that 99% of work on the debt sustainability report isdone.

The involvement of the official sector in the Greek debt restructuring has yet to be clarified,however. At the ECB press conference yesterday, Mr Draghi refused to comment specificallyon the ECB position on the treatment of Greek bonds purchased through the SMP. But, whilehe confirmed that the ECB does not intend to take losses – this would violate the EU Treaty – he seemed to leave the door open to other forms of participation (such as the speculatedswap at below par of the Greek bonds with the EFSF). A decision on this issue will be takenin conjunction with other pending issues on the Greek deal.

We believe that, in order to achieve 100% participation in the PSI, collective action clauses(CACs) will be inserted and activated. In this respect, the ECB exchanging its Greek bondholdings with the EFSF bonds beforehand looks like the most likely option at the moment.

At the ECB press conference yesterday, most of the Q&A was dedicated to the new collateral



IMPORTANT NOTICE. Please refer to important disclosures found at the end of this report.www.GlobalMarkets.bnpparibas.com

rules, as the ECB approved the eligibility criteria for the acceptance of additional creditclaims as collateral in its refinancing operations. The new measures should lead to anincrease in available collateral of EUR 600-700bn (EUR 200-300bn once haircuts areapplied), according to Mr Draghi. Note that only seven central banks have submittedproposals so far (France, Italy, Spain, Austria, Portugal, Ireland and Cyprus, but more could

follow), confirming press speculation that some national central banks opted out. The decisionon additional collateral was “not unanimous” in Draghi’s words but “not particularlycontentious” either, suggesting that divisions within the board remain limited. This is importantin assessing the probability of further monetary easing.

German Finance Minister, Wolfgang Schauble, said during an informal talk with thePortuguese Finance Minister, Vitor Gaspar, that Germany would support a new or arenewed rescue programme for Portugal, once the Greek situation is resolved. Whileappreciating the support, the Portuguese Finance Minister later denied the need for a newprogramme and reiterated that the country will return to the markets in 2013.

Portugal is likely to experience a sharp decline in GDP over the next few years as a responseto fiscal tightening, well beyond the initial assumptions underlying the EU/IMF programme.

With elevated long-term bond yields, this implies the need for either additional public financingand/or restructuring of past debt. We think the former is the most likely option, but we cannotrule out the latter. Should there be a restructuring, we believe the contagion effect would besignificant, at least in the near term, despite the firewall set up by the EU authorities.

The Spanish cabinet will meet today to approve a reform of the labour market. The objectiveof this reform is to improve the competitiveness and flexibility of the Spanish workforce.According to the latest press reports, this reform could include a reduction in the redundancycompensation to 22 or 33 days per annum from the current 45 days, changes tothe collective bargaining system and a greater harmonisation of fixed and temporarycontracts.

Gizem KaraTel: 44 20 7595 8783Email: [email protected]

Luigi SperanzaTel: 44 20 7595 8322Email: [email protected]

Ricardo SantosTel: 44 20 7595 8369Email: [email protected]




Fiscal Monitor www.GlobalMarkets.bnpparibas.com

Ratings MonitorChart 1: Sovereign 5yr CDS & Credit Ratings

0

200

400

600

800

1000

1200

AA+ AA- A BBB+ BBB- BB B+

Rating (Avg. of Moody's, S&P, Fitch)

5 y r S o v e r e i g n

C D S (

b p )

Philippines

Romania

Colombia

Indonesia

TurkeyIceland

Bulgaria

Brazil

Kazakhstan

Hungary

Russia

Mexico

Thailand

Poland

Bahrain

Portugal

Ireland

Italy

Spain

S. Korea

Belgium

Slovenia

JapanAustralia

UK

US

France

Chile

China

Slovakia

Switz.Norway

Sweden

0

200

400

600

800

1000

1200

AA+ AA- A BBB+ BBB- BB B+

Rating (Avg. of Moody's, S&P, Fitch)

5 y r S o v e r e i g n

C D S (

b p )

Philippines

Romania

Colombia

Indonesia

TurkeyIceland

Bulgaria

Brazil

Kazakhstan

Hungary

Russia

Mexico

Thailand

Poland

Bahrain

Portugal

Ireland

Italy

Spain

S. Korea

Belgium

Slovenia

JapanAustralia

UK

US

France

Chile

China

Slovakia

Switz.Norway

Sweden

Source: Bloomberg, BNP Paribas, Note: the chart does not include Greece

The chart above plots the relationship between sovereign ratingsand CDS spreads. Portugal, for example, is still trading at levelsconsistent with further downgrades.

Chart 2: Greece – Credit Ratings

C

CCC-

CCC+

B

BB-

BB+

BBB

A-

A+

AA

AAA

Jan-09 Jul-09 Jan-10 Ju l-10 Jan-11 Jul-11 Jan-12

Moody's

FitchS&P

C

CCC-

CCC+

B

BB-

BB+

BBB

A-

A+

AA

AAA


Moody's

FitchS&P

Source: Bloomberg, BNP Paribas

Chart 4: Portugal – Credit Ratings

C

CCC-

CCC+

B

BB-

BB+

BBB

A-

A+

AA

AAA


Moody's

Fitch

S&P

C

CCC-

CCC+

B

BB-

BB+

BBB

A-

A+

AA

AAA


Moody's

Fitch

S&P


Table 1: Eurozone Credit Ratings

Moody’s S&P Fitch

Rating Last Chg Rating Last Chg Rating Last Chg

AT Aaa - AA+ (-) 13/1/12 AAA -

BE Aa3 (-) 16/12/11 AAu (-) 25/11/11 AA (-) 27/01/12

FI Aaa - AAA (-) - AAA -

FR Aaa - AA+ (-) 13/1/12 AAA -

GE Aaa - AAAu - AAA -

GR Ca* 25/7/11 CC (-) 27/7/11 CCC 13/7/11

IR Ba1 (-) 12/7/11 BBB+ (-) 1/4/11 BBB+ (-) 14/4/11

IT A2 (-) 4/10/11 BBB+ (-) 13/1/12 A- (-) 27/01/12

ND Aaa - AAAu (-) - AAA -

PT Ba2 (-) 5/7/11 BB (-) 13/1/12 BB+ (-) 24/11/11

SP A1 (-) 18/10/11 A (-) 13/1/12 A (-) 27/01/12


Note: u: unsolicited

(-): negative outlook

* : developing outlook

Chart 3: Ireland – Credit Ratings

C

CCC-

CCC+

B

BB-

BB+

BBB

A-

A+

AA

AAA

Ja n-09 Ju l-09 Jan -10 Ju l-10 Jan -11 Ju l-11 Jan -12

Moody's

FitchS&P

C

CCC-

CCC+

B

BB-

BB+

BBB

A-

A+

AA

AAA

Ja n-09 Ju l-09 Jan -10 Ju l-10 Jan -11 Ju l-11 Jan -12

Moody's

FitchS&P


Chart 5: Spain – Credit Ratings

C

CCC-

CCC+

B

BB-

BB+

BBB

A-

A+

AA

AAA

Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12

Moody's Fitch

S&P

C

CCC-

CCC+

B

BB-

BB+

BBB

A-

A+

AA

AAA

Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12

Moody's Fitch

S&P






Growth MonitorChart 1: Industrial Production (% y/y)

Source: Reuters EcoWin Pro

Among the so-called ‘peripherals’, industrial production continuesto contract in Greece. In Portugal and Spain, production has beenbroadly flat over the last year, but is now trending lower.

Chart 3: Manufacturing Sentiment


Manufacturing sentiment in the peripherals remains well below theeurozone average.

Chart 5: Consumer Sentiment


Consumer confidence for the eurozone overall is below its long-term average. Sentiment indices in the peripherals remain wellbelow their historical averages. In Portugal, sentiment is trendinglower, which is unsupportive of consumer spending.

Chart 2: Retail Sales (% y/y)


Consumer spending is weakening in Portugal and Spain.

Chart 4: Services Sentiment


Services sentiment is generally weaker.

Chart 6: Current Account (% GDP)


In Portugal and Greece, the current account deficit remains wide,reflecting persistent imbalances between domestic savings andinvestment. In contrast, Spain’s current account deficit narrowedfrom 10% of GDP in 2008 to 4.5% last year. In Ireland, the current

account has returned to a surplus.





RESEARCH DISCLAIMERS:

IMPORTANT DISCLOSURES: Please see important disclosures in the text of this report.

The information and opinions contained in this report have been obtained from, or are based on, public sources believed to bereliable, but no representation or warranty, express or implied, is made that such information is accurate, complete or up to dateand it should not be relied upon as such. This report does not constitute an offer or solicitation to buy or sell any securities orother investment. Information and opinions contained in the report are published for the assistance of recipients, but are not tobe relied upon as authoritative or taken in substitution for the exercise of judgement by any recipient, are subject to changewithout notice and not intended to provide the sole basis of any evaluation of the instruments discussed herein. Any reference topast performance should not be taken as an indication of future performance. To the fullest extent permitted by law, no BNPParibas group company accepts any liability whatsoever (including in negligence) for any direct or consequential loss arisingfrom any use of or reliance on material contained in this report. All estimates and opinions included in this report are made as ofthe date of this report. Unless otherwise indicated in this report there is no intention to update this report. BNP Paribas SA andits affiliates (collectively “BNP Paribas”) may make a market in, or may, as principal or agent, buy or sell securities of any issueror person mentioned in this report or derivatives thereon. BNP Paribas may have a financial interest in any issuer or personmentioned in this report, including a long or short position in their securities and/or options, futures or other derivativeinstruments based thereon, or vice versa. BNP Paribas, including its officers and employees may serve or have served as anofficer, director or in an advisory capacity for any person mentioned in this report. BNP Paribas may, from time to time, solicit,perform or have performed investment banking, underwriting or other services (including acting as adviser, manager,underwriter or lender) within the last 12 months for any person referred to in this report. BNP Paribas may be a party to anagreement with any person relating to the production of this report. BNP Paribas, may to the extent permitted by law, haveacted upon or used the information contained herein, or the research or analysis on which it was based, before its publication.BNP Paribas may receive or intend to seek compensation for investment banking services in the next three months from or inrelation to any person mentioned in this report. Any person mentioned in this report may have been provided with sections ofthis report prior to its publication in order to verify its factual accuracy.

BNP Paribas is incorporated in France with limited liability. Registered Office 16 Boulevard des Italiens, 75009 Paris. This reportwas produced by a BNP Paribas group company. This report is for the use of intended recipients and may not be reproduced (inwhole or in part) or delivered or transmitted to any other person without the prior written consent of BNP Paribas. By acceptingthis document you agree to be bound by the foregoing limitations.

Certain countries within the European Economic Area:

This report is solely prepared for professional clients. It is not intended for retail clients and should not be passed on to any such

persons.

This report has been approved for publication in the United Kingdom by BNP Paribas London Branch. BNP Paribas LondonBranch is authorised and supervised by the Autorité de Contrôle Prudentiel and authorised and subject to limited regulation bythe Financial Services Authority. Details of the extent of our authorisation and regulation by the Financial Services Authority areavailable from us on request.

This report has been approved for publication in France by BNP Paribas, a credit institution licensed as an investment servicesprovider by the Autorité de Contrôle Prudentiel whose head office is 16, Boulevard des Italiens 75009 Paris, France.

This report is being distributed in Germany either by BNP Paribas London Branch or by BNP Paribas Niederlassung Frankfurtam Main, regulated by the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin).

United States: This report is being distributed to US persons by BNP Paribas Securities Corp., or by a subsidiary or affiliate ofBNP Paribas that is not registered as a US broker-dealer to US major institutional investors only. BNP Paribas Securities Corp.,a subsidiary of BNP Paribas, is a broker-dealer registered with the Securities and Exchange Commission and a member of the

Financial Industry Regulatory Authority and other principal exchanges. BNP Paribas Securities Corp. accepts responsibility forthe content of a report prepared by another non-US affiliate only when distributed to US persons by BNP Paribas SecuritiesCorp.

Japan: This report is being distributed to Japanese based firms by BNP Paribas Securities (Japan) Limited or by a subsidiary oraffiliate of BNP Paribas not registered as a financial instruments firm in Japan, to certain financial institutions defined by article17-3, item 1 of the Financial Instruments and Exchange Law Enforcement Order. BNP Paribas Securities (Japan) Limited is afinancial instruments firm registered according to the Financial Instruments and Exchange Law of Japan and a member of theJapan Securities Dealers Association and the Financial Futures Association of Japan. BNP Paribas Securities (Japan) Limitedaccepts responsibility for the content of a report prepared by another non-Japan affiliate only when distributed to Japanesebased firms by BNP Paribas Securities (Japan) Limited. Some of the foreign securities stated on this report are not disclosedaccording to the Financial Instruments and Exchange Law of Japan.

Hong Kong: This report is being distributed in Hong Kong by BNP Paribas Hong Kong Branch, a branch of BNP Paribas whosehead office is in Paris, France. BNP Paribas Hong Kong Branch is regulated as a Registered Institution by Hong Kong MonetaryAuthority for the conduct of Advising on Securities [Regulated Activity Type 4] under the Securities and Futures Ordinance.

Some or all the information reported in this document may already have been published on https://globalmarkets.bnpparibas.com

© BNP Paribas (2012). All rights reserved.

Eurozona 02.10.12 (Dokument v AJ)

Documents

Transcript of Eurozona 02.10.12 (Dokument v AJ)