Category Archives: European Update

European Bank Stress Tests: Just One Step in the Right Direction

The European Central Bank (ECB)  has announced the results of the stress test exercise over the banking system. Out of 130 banks scrutinized 25 failed, revealing capital shortfalls for a total of about 25 billion euros. Out of these 25 banks, nine are Italian, three Greek and three Cypriot. In several cases, plans were already [...]

Five Themes of the Week

The disappointing employment report in the U.S. came at the end of an eventful week in the global economy. Central bankers met and took action in Europe, but held their ground in Japan. Political risks heightened in the United Kingdom, while they appeared to abate in Ukraine

ECB Decision: The Choice of the Glutton, with Nothing Left on the Table

Standing before a smorgasbord of policy options, the president of the European Central Bank (ECB), Mario Draghi, made the choice of the glutton; he chose them all: lower interest rates, expansion of the balance sheet, short-term financing to banks and forward guidance. Short of purchasing sovereign bonds and throwing in the kitchen sink, practically every [...]

Economic Consequences of Crisis in Ukraine

We are optimistic that there will be no further escalation, i.e., it is unlikely that Russia’s President Vladimir Putin will move his forces further west into Ukraine beyond the Crimea. The reason is, neither country can afford the political and economic costs of escalation. Our baseline scenario is for a short-lived crisis, the de facto [...]

Russian Troops in Crimea Trigger “Flight To Safety”

A global “flight to safety” is taking place in financial markets since Russia took de facto military control over the Ukrainian southern peninsula of Crimea over the weekend. Equities were hit in Asia, Europe and emerging markets overnight, while Treasury bonds rallied. Financial markets in Russia were hit even harder. Oil prices have also risen, [...]