Portugal & Spain in fear of EU’s non existent fines
April 26, 2016
Yet again the never ending story of Greece reaching another bailout deal is nearing completion. However this time we hear it from the German Finance Minister and given that the Germans have historically been the ones to drag their feet on any progress we can be pretty confident that a deal will be made and should go through. Greece is certainly nowhere near out of the woods yet, in fact they are barely keeping their heads above water, at least they aren’t being dunked by Germany anymore.
Portugal and Spain are likely to be put in the stocks for missing deficit targets according to various sources at the EU. However the punishment for such a crime has not yet been confirmed and there is still a chance they will be given more time. One source said that the fines may be set at zero so the step is only symbolic, or non-existent dependent upon your interpretation of the English language. Only a central governance body could come up with a fine at zero.
US Banks are being scrutinised as regulators call for banks to have a years’ worth of liquidity, they certainly should do given the amount of cash the Fed have been chucking about for the past eight years. Large banks will have to have enough surplus cash to be able to withstand severe market turmoil lasting as long as a year under a new ruling set to be announced today. Roughly 30 of the US’s largest banks would be required to adjust their balance sheets to allow for this slack. Apparently this will cut the odds the would run into the kind of funding crunch that crippled Bear Stearns and Lehman Brothers. Noah only starting building his Ark because he expected a flood, perhaps the rest of market should start.
Whilst the rest of the world is grubbing around for cash Saudi Arabia are beginning to take on vast plans to steer themselves away from an oil dependent economy. Sweeping plans to end an addiction to oil will start through the creation of a $2 trillion sovereign wealth fund. Most of the cash for which will come from an IPO of less than 5% of Aramco, currently valued at anywhere between $2-2.5 trillion. The IPO would be carried inside Saudi Arabia, a move that would boost the size of the Saudi capital market substantially.
Prince Muhammad’s plans aims are bold, “I think by 2020, if oil stops we can survive.” The world’s largest wealth fund would be managed by an outside board of directors and not Aramco. The fund’s revenues would go into developing the kingdoms cities, increasing tourism, defence and clearly the financial sector.
Today another pretty quiet day on the data front, this afternoon US durable goods orders and US consumer confidence.
Have a great day.