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Confused by the implications of Draghi’s pre-leaked speech? Don’t worry, you are not alone. As the following sampling of opinions by Wall Street experts via Reuters confirms, opinions range from the positive to the negative, to the completely clueless. IOAN SMITH, STRATEGIST, KNIGHT CAPITAL “With regards to seniority this point is important. Pari passu will not apply to existing SMP holdings which suggest dealing with Greece remains a problem. A precedent was [...] DEVELOPING: Draghi: Growth is expected to remain weak Draghi: “governing council today decided on modalities for undertaking outright monetary transactions. OMTs. In secondary markets.” DRAGHI SAYS GOVERNMENTS MUST BE READY TO ACTIVATE EFSF, ESM DRAGHI SAYS ECB TOOK DECISION ON COLLATERAL ECB CUTS 2012 GDP FORECAST TO -0.4% FROM -0.1% Draghi: ECB inflation forecast 2012 2.4-2.6% 2013 1.3-2.5%, higher than June forecast DRAGHI SAYS IMPORTANT FOR BANKS TO BOOST RESILIENCE IF NEEDED. Draghi : ECB can undertake outright [...] This morning, BofA economist Laurence Boone said in a note to clients that given all of the leaked details and investors’ high expectations that the ECB will announce a game-changer for the euro crisis today, there isn’t much left that the ECB could say to give markets a positive surprise. However, there are a few things they could still do keep the market rally going. Here is Boone’s take: We have argued [...] http://www.twitter.com/FGoria *MERKEL SAYS EURO AREA NEEDS MORE COHERENCE (yes, thank you, water is wet) http://www.zerohedge.com/news/merkel-monti-mumble-sweet-nothings-market-moves-higher European Economic and Monetary Affairs Commissioner Olli Rehn spoke with Bloomberg TV’s Sara Eisen today and said that Spain’s government is considering a request for a bailout. Rehn said, “The Spanish government has an open mind on this issue, but no decision has been made. We stand ready to act if there is a request.” Rehn also said that “negative bond yields are not a healthy phenomenon. They’re not good for [...] The short-end of the Spanish curve is collapsing rapidly, and at last check was tighter by nearly 70 bps even with the 10 Year essentially unchanged, for one simple reason: more hope and prayer. This time we have completely unconfirmed and unverified talk that either the ECB will hold another conference, or that Spain will finally request a full blown bailout. Neither is likely to happen, certainly not on a Friday. In [...] UPDATE: It would appear the right hand has no idea what the left hand is doing in Spain, as via Bloomberg: *MONTORO SAYS VALENCIA HASN’T SOUGHT RESCUE but *VALENCIA TO TAP SPAIN’S REGIONAL FINANCING FACILITY Just as today’s largely expected announcement that the Eurogroup has formally agreed to accpet the Spanish bail out (details still lacking), the Spanish region of Valencia just became the second to officially demand [...] From Citi’s Willem Buiter… After Spain’s still-to-be-finalised euro area bank bail-out, we expect it to be in a troika programme with sovereign conditionality, quite possibly soon. New Democracy. Syriza. Doesn’t matter. According to Citi’s senior political analyst Tina Fordham, chief economist Willem Buiter, and global economist Ebrahim Rahbari, “any new Greek government, regardless of its composition, will struggle with implementation challenges related to the imposition of further austerity measures demanded by the Troika in exchange for further assistance,” and as a result, they “consider it likely that a new troika deal would ultimately fall apart and [...] The week has begun, as Wall Street starts to crank out its takes on the Spanish bailout. First up, a take from Goldman’s Andrew Benito who sees says: “We view this as a positive near-term development for Spain, and in particular for its banks. But it does not solve Spain’s overall fiscal and macroeconomic challenges, which remain substantial.” The problem? Major core structural problems with the Spanish economy: Not Enough, By Itself Will this step [...] Reports citing European sources state that Eurozone finance ministry officials, followed by finance ministers themselves, will hold conference calls on Saturday. A formal request for Spanish EFSF/ESM/IMF support, solely for the purposes of bank recapitalization, could be announced after these calls, and appears to be the motivation for them. As JPMorgan notes, while the timing of such a request would come as something of a surprise, the substance does not. JPMorgan [...] Spanish regional debt currently stands at 13% of GDP and has surged from EUR60bn in 2006 to over EUR140bn currently. As Credit Suisse points out, the top four regions account for the majority of GDP, two-thirds of regional debt, and, with the exception of Madrid, substantially missed their deficit targets. What is more worrisome is the heavily front-loaded nature of the maturing debt with substantial refinancing needs in the next 2 years and this [...] From SocGen: Greece: One step closer to the precipice Greece’s sovereign crisis has reached a critical phase, and the likelihood of a disorderly outcome has risen dramatically in the last 48 hours. Two-year Greek bond yields breached the 30% mark, while Irish and Portuguese yield spreads reached one-year highs. In the meantime, Greek economic and fiscal data continue to disappoint, and public discontent is rising in the face of the [...] From Erik Nielsen Happy Sunday, It’s a beautiful winter day here in Chiswick today: cold and crisp and high blue sky. For Northern Europe, you couldn’t ask for more in mid-December. And Europe is still standing; here’s the way I see it: Merkel’s and Sarkozy’s statements on Friday provide a welcome return to the German-French leadership of Europe. |
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