IMF: European banks do not perform their duty to real economy

Sharon Bowles, (ALDE, UK), President of the EU Parliament Committee of Economic and Monetary Affairs (on the left) during Economic Dialogue and exchange of views with Minister for Finance of Ireland Michael Noonan. (European Parliament photographic library).

Sharon Bowles, (ALDE, UK), President of the EU Parliament Committee of Economic and Monetary Affairs (on the left) during Economic Dialogue and exchange of views with Minister for Finance of Ireland Michael Noonan. (European Parliament photographic library).

During this week everybody took an interest on Europe’s and more so on Eurozone’s financial standing. During the last two days Jörg Asmussen, Member of the Executive Board of the ECB, the International Monetary Fund and the European Council Presidency came out to either criticise or reassure everybody that the European financial and banking system has made remarkable progress towards a sustainable status. The arguments in favour of the European financial system included the marked decrease of the Italian and Spanish sovereign bonds yields, the substantial betterment of the liquidity position of banks and the tangible progress towards the EU banking union, with a deal brokered in Brussels to make the European Central Bank responsible for supervising the major European lenders.

No need to mention that all those positive remarks came from Asmussen and the Irish Presidency of the European Council. Not surprisingly the IMF report painted a slightly different picture. Obviously Asmussen and the EU Council Presidency tried to focus on the bright side of the moon. More so the Irish Presidency, because the politicians who are powering it, have a very strong interest to appear active and successful.

Back in Dublin the Irish Press is following very closely what is happening in Brussels and the country’s minister of Finance, Michael Noonan, doesn’t leave the slightest opportunity to show off his abilities in managing the European affairs. By been seen that he is helping the entire Eurozone promote its financial stability, he expects not only a positive assessment by the Irish Press, but also a positive attitude by the Brussels authorities towards his country’s problems. This may greatly help Ireland reduce its debt burden and Noonan increase his political capital.

IMF’s criticism

It’s not the same with the IMF. The Fund’s Global Financial Stability Report is not of course unduly negative towards the European financial system, but nor it appears ready to overlook the drawbacks. In this respect the IMF report is observing that the European financial system doesn’t perform its duties towards the real economy. The relevant quote is very informative: “In spite of the recent improvements in market conditions, credit is not adequately flowing in the euro area periphery.
* Small and medium-sized companies, which are the backbone of employment, are particularly affected by the increased cost and limited supply of bank credit.
* The periphery corporate sector is also facing a large debt overhang, which was built up before the crisis.”

IMF’s report identifies also a weak tail of listed companies in the periphery that need to reduce their debt over time. The required debt reduction by these companies accounts for a fifth of the total debt of listed periphery corporates analyzed in the Global Financial Stability Report. This poses a challenge to their economies and financial stability.

IMF’s has also a very important observation for the entire Eurozone’s financial system. Says the GFSR: “Bank balance sheet repair has not been completed and progress has been uneven”. Let’s analyse those comments one by one.

What the IMF says in a few words here is that the European financial/banking system for one thing is not performing its duties towards the real economy, letting the small and medium enterprises out in the cold not caring to cover their financial needs. On the contrary the peripheral European banks have loaded with loans the listed companies, as if there were a hidden link between the two sides.
In this respect the IMF doesn’t go as far as to say that the peripheral banks accorded more loans than they should to listed companies, because bankers and banks had a lot to gain from that. This was however a true fact until 2009. All new stock issues along with every aspect of banking support and services to listed companies was undertaken by the same lenders. The links were and still are many and well hidden.

Last but not least the IMF says that the repair of the European banks balance sheet, meaning mainly recapitalisation and toxic asset cleanup, remain an open question. This is though a general observation and is addressed to the entire Eurozone banking system, peripheral and central. It is a direct hint that also the German and the French banks have not yet managed to come up with solutions.
All in all the IMF does not spare its criticism on European banks. Their lack of capital and their reluctance to serve the real economy are still two major unaccomplished tasks.

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

the European Sting Milestones

Featured Stings

These campaigners want to give a quarter of the UK back to nature

How to build a more resilient and inclusive global system

Stopping antimicrobial resistance would cost just USD 2 per person a year

Libya: EU efforts should focus on protecting migrants, MEPs say

This new way of understanding disease is changing medicine

Action needed to end deadly clashes between African herders and farmers: UN chief

The four top Americans who flew to Europe perplexed things about Trump’s intentions

“A Junior Enterprise is run only by students.. there are no professors or managers that can help you solve your problems”

EU-India summit: Will the EU manage to sign a free trade agreement with India before Britain?

Africa-Europe Alliance: first projects kicked off just three months after launch

The German automotive industry under the Trump spell

Fight against climate change and poverty will fail without overhaul of global financial system, says major UN report

Eurozone closer to a deflation – stagnation trap

Why Commissioner Rehn wants us all to work more for less

Syrian Refugees in Germany face distinctly different challenges than those in Lebanon

Consumers suffer three defeats

Is a full course lunch, a new Commissioner and 2 million anti-TTIP citizens what you would call a “Fresh Start”?

What we take for granted: The EU is not perfect

Who the US and China have trade disputes with

EU makes key TTIP document public as protests get louder

ILO’s Bureau for Employers´Activities to publish new study on women in business and management

3 autonomous vehicle trends to follow in 2019

Second Facebook-Cambridge Analytica hearing: impact on privacy, voting and trust

This is what a planet-wide network of ocean sanctuaries could look like

EU budget: the Common Agricultural Policy beyond 2020

‘Global care crisis’ set to affect 2.3 billion people warns UN labour agency

Guatemala: UN anti-corruption body will continue working, as Constitutional Court blocks Government expulsion

COP21 Breaking News_03 December: Unprecedented Global Alliance for Buildings and Construction to Combat Climate Change

Why the ECB prepares to flood the markets with more and free of charge euro; everybody needs that now

This is our chance to completely redefine the meaning of work

Greece and Ukraine main items on EU28 menu; the course is set

Eurozone: The crisis hit countries are again subsidizing the German and French banks

The Indian miracle state pointing the way to global sustainability

EU Commission: Germany can make Eurozone grow again just by helping itself

Chinese Premier Li Keqiang’s speech from World Economic Forum’s Annual Meeting of New Champions

Press coverage of migration crisis in Europe: a call for collaborative action

Parliament demands ban on neo-fascist and neo-Nazi groups in the EU

Climate change recognized as ‘threat multiplier’, UN Security Council debates its impact on peace

2 trillion drinks containers are made every year – so where do they go?

Water supply a human right but Greeks to lose their functioning utilities

Darfur: Inter-communal tensions still high despite improved security, Mission head tells Security Council

Brexit: when the hubris of one man can set the UK, the EU and the entire world on fire

Marking Sir Brian Urquhart’s 100th birthday, UN honours life-long servant of ‘we the peoples’

Mandela, ‘true symbol of human greatness’, celebrated on centenary of his birth

ECB’s first flight in Eurozone’s banking universe will be just a reconnaissance

Syria: ‘Violence, displacement’ and cold kill 11 infants ‘in the past two days’

Tuesday’s Daily Brief: Bicycles for the environment, new leader for the UN General Assembly, UN values, Ebola, Syria and Libya

EU-China Light Bridge in Brussels signals the bright coming of the Year of The Dog

‘Never give up’: UN chief urges all who serve, marking UN Day

Venezuela: UN human rights office calls for ‘maximum restraint’ by authorities in face of new demonstrations

The EU Commission does nothing about the food retailing oligopoly

MEPs want to ensure sufficient funding for Connecting Europe’s future

We need to talk about failure in the social sector

Long live Eurozone’s bank supervisor down with the EU budget supremo

Why Obama asks approval from Congress to bomb Syria?

UK voters sent strong message to May and Corbyn for soft Brexit

COP21 Breaking News_05 December: Ban Ki-Moon Closing Address at COP21 Action Day Innovation, Imagination, Faster Climate Action

The 28 EU leaders show contempt for the European Elections results

WEF Davos 2016 LIVE: “No other problem has jeopardised the EU as much as the refugee question” Joachim Gauck, President of the Federal Republic of Germany, cries out from Davos

Love unlimited

Medical students of today, technological doctors of tomorrow

Why Eurozone urgently needs the ECB to print and distribute at least €500 billion

European Youth Forum welcomes the European Commission’s proposed revision of the Union Code on Visas, however it does not go far enough

More Stings?

Speak your Mind Here

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s