30,99 €
Mehr erfahren.
- Herausgeber: John Wiley & Sons
- Kategorie: Fachliteratur
- Sprache: Englisch
A fact-based treatise on the Eurozone crisis, with analysis of possible solutions
The Incomplete Currency is the only technical — yet accessible — analysis of the current Eurozone crisis from a global perspective. The discussion begins by explaining how the Euro's architecture, the relationship between finance and the real economy, and the functioning of the Eurosystem in general are all at the root of the current crisis, and then explores possible solutions rooted in fact, not theory. All topics are analysed and illustrated, making extensive use of examples, tables, and graphics, and the ideas presented are supported by data sets and their statistical elaborations throughout the book. An extensive digital component includes numerical simulations of public debt dynamics for different Eurozone countries, evaluations of the sustainability of programmes like the Fiscal Compact, and stress tests on the ability of institutions like the ESM to cope with major liquidity crises, and the spreadsheets used to calculate data in the book is provided for readers to access for themselves.
The survival of the European monetary union has been questioned due to the accumulation of structural imbalances and the negative effects of the global financial crisis. This book lays out the full extent of the problem, explains what caused it, and provides possible solutions backed by extensive data.
- Dig down to the root of the Eurozone crisis
- Learn why austerity doesn't fix anything
- Understand how the Euro has changed economies
- Consider possible strategies for recovery
In a macroeconomic context where the monetary policy is the prerogative of the European Central Bank and fiscal policy, hopeless austerity works against the economic recovery of the Eurozone countries. A positive attitude is difficult, but necessary. The Incomplete Currency is an insightful, important resource that guides readers toward real solutions.
Sie lesen das E-Book in den Legimi-Apps auf:
Seitenzahl: 1117
Veröffentlichungsjahr: 2016
Ähnliche
Founded in 1807, John Wiley & Sons is the oldest independent publishing company in the United States. With offices in North America, Europe, Australia and Asia, Wiley is globally committed to developing and marketing print and electronic products and services for our customers' professional and personal knowledge and understanding.
The Wiley Finance series contains books written specifically for finance and investment professionals as well as sophisticated individual investors and their financial advisors. Book topics range from portfolio management to e-commerce, risk management, financial engineering, valuation and financial instrument analysis, as well as much more.
For a list of available titles, visit our Web site at www.WileyFinance.com.
Table of Contents
Title Page
Copyright
Dedication
List of Figures
List of Tables
Foreword
Preface
Acknowledgments
About the Author
About the Website
Chapter 1: The Building Blocks of the Single European Currency
1.1 The Basic Concepts: Financial Flows, Risks and Probability Distribution
1.2 Sovereign Credit Risk, Public Debt and Inflation
1.3 Single Curve of Interest Rate: EURIBOR, Euro Swap, Eurepo
1.4 The Monetary Policy in the Eurozone and the Mechanisms of Transmission
1.5 Recognition and Management of the Sovereign Credit Risk
Chapter 2: The Eurozone Architecture and the Working Paradigms
2.1 Relationships within the European Financial System
2.2 The Transmission Mechanisms between Finance and Real Economy in the Eurozone
Chapter 3: The Single Currency Area in the Context of International Crisis
3.1 Before the Crisis: the Adverse Effects of the Single Currency
3.2 The Crisis: Divergence of the Sovereign Debt Curves and the Disintegration of the Single Interest Rate Curve
Chapter 4: Dysfunctional Mechanisms of the Eurozone
4.1 The Explosion of Target2 Balances and the Unsustainable Accumulation of the Structural Imbalances
4.2 The Nationalisation of the Public Debt: the Case of Italy
4.3 The Nationalisation of the Public Debt Pushed to the Extreme: the Case of Greece
Chapter 5: The Pathological Banks-Governments Relationship
5.1 The Spread Intermediation
5.2 Collateral Discrimination on the Interbank Market
5.3 The Divergence Mechanisms in Action: Synergies and Accelerations
5.4 Case Studies: the Divergence Process in Some Peripheral Countries
Chapter 6: Assessing the Risk of a Euro Break-Up
6.1 A Historical Perspective on the Possible Break-up of the Euro
6.2 The Probability of a Euro Break-up
6.3 Costs and Benefits Associated with the Exit from the Euro
Chapter 7: Financial Assistance and Fiscal Agreements in the Eurozone
7.1 The Sovereign Bail-out Funds
7.2 The Reforms of the Stability and Growth Pact and the Fiscal Compact
Chapter 8: The Extraordinary Interventions of the ECB
8.1 The Securities Market Programme and the Purchases of Covered Bonds
8.2 The Long-term Refinancing Operations of December 2011 and February 2012 (LTROS)
8.3 The Outright Monetary Transactions (OMT)
8.4 The Targeted Long-term Refinancing Operations (TLTROS)
8.5 The Quantitative Easing
Chapter 9: The European and National Interventions on the Banking Systems
9.1 The Banking Union
9.2 The Hidden Recapitalisation of the Peripheral Banking Systems
9.3 The State Aids to the Banking Systems of the Core Countries
Chapter 10: Mutualisation of the Public Debt and Fiscal Transfers
10.1 The Mutualisation of the Public Debt in the Eurozone
10.2 The “Fiscal Currency” and Other Theories for the Unilateral Solution of Problems for Peripheral Countries
10.3 The Fiscal Transfers: Proposals for Structural Balance of Financial Flows
Chapter 11: Proposals of Monetary Policy Interventions to Overcome the Crisis
11.1 Reforming the Statutory Objectives of the ECB: the “Zero-spread Target”
11.2 The Cancellation of Interests on Government Bonds Purchased by the ECB
11.3 The European Public Debt Refinancing Programme (EPDRP)
11.4 A Far More Pervasive Intervention: Partial Debt Monetisation
11.5 The Purchase Programme of Asset-backed Securities Guaranteed by Sovereign States and Supranational Institutions
11.6 A Measure of Direct Support to the Real Economy: the Cancellation of Impaired Debts of the Non-financial Private Sector
11.7 A Proposal for an Authentic Sustainability of the Greek Public Debt
Chapter 12: Transparency as a Tool to Prevent Excessive Risk-taking and Contrast the Crisis
12.1 The Need for a Market Logic as the Basis of the Financial Sector's Regulation
12.2 Implications of the Lack of Transparency on Risks at a Macro Level
12.3 Fair Value and Probability Scenarios as a Solution to the Problem of Risk Transparency
Annex A: History of the Crisis from 2007 to the Present
References
Index
End User License Agreement
Pages
i
v
xi
xii
xiii
xiv
xix
xv
xvi
xvii
xviii
xx
xxi
xxii
xxiii
xxix
xxv
xxvi
xxvii
xxviii
xxx
xxxi
xxxii
xxxiii
xxxv
xxxvi
01
02
03
04
05
06
07
08
09
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
61
62
63
64
65
66
67
68
69
70
71
72
73
74
75
76
77
78
79
80
81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
100
101
102
103
104
105
106
107
108
109
110
111
112
113
114
115
116
117
118
119
120
121
122
123
124
125
126
127
128
129
130
131
132
133
134
135
136
137
138
139
140
141
142
143
144
145
146
147
148
149
150
151
152
153
154
155
156
157
158
159
160
161
162
163
164
165
166
167
168
169
170
171
172
173
174
175
176
177
178
179
180
181
182
183
184
185
186
187
188
189
190
191
192
193
194
195
196
197
198
199
200
201
202
203
204
205
206
207
208
209
210
211
212
213
214
215
216
217
218
219
220
221
222
223
224
225
226
227
228
229
230
231
232
233
234
235
236
237
238
239
240
241
242
243
244
245
246
247
248
249
250
251
252
253
254
255
256
257
258
259
260
261
262
263
264
265
266
267
268
269
270
271
272
273
274
275
276
277
278
279
280
281
282
283
284
285
286
287
288
289
290
291
292
293
294
295
296
297
298
299
300
301
302
303
304
305
306
307
308
309
310
311
312
313
314
315
316
317
318
319
320
321
322
323
324
325
326
327
328
329
330
331
332
333
334
335
336
337
338
339
340
341
342
343
344
345
346
347
348
349
350
351
352
353
354
355
356
357
358
359
360
361
362
363
364
365
366
367
368
369
370
371
372
373
374
375
376
377
378
379
380
381
382
383
384
385
386
387
388
389
390
391
392
393
394
395
396
397
398
399
400
401
402
403
404
405
406
407
408
409
410
411
412
413
414
415
416
417
418
419
420
421
422
423
424
425
426
427
428
429
430
431
432
433
434
435
436
437
438
439
440
441
442
443
444
445
446
447
448
449
450
451
452
453
454
455
456
457
458
459
460
461
463
464
465
466
467
468
469
470
471
472
473
474
475
476
477
478
479
480
481
482
483
484
485
486
487
488
489
490
491
492
493
494
495
496
497
498
499
500
501
502
503
504
505
506
507
508
509
510
511
512
513
Guide
Table of Contents
Begin Reading
List of Illustrations
Chapter 1: The Building Blocks of the Single European Currency
Figure 1.1 Possible realisations of the random coupon depending on the possible values of the interest rate
Figure 1.2 Probability distribution of the values at the maturity of a floating rate bond issued by Bank A
Figure 1.3 Calculation of the fair price of a 6-month floating-rate bond issued by Bank A
Figure 1.4 Probability distribution of the values at maturity of a 2-year floating-rate bond issued by Bank A and calculation of the fair price
Figure 1.5 Calculation of the swap rate of a 2-year floating-rate bond issued by Bank A
Figure 1.6 Probability distribution of the values at maturity of a 2-year floating-rate bond issued by State D
Figure 1.7 Probability distribution of the values at maturity of a 2-year floating-rate bond issued by State GR
Figure 1.8 Probability distribution of the values at maturity of a 2-year fixed rate bond issued by State D and of a 2-year fixed rate bond issued by State GR
Figure 1.9 Probability distribution of the values at maturity of a 2-year fixed-rate bond issued by State D, of a 2-year fixed rate bond issued by State GR, and of a further 2-year fixed rate bond whose issuer is riskier than GR
Figure 1.10 Credit Default Swap contract (CDS)
Figure 1.11 The real interest rate
Figure 1.12 Inflation, nominal and real interest rates in Italy (1975–2014)
Figure 1.13 Inflation, nominal and real interest rates in the US (2000–2014)
Figure 1.14 Inflation, nominal and real interest rates in Germany (2000–2014)
Figure 1.15 Inflation, nominal and real interest rates in Japan (2000–2014)
Figure 1.16 Inflation and Debt/GDP ratio in Argentina (1884–2010)
Figure 1.17 Inflation and Debt/GDP ratio in France (1880–2010)
Figure 1.18 Inflation and Debt/GDP ratio in Germany (1880–2010)
Figure 1.19 Inflation and Debt/GDP ratio in Greece (1884–2010)
Figure 1.20 Inflation and Debt/GDP ratio in Italy (1860–2010)
Figure 1.21 Inflation and Debt/GDP ratio in Spain (1880–2010)
Figure 1.22 Inflation and Debt/GDP ratio in UK (1880–2010)
Figure 1.23 Inflation and Debt/GDP ratio in the US (1860–2010)
Figure 1.24 Interest rate on 10-year government bonds of various Eurozone countries
Figure 1.25 Credit disbursed from the banking systems to the national economies (Eurozone)
Figure 1.26 European banks involved in the determination of the interbank interest rates in the Eurozone
Figure 1.27 Term structure of the interest rates on interbank loans
Figure 1.28 Term structure of the interest rates on Overnight Index Swap (OIS) transactions
Figure 1.29 Term structure of the interest rates on interbank loans and on Overnight Index Swap (OIS) transactions with evidence of EURIBOR-IRS/OIS spread
Figure 1.30 Term structure of the interest rates on Overnight Index Swap (OIS) transactions and on collateralised loans (Eurepo)
Figure 1.31 Term structure of the interest rates on Overnight Index Swap (OIS) transactions and on collateralised loans (Eurepo) with evidence of the OIS/Eurepo spread
Figure 1.32 Excerpt from the Statute of Federal Reserve Bank (USA)
Figure 1.33 Excerpt from the Statute of the European Central Bank (EU)
Figure 1.34 Evolution of the ECB short-term refinancing rate (MRO rate)
Figure 1.35 Evolution of the ECB rate on Marginal Lending Facility (MLF)
Figure 1.36 Evolution of the rate paid by the ECB on overnight deposits
Figure 1.37 Amount of overnight deposits at the European Central Bank
Figure 1.38 Amount of standard cash deposits at the European Central Bank
Figure 1.39 Total amount of cash deposits (standard and overnight) at the European Central Bank
Figure 1.40 Market quote of the US sovereign CDS in June 2012
Figure 1.41 Market quotes of the CDSs of the individual states of the US federation in June 2012
Figure 1.42 Market quote of the CDSs of the individual states of the Eurozone in June 2012
Figure 1.43 Market quote of the CDSs of the European states that do not adhere to the Euro in June 2012
Figure 1.44 Definition of a sovereign CDS denominated in Euro
Figure 1.45 Definition of a sovereign CDS denominated in Dollars
Figure 1.46 Definition of Dollar/Euro CDS
quanto spread
Figure 1.47 Representation of the Bond spread on an Italian government bond (BTP)
Figure 1.48 Relation between CDS spread and Bond spread in absence of arbitrage
Figure 1.49 The basis in absence of arbitrage
Figure 1.50 Positive basis arbitrage strategy
Figure 1.51 Negative basis arbitrage strategy
Figure 1.52 Underlying reasons of the positive basis phenomenon
Figure 1.53 Development of the bases for Germany, France, Italy and Spain
Figure 1.54 Development of the bases for Germany, France, Italy and Spain with indications of significant events
Figure 1.55 Underlying reasons for the negative basis phenomenon
Figure 1.56 Evolution of the 5-year OIS and SWAP and yield on the 5-year Bund: period 2000–2014
Figure 1.57 Definition of the cash synthetic basis
Figure 1.58 Types of risks considered in the definition of the cash synthetic basis
Figure 1.59 Relation between negative basis and cash synthetic basis
Figure 1.60 Trend of the basis and of the cash synthetic basis for Italy
Figure 1.61 Relation between positive basis and cash synthetic basis
Figure 1.62 Trend of the basis and of the cash synthetic basis for Germany
Figure 1.63 Distinctive trait of the Germany basis
Chapter 2: The Eurozone Architecture and the Working Paradigms
Figure 2.1 The European Financial System: the key players
Figure 2.2 The relationship between the banks and the sovereign states
Figure 2.3 Evolution of government debt held by foreign investors for the main Eurozone countries (period 2003–2007)
Figure 2.4 Percentage of government debt held by own banking system compared to the total of sovereign bonds in the banks' balance sheet–period 2001–2007
Figure 2.5 Evolution of government debt held by foreign investors for the main Eurozone countries (Period 2007–2013)
Figure 2.6 Percentage of government debt held by own banking system compared to the total of sovereign bonds in the balance sheets of the banks: 2001–2013
Figure 2.7 The relationship between the banks and the European Central Bank
Figure 2.8 The management of the collateral by the ECB (2000–2007)
Figure 2.9 Holdings of bonds (sovereign or not) in the assets of the banks (€ billion)–June 2014 figures
Figure 2.10 The key relationships in the European financial system
Figure 2.11 The outflow of financial assets from Europe to the US
Figure 2.12 The depreciation of the Euro/Dollar exchange rate
Figure 2.13 The outflow of financial assets from the US to Europe
Figure 2.14 The appreciation of the Euro/Dollar exchange rate
Figure 2.15 Exchange rate Italian Lira/German Deutschmark–(January 1995–December 1998)
Figure 2.16 Exchange rate Italian Lira/French Franc–(January 1995–December 1998)
Figure 2.17 Interest rate on 10-year government bonds of different Eurozone countries
Figure 2.18 Summary of the convergence trade strategy
Figure 2.19 Inflation rate differentials of “peripheral countries” with respect to the Eurozone average (January 1995–December 1998)
Figure 2.20 The outflow of financial capitals from Europe to the US with an irrevocably fixed exchange rate
Figure 2.21 The increase of real interest rate in Europe
Figure 2.22 The outflow of financial capitals from the US to Europe with an irrevocably fixed exchange rate
Figure 2.23 The increase of the real interest rate in the US
Figure 2.24 Correlation between the economic cycles of the Eurozone countries and the economic cycle of Germany
Figure 2.25 % Exports + imports of different Eurozone countries as a percentage of GDP
Figure 2.26 % Exports and imports in terms of GDP for the giants of the world economy
Figure 2.27 Correlation coefficient between the growth of regional and aggregate employment (national and EU) 1996–2000
Figure 2.28 Correlation coefficient between the growth of regional and aggregate employment (national and EU) 2001–2006
Figure 2.29 Average inflation rates of the various Eurozone countries (1999–2007)
Figure 2.30 Average real interest rates in Eurozone countries (1999–2007)
Figure 2.31 Dollar/Euro exchange rate and theoretical cost of Italian and German exports in Dollars in 1999
Figure 2.32 Dollar/Euro exchange rate and theoretical cost of Italian and German exports in Dollars in 2007
Figure 2.33 Real effective exchange rate trend of some Eurozone countries 1994–2008 (basis 1994)
Figure 2.34 Trend of the real effective exchange rate and of the current account balance for Germany 1994–2014 (Base 1994)
Figure 2.35 Italy and Germany: percentage weight of exports compared to exports of Europe to the rest of the world (2002–2013)
Figure 2.36 Trend of the current account balance of the main Eurozone countries: 2002–2013
Figure 2.37 Accounting of financial flows in the Target2 payments system–1st Part
Figure 2.38 Accounting of financial flows in the Target2 payments system–2nd Part
Figure 2.39 ISA balance of the US Reserve Banks ($ billion 2003–2014)
Figure 2.40 Target2 net balances for different Eurozone countries (1999–2014)
Figure 2.41 Target2 net balance for peripheral and
core
countries of the Eurozone (1999–2014)
Figure 2.42 Hidden transfer of credit risks in the Target2 payments system
Figure 2.43 Infringement procedures provided by the Stability and Growth Pact
Figure 2.44 Phase 1 of the speculative attack on the Lira (August–September 1992)
Figure 2.45 Phase 2 of the speculative attack on the Lira (August–September 1992)
Figure 2.46 Phase 3 of the speculative attack on the Lira (August–September 1992)
Chapter 3: The Single Currency Area in the Context of International Crisis
Figure 3.1 Eurozone inflation rate (1999–2007)
Figure 3.2 % Growth rate of the GDP of some Eurozone countries (1999–2007)
Figure 3.3 Budget deficit in terms of GDP for some Eurozone countries (2002–2007)
Figure 3.4 Evolution of the real estate bubble in Spain (1998–2008)
Figure 3.5 Normalised trend of the prices of new building in Ireland and the USA (1998–2008)
Figure 3.6 Percentage weight of real estate taxes on total fiscal revenues–Ireland (2002–2007)
Figure 3.7 Percentage weight of real estate taxes on total fiscal revenues–Ireland (Period 2002–2011)
Figure 3.8 GDP change for some Eurozone countries in 2009
Figure 3.9 Budget deficit in terms of GDP of some Eurozone countries (2008–2013)
Figure 3.10 10-year government bonds' yields of various Eurozone countries
Figure 3.11 Evolution of the real effective exchange rate of some Eurozone countries 1994–2014
Figure 3.12 Evolution of the real financial effective exchange rate for some Eurozone countries: 2000–2014
Figure 3.13 BTP-BUND spread vs difference in the cost of access to credit between Italian and German companies (2009–2014)
Figure 3.14 BONOS-BUND spread vs difference in the cost of access to credit between Spanish and German companies (2009–2014)
Figure 3.15 Evolution of the inflation rate in some Eurozone countries (2004–2014)
Figure 3.16 Evolution of the inflation rate and the real interest rate in Italy (2004–2014)
Figure 3.17 Evolution of the inflation and the real interest rate in Spain (2004–2014)
Figure 3.18 Evolution of the inflation differential and of the real interest rate spread between Italy and Germany (2004–2014)
Figure 3.19 Evolution of the inflation differential and of the real interest rate spread between Spain and Germany (2004–2014)
Figure 3.20 Evolution of the interest rates differential and of the exchange rate: Italy–Germany (1993–1999)
Figure 3.21 Evolution of the interest rates differential and of the exchange rate: Spain–Germany (1993–1999)
Figure 3.22 Evolution of the interest rates differential and of the exchange rate: France–Germany (1993–1999)
Figure 3.23 Evolution of CDS spread for Spain, Germany, Italy and France (July 2009–September 2012)
Figure 3.24 Gross amount of traded sovereign CDS ($ billion)–US and Eurozone (August 2012)
Figure 3.25 Gross outstanding amount of traded sovereign CDS with respect to national public debts (US and Eurozone–August 2012)
Figure 3.26 Evolution of the Credit Default Swap spread for Spain, Germany, Italy and France (2009–2014)
Figure 3.27 Gross amount of traded sovereign CDS ($ billion)–USA and Eurozone (August 2012 vs December 2014)
Figure 3.28 Total financial assets/GDP ratio of the major world economies
Figure 3.29 Comparison of the trends of the interest rates differential and of the (true and shadow) exchange rate for Italy and Germany
Figure 3.30 Comparison of the trends of the interest rates differential and of the (true and shadow) exchange rate for Spain and Germany
Figure 3.31 Comparison of the trends of the interest rates differential and of the (true and shadow) exchange rate for France and Germany
Chapter 4: Dysfunctional Mechanisms of the Eurozone
Figure 4.1 Target2 net balance for the peripheral and
core
Eurozone countries (1999–2014)
Figure 4.2 Evolution of the current account /GDP ratio of the main Eurozone countries: 2002–2013
Figure 4.3 Germany: trend of the cumulated per capita current account surplus and of the Target2 net balance: 2004–2014
Figure 4.4 Italy: evolution of the financial account and some of its components (2004–2014)
Figure 4.5 Spain: evolution of the financial account and some of its components (2004–2014)
Figure 4.6 Italian government bonds held by the main Eurozone banking systems (2010–2014)
Figure 4.7 Spanish government bonds held by the main Eurozone banking systems (2010–2014)
Figure 4.8 Germany: evolution of the financial account and some of its components (2004–2014)
Figure 4.9 Germany: Target2 net balance and financial account to the rest of the Eurozone (2004–2014)
Figure 4.10 German government bonds held by the main Eurozone banking systems (2010–2014)
Figure 4.11 Credits of the German banks towards the Eurozone: breakdown by country (2002–2014)
Figure 4.12 Percentage weight of the credits granted by German banks to the
core
and peripheral countries (2002–2014)
Figure 4.13 Percentage weight of the credits granted by German banks to some representative Eurozone countries (2008–2014)
Figure 4.14 Credits of German banks and net trade balance of Germany to France (2002–2014)
Figure 4.15 Credits of German banks and net trade balance of Germany to Italy (2002–2014)
Figure 4.16 Credits of German banks and net trade balance of Germany to Spain (2002–2014)
Figure 4.17 Evolution of the net trade balance of Germany towards France, Italy and Spain (2002–2013)
Figure 4.18 Percentage weight of credits granted by German banks to the rest of the Eurozone with respect to the total credit disbursed abroad by German banks (2002–2014)
Figure 4.19 Percentage weight of the German trade surplus to the Eurozone with respect to the total German trade surplus (2004–2013)
Figure 4.20 Reduction of credits of German banks to the Eurozone and evolution of ECB loans to non-German European banks (2011–2014)
Figure 4.21 Reduction of credits of German banks to the Italian economy and evolution of ECB loans to Italian banks (2011–2014)
Figure 4.22 Reduction of credits of German banks to the Spanish economy and evolution of ECB loans to Spanish banks (2011–2014)
Figure 4.23 Germany: Target2 net balance and the expected potential damage in the event of a Euro break-up (2004–2014)
Figure 4.24 Italian public debt held by the Italian and foreign banking sectors (1997–2014)
Figure 4.25 Italian public debt: breakdown by holders (1997–2014)
Figure 4.26 Italian public debt held by the domestic banking system and total amount of loans granted to households and businesses (1998–2014)
Figure 4.27 Performance of the RESI index (1999–2014)
Figure 4.28 Evolution of LTRO loans to the Italian banking system (1999–2014)
Figure 4.29 Total loans of the ECB to the European banking system (2011–2014): breakdown by country
Figure 4.30 The impact of the ECB liquidity support on the Italian real economy (2010–2014)
Figure 4.31 The impact of the ECB liquidity support on the balance sheets of Italian banks (2007–2014)
Figure 4.32 The impact of the ECB liquidity support on the RESI index (1999–2014)
Figure 4.33 Evolution of the Greek public debt with evidence of the component held by foreign investors (2003–2008)
Figure 4.34 Percentage breakdown of the evolution of the Greek public debt with evidence of the component held by foreign investors (2003–2008)
Figure 4.35 Government bonds held by the Greek banking system (breakdown by area of origin 2001–2008)
Figure 4.36 Evolution of the yield on the 10-year Greek government bonds (2010–2011)
Figure 4.37 Evolution of the Greek public debt with evidence of the component held by foreign investors (2003–2011)
Figure 4.38 Percentage breakdown of the evolution of the Greek public debt with evidence of the component held by foreign investors (2003–2011)
Figure 4.39 Government bonds held by the Greek banking system (breakdown by area of origin 2001–2011)
Figure 4.40 Exposure of the worldwide main banking systems to Greece risk (breakdown by country 2010–2011)
Figure 4.41 Exposure of the worldwide main banking systems to Greece risk (breakdown by asset class 2010–2011)
Figure 4.42 Direct exposure of the main Eurozone governments and deleveraging of their corresponding banking systems (2010–2011)
Figure 4.43 Exposure of the International Monetary Fund and deleveraging of the US and UK national banking systems
Figure 4.44 Breakdown of the Greek public debt by asset class (December 2011)
Figure 4.45 Evolution of the yields on the 10-year Greek government bonds (2010–2012)
Figure 4.46 Government bonds held by the Greek banking system: breakdown by area of origin (2001–2014)
Figure 4.47 Deferred tax assets in the balance sheets of the main Greek banks (2011–2014)
Figure 4.48 Evolution of the Greek public debt with evidence of the component held by foreign investors (€ billion) (2003–2014)
Figure 4.49 Evolution of the Greek public debt with evidence of the component held by foreign investors: percentage breakdown (2003–2014)
Figure 4.50 Evolution of the yields on the 10-year Greek government bonds (2010 to 2014)
Figure 4.51 Exposure of the main worldwide banking systems to the Greece risk: breakdown by country (2010–2014)
Figure 4.52 Exposure of the main worldwide banking systems to the Greece risk: breakdown by asset class (2010–2014)
Figure 4.53 Exposure of the French banking system to the Greek risk: breakdown by asset class (2010–2014)
Figure 4.54 Exposure of the German banking system to Greek risk: breakdown by asset class (2010–2014)
Figure 4.55 Greek public debt: breakdown by asset class (January 2015)
Figure 4.56 Total exposure of Eurozone governments to the Greece risk (December 2014)
Figure 4.57 ELA ceiling to Greek banks (February–August 2015)
Chapter 5: The Pathological Banks-Governments Relationship
Figure 5.1 The relationship between banks, sovereigns and investors in the intermediation of the public debt
Figure 5.2 Placement of a bank bond with intermediation of the market risk
Figure 5.3 Probabilistic analysis of a bank bond with intermediation of the market risk
Figure 5.4 Placement of a bank bond with intermediation of the credit risk
Figure 5.5 Probabilistic analysis of a bank bond with intermediation of the credit risk (Part 1)
Figure 5.6 Probabilistic analysis of a bank bond with intermediation of the credit risk (Part 2)
Figure 5.7 Probabilistic analysis of a bank bond with intermediation of the credit risk (Part 3)
Figure 5.8 Probabilistic analysis of a fixed-rate government bond compared to an inflation-linked government bond
Figure 5.9 Banks' placement of inflation-linked government bonds and intermediation of the yield's spread with fixed-rate government bonds
Figure 5.10 Direct effects of the collateral discrimination in a repo operation
Figure 5.11 Direct effects of collateral discrimination in reverse repo operations
Figure 5.12 Use of financial assets as collateral on the Repo market: breakdown by issuer's nationality (% on total)
Figure 5.13 Table of collateral discrimination based on assessments of the European Central Bank (2012–2014 data)
Figure 5.14 Overview of the collateral discrimination phenomenon
Figure 5.15 Spread Intermediation via collateral discrimination in a repo contract (Case C)
Figure 5.16 Spread intermediation via collateral discrimination in a repo contract (Case D)
Figure 5.17 Spread intermediation via collateral discrimination in a repo contract (case E)
Figure 5.18 Stock of bonds held by the peripheral banks with evidence of the amount of government bonds–May 2012
Figure 5.19 Loans granted by the ECB to the banking system: Breakdown by country (May 2012)
Figure 5.20 Loans granted by the ECB to the banking system: Breakdown by country (January 2012–December 2014)
Figure 5.21 Stock of bonds held by banks (with evidence of the stock of government bonds) and loans granted by the European Central Bank (€ billion–May 2012)
Figure 5.22 Relative weight of “
core
” and “peripheral” areas of the Eurozone in relation to the stock of government bonds in the ECB balance sheet (2012)
Figure 5.23 Transmission mechanism of the spread via the public auctions of government bonds
Figure 5.24 Transmission mechanism of the spread via collateral discrimination on the interbank market
Figure 5.25 Process of positive feedback in the transmission of the effects of the spread within the Eurozone (phase 1)
Figure 5.26 Process of positive feedback in the transmission of the effects of the spread within the Eurozone (phase 2)
Figure 5.27 Reduction of collateral turnover coefficients on the Repo market for the government bonds of the peripheral countries
Figure 5.28 Process of positive feedback in the transmission of the effects of the spread within the Eurozone (phase 3)
Figure 5.29 Comparison between the trend of the BTP-BUND spread and the trend of the FTSE Italy Banks index (Period 2008–2014)
Figure 5.30 Stabilisation of the spread on the interbank channel due to the reduction of collateral available
Figure 5.31 Process of positive feedback in the transmission of the effects of the spread within the Eurozone (phase 3)
Figure 5.32 The “factors of combustion” of the divergence process and their interactions
Figure 5.33 Amount of issuances of Portuguese government bonds and average yield recorded in the secondary market (period 2008–2015)
Figure 5.34 Amount of issuances of Portuguese government bonds and average yield recorded in the secondary market with evidence of the period of financial assistance by the EFSF/ESM (Period 2008–2015)
Figure 5.35 Amount of issuances of Irish government bonds and average yield recorded in the secondary market (period 2009–2015)
Figure 5.36 Amount of issuances of Irish government bonds and average yield recorded in the secondary market with evidence of the period of financial assistance by the EFSF/ESM (Period 2009–2015)
Figure 5.37 Amount of issuances of Spanish government bonds and average yield recorded in the secondary market (Period 2008–2015)
Figure 5.38 Amount of issuances of Spanish government bonds and average yield recorder in the secondary market with evidence of the period of divergence attributable to the “auction effect” (period 2008–2015)
Figure 5.39 Amount of issuances of Italian government bonds and average yield recorded in the secondary market (Period 2008–2015)
Figure 5.40 Amount of issuances of Italian government bonds and average yield registered in the secondary market with evidence of the period of divergence attributable to the “collateral discrimination” effect (period 2008–2015)
Figure 5.41 Amount of issuances of Italian government bonds and average yield recorded in the secondary market with evidence of the period of divergence attributable to the “public auction” effect (period 2008–2015)
Chapter 6: Assessing the Risk of a Euro Break-Up
Figure 6.1 The functioning of the “Gold Standard” fixed exchange rate agreement
Figure 6.2 The functioning of the Bretton Woods fixed exchange rate agreement
Figure 6.3 Speculative attack on the Bretton Woods fixed exchange rate agreement–Phase 1 (1968–July 1971)
Figure 6.4 Speculative attack on the Bretton Woods fixed exchange rate agreement–Phase 2 (1968–July 1971)
Figure 6.5 Speculative attack on the Bretton Woods fixed exchange rate agreement–Phase 3 (August 1971)
Figure 6.6 Evolution of the 5-year Credit Default Swaps spread for Spain, Germany, Italy and France (Period 2009–2014)
Figure 6.7 1-year default probability implicit in CDS spreads for selected Eurozone countries (August 2011)
Figure 6.8 Price and probability distribution of an Italian Government bond (BTP) by way of example in the presence of devaluation risk of the new Italian lira following the exit of Italy from the Euro
Figure 6.9 Explanation of the synchronous trend of Italian BTP yields and CDS spread
Figure 6.10 Comparison between the trends of the yields on 5-year government bonds and of the 5-year CDS spread in Germany (2010–2014)
Figure 6.11 Example on the price and probability distribution of a German Government bond (Bund) in presence of a risk of revaluation of the new German mark following the exit of Germany from the Euro
Figure 6.12 Explanation of the decoupled trend of Bund yields and CDS spread in Germany
Figure 6.13 The evolution of the 5-year quanto spread for Spain, Germany, Italy and France (2009–2014)
Figure 6.14 Evolution of the 5-year probability of the Euro break-up implied in the quanto spreads of Spain, Germany, Italy and France (2009–2014)
Figure 6.15 Extent of government debts in relation to GDP (Eurozone: year 2014)
Figure 6.16 Government debt and GDP for several EU countries (2014 in € billion)
Figure 6.17 National bonds issued on foreign markets (% on the overall issued amount–March 2014)
Figure 6.18 Restriction on the issuance of public debt without standard CACs for Eurozone countries
Figure 6.19 Estimates of the Deficit/GDP ratio for 2014 (peripheral countries)
Figure 6.20 Exports and Imports in terms of GDP for several EU countries–2013
Figure 6.21 Share of exports to the Eurozone: period–2008 2013
Chapter 7: Financial Assistance and Fiscal Agreements in the Eurozone
Figure 7.1 Contribution (€ billion) of the various Member States of the Monetary Union to the EFSF fund guarantees
Figure 7.2 Total loans granted by the EFSF (2011–2014)
Figure 7.3 Issues of the EFSF Fund–structure of the placed amounts
Figure 7.4 Issues of the EFSF Fund–structure of annual yields
Figure 7.5 Issues of the EFSF Fund–maturity structure of the issues
Figure 7.6 Geographical breakdown of investors who bought securities issued by the EFSF (2011–2014)
Figure 7.7 EFSF issues (2011–2014): breakdown by category of investors
Figure 7.8 Yield comparison between 10Y EFSF and 10Y Euro Swap Rate
Figure 7.9 Percentage contribution of the Member States of the Monetary Union to physical capital of ESM
Figure 7.10 Total loans disbursed by the ESM (2012–2014)
Figure 7.11 Issues of the ESM–structure of placed amounts
Figure 7.12 Issues of the ESM–structure of annual yields
Figure 7.13 Issues of the ESM–maturity structure of the issues
Figure 7.14 Geographical breakdown of investors who bought securities issued by the ESM (2013–2014)
Figure 7.15 ESM issues (2013–2014) breakdown by category of investors
Figure 7.16 Contribution of selected Eurozone countries to the constitution of the initial capital of the ESM
Figure 7.17 Impact of recovery of the Spanish banking system by ESM on the finances of the Spanish Government
Figure 7.18 Selected countries' MTOs versus structural balance forecasts for 2014 and 2015
Figure 7.19 Application of the “debt brake rule” in the case of Italy: backward-looking check–Government Data September 2013
Figure 7.20 Application of the “debt brake rule” in the case of Italy: forward-looking check–Government Data September 2013
Chapter 8: The Extraordinary Interventions of the ECB
Figure 8.1 Evolution of the European Central Bank purchasing programmes (in € billion)
Figure 8.2 Purchases of bonds (in € billion) carried out by the ECB under the Securities Market Programme
Figure 8.3 Structured securities with collateral located in the Eurozone (amount outstanding: June 2014)
Figure 8.4 Structured securities with collateral located in the Eurozone (breakdown by country: June 2014)
Figure 8.5 PSPP monthly purchases of government and agencies bonds–breakdown by country (€ billion)
Figure 8.6 PSPP impact on the term structure of Bunds
Figure 8.7 PSPP impact on the term structure of OATs
Figure 8.8 Eurozone government bonds with implicit negative yields (% of total debt)
Figure 8.9 Eurozone government bonds with implicit negative yields purchased by the NCBs within the PSPP up to 30 April 2015
Figure 8.10 Eurozone government bonds purchased by NCBs within the PSPP up to 30 April 2015: distribution by time to maturity
Figure 8.11 Impact of the PSPP and of the Flash Crash of 29 April 2015 on the Term Structure of Bunds
Figure 8.12 Impact of the PSPP and of the flash crash of 29 April 2015 on the term structure of OATs
Figure 8.13 Estimated capital gains of the main Eurozone banking systems and yields' volatility associated with the PSPP
Figure 8.14 Impact of the PSPP and of the 1st and the 2nd flash crash on the term structure of Bunds
Figure 8.15 Impact of the PSPP and of the 1st and the 2nd flash crash on the term structure of OATs
Chapter 9: The European and National Interventions on the Banking Systems
Figure 9.1 The three pillars of the European Banking Union
Figure 9.2 Total amount of Deferred Tax Assets in the balance sheet of major peripheral banks (breakdown by country 2011–2014)
Figure 9.3 DTAs in the balance sheet of the main Italian banks (2011–2014)
Figure 9.4 DTAs in the balance sheet of the main Spanish banks (2011–2014)
Figure 9.5 DTAs in the balance sheet of the main Portuguese banks (2011–2014)
Figure 9.6 DTAs in the balance sheet of the main Greek banks (2011–2014)
Figure 9.7 Italian banks: DTAs converted in DTCs as a result of regulatory reform introduced by Law 214/2011 (2012–2014)
Figure 9.8 Exposure of Eurozone governments towards national banking systems (2014)
Chapter 10: Mutualisation of the Public Debt and Fiscal Transfers
Figure 10.1 Degree of mutualisation of debt in the current implementation in the USA
Figure 10.2 Degree of debt mutualisation in the 1st implementation scheme considered in the Green Paper of the European Commission
Figure 10.3 Degree of debt mutualisation in the 2nd implementation scheme considered in the Green Paper of the European Commission
Figure 10.4 Degree of Debt Mutualisation in the 3
rd
implementation scheme considered in the Green Paper of the European Commission
Figure 10.5 Degree of debt mutualisation in the “Blue Bonds” proposal
Figure 10.6 Federal budget of the US and of the European Union as a percentage of their GDP (2014)
Figure 10.7 Degree of fiscal integration in terms of transfers in the US
Figure 10.8 Degree of fiscal integration in terms of transfers in Germany
Figure 10.9 Degree of fiscal integration of the “strong” proposal in terms of transfers in the European Union
Figure 10.10 Degree of fiscal integration of the “soft” proposal in terms of transfers in the European Union
Figure 10.11 Degree of fiscal integration of the Finnish proposal in terms of transfers
Chapter 11: Proposals of Monetary Policy Interventions to Overcome the Crisis
Figure 11.1 Public debt and interest burden: comparison between Germany and Italy
Figure 11.2 EPDRP: breakdown by country
Figure 11.3 Eurozone's public debt: breakdown by maturity
Figure 11.4 EPDRP: duration and extent of the programme for the main Eurozone countries
Figure 11.5 EPDRP: reprofiling of the public debt of the main Eurozone countries
Figure 11.6 EPDRP: reduction in the interest burden for the main Eurozone countries
Figure 11.7 Percentage of government bonds with a duration of less/more than a 1 year for selected Eurozone countries
Figure 11.8 Impact of partial debt monetisation on the Debt/GDP Ratio of the Eurozone countries (except Greece)
Figure 11.9 Example of a security scheme
Chapter 12: Transparency as a Tool to Prevent Excessive Risk-taking and Contrast the Crisis
Figure 12.1 Comparison of an investment in a 3-year BTP and in a 3-year bank bond through the probability table
Figure 12.2 Selection of an investment in BTP through the probability table
Figure 12.3 Representation of a complex financial product through the probability table
Figure 12.4 Selection of an investment in a complex financial product through the probability table
Figure 12.5 Some heterogeneous financial products
Figure 12.6 Probability scenarios and fair value of some heterogeneous financial products
Figure 12.7 Macroeconomic benefits of rules based on the measurement and transparency of risks
List of Tables
Chapter 5: The Pathological Banks-Governments Relationship
Table 5.1 Table of collateral discrimination based on assessments of the interbank Repo market (data of June 2012)
Table 5.2 Table of collateral discrimination based on assessments of the interbank Repo market (data of June 2014)
Chapter 11: Proposals of Monetary Policy Interventions to Overcome the Crisis
Table 11.1 ABS structure with sovereign/supranational guarantee
Table 11.2 ABS structure (including 10% of NPLs) with sovereign/supranational guarantee
The Incomplete Currency
The Future of the Euro and Solutions for the Eurozone
MARCELLO MINENNA
This edition first published 2016
© 2016 Marcello Minenna
This English language edition is based on the original Italian version of the book entitled “La Moneta Incompiuta” ISBN 9788823017641, published in 2013 by Ediesse.
Registered office
John Wiley & Sons Ltd, The Atrium, Southern Gate, Chichester, West Sussex, PO19 8SQ, United Kingdom
For details of our global editorial offices, for customer services and for information about how to apply for permission to reuse the copyright material in this book please see our website at www.wiley.com.
All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, except as permitted by the UK Copyright, Designs and Patents Act 1988, without the prior permission of the publisher.
Wiley publishes in a variety of print and electronic formats and by print-on-demand. Some material included with standard print versions of this book may not be included in e-books or in print-on-demand. If this book refers to media such as a CD or DVD that is not included in the version you purchased, you may download this material at http://booksupport.wiley.com. For more information about Wiley products, visit www.wiley.com.
Designations used by companies to distinguish their products are often claimed as trademarks. All brand names and product names used in this book are trade names, service marks, trademarks or registered trademarks of their respective owners. The publisher is not associated with any product or vendor mentioned in this book.
Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts in preparing this book, they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose. It is sold on the understanding that the publisher is not engaged in rendering professional services and neither the publisher nor the author shall be liable for damages arising herefrom. If professional advice or other expert assistance is required, the services of a competent professional should be sought.
Library of Congress Cataloging-in-Publication Data
Names: Minenna, Marcello, author.
Title: The incomplete currency: the future of the euro and solutions for the Eurozone / Marcello Minenna.
Description: Chichester, West Sussex, United Kingdom: John Wiley & Sons, 2016. | Includes index.
Identifiers: LCCN 2015051048 (print) | LCCN 2016007184 (ebook) | ISBN 9781119019091 (hardback) | ISBN 9781119019114 (pdf) | ISBN 9781119019121 (epub)
Subjects: LCSH: Euro. | Eurozone. | Monetary policy—European Union countries. | Finance—European Union countries. | European Union countries—Economic policy. | BISAC: BUSINESS & ECONOMICS / Finance.
Classification: LCC HG925 .M534 2016 (print) | LCC HG925 (ebook) | DDC 332.4/94—dc23
LC record available at http://lccn.loc.gov/2015051048
Cover Design: Wiley
Cover photo concept by Yorkman/Shutterstock;
Cover Image ©omersukrugoksu/iStock
To Giovi and Pablo
List of Figures
Figure 1.1 Possible realisations of the random coupon depending on the possible values of the interest rate
Figure 1.2 Probability distribution of the values at the maturity of a floating rate bond issued by Bank A
Figure 1.3 Calculation of the fair price of a 6-month floating-rate bond issued by Bank A
Figure 1.4 Probability distribution of the values at maturity of a 2-year floating-rate bond issued by Bank A and calculation of the fair price
Figure 1.5 Calculation of the swap rate of a 2-year floating-rate bond issued by Bank A
Figure 1.6 Probability distribution of the values at maturity of a 2-year floating-rate bond issued by State D
Figure 1.7 Probability distribution of the values at maturity of a 2-year floating-rate bond issued by State GR
Figure 1.8 Probability distribution of the values at maturity of a 2-year fixed rate bond issued by State D and of a 2-year fixed rate bond issued by State GR
Figure 1.9 Probability distribution of the values at maturity of a 2-year fixed-rate bond issued by State D, of a 2-year fixed rate bond issued by State GR, and of a further 2-year fixed rate bond whose issuer is riskier than GR
Figure 1.10 Credit Default Swap contract (CDS)
Figure 1.11 The real interest rate
Figure 1.12 Inflation, nominal and real interest rates in Italy (1975–2014)
Figure 1.13 Inflation, nominal and real interest rates in the US (2000–2014)
Figure 1.14 Inflation, nominal and real interest rates in Germany (2000–2014)
Figure 1.15 Inflation, nominal and real interest rates in Japan (2000–2014)
Figure 1.16 Inflation and Debt/GDP ratio in Argentina (1884–2010)
Figure 1.17 Inflation and Debt/GDP ratio in France (1880–2010)
Figure 1.18 Inflation and Debt/GDP ratio in Germany (1880–2010)
Figure 1.19 Inflation and Debt/GDP ratio in Greece (1884–2010)
Figure 1.20 Inflation and Debt/GDP ratio in Italy (1860–2010)
Figure 1.21 Inflation and Debt/GDP ratio in Spain (1880–2010)
Figure 1.22 Inflation and Debt/GDP ratio in UK (1880–2010)
Figure 1.23 Inflation and Debt/GDP ratio in the US (1860–2010)
Figure 1.24 Interest rate on 10-year government bonds of various Eurozone countries
Figure 1.25 Credit disbursed from the banking systems to the national economies (Eurozone)
Figure 1.26 European banks involved in the determination of the interbank interest rates in the Eurozone
Figure 1.27 Term structure of the interest rates on interbank loans
Figure 1.28 Term structure of the interest rates on Overnight Index Swap (OIS) transactions
Figure 1.29 Term structure of the interest rates on interbank loans and on Overnight Index Swap (OIS) transactions with evidence of EURIBOR-IRS/OIS spread
Figure 1.30 Term structure of the interest rates on Overnight Index Swap (OIS) transactions and on collateralised loans (Eurepo)
Figure 1.31 Term structure of the interest rates on Overnight Index Swap (OIS) transactions and on collateralised loans (Eurepo) with evidence of the OIS/Eurepo spread
Figure 1.32 Excerpt from the Statute of Federal Reserve Bank (USA)
Figure 1.33 Excerpt from the Statute of the European Central Bank (EU)
Figure 1.34 Evolution of the ECB short-term refinancing rate (MRO rate)
Figure 1.35 Evolution of the ECB rate on Marginal Lending Facility (MLF)
Figure 1.36 Evolution of the rate paid by the ECB on overnight deposits
Figure 1.37 Amount of overnight deposits at the European Central Bank
Figure 1.38 Amount of standard cash deposits at the European Central Bank
Figure 1.39 Total amount of cash deposits (standard and overnight) at the European Central Bank
Figure 1.40 Market quote of the US sovereign CDS in June 2012
Figure 1.41 Market quotes of the CDSs of the individual states of the US federation in June 2012
Figure 1.42 Market quote of the CDSs of the individual states of the Eurozone in June 2012
Figure 1.43 Market quote of the CDSs of the European states that do not adhere to the Euro in June 2012
Figure 1.44 Definition of a sovereign CDS denominated in Euro
Figure 1.45 Definition of a sovereign CDS denominated in Dollars
Figure 1.46 Definition of Dollar/Euro CDS
quanto spread
Figure 1.47 Representation of the Bond spread on an Italian government bond (BTP)
Figure 1.48 Relation between CDS spread and Bond spread in absence of arbitrage
Figure 1.49 The basis in absence of arbitrage
Figure 1.50 Positive basis arbitrage strategy
Figure 1.51 Negative basis arbitrage strategy
Figure 1.52 Underlying reasons of the positive basis phenomenon
Figure 1.53 Development of the bases for Germany, France, Italy and Spain
Figure 1.54 Development of the bases for Germany, France, Italy and Spain with indications of significant events
Figure 1.55 Underlying reasons for the negative basis phenomenon
Figure 1.56 Evolution of the 5-year OIS and SWAP and yield on the 5-year Bund: period 2000–2014
Figure 1.57 Definition of the cash synthetic basis
Figure 1.58 Types of risks considered in the definition of the cash synthetic basis
Figure 1.59 Relation between negative basis and cash synthetic basis
Figure 1.60 Trend of the basis and of the cash synthetic basis for Italy
Figure 1.61 Relation between positive basis and cash synthetic basis
Figure 1.62 Trend of the basis and of the cash synthetic basis for Germany
Figure 1.63 Distinctive trait of the Germany basis
Figure 2.1 The European Financial System: the key players
Figure 2.2 The relationship between the banks and the sovereign states
Figure 2.3 Evolution of government debt held by foreign investors for the main Eurozone countries (period 2003–2007)
Figure 2.4 Percentage of government debt held by own banking system compared to the total of sovereign bonds in the banks' balance sheet–period 2001–2007
Figure 2.5 Evolution of government debt held by foreign investors for the main Eurozone countries (Period 2007–2013)
Figure 2.6 Percentage of government debt held by own banking system compared to the total of sovereign bonds in the balance sheets of the banks: 2001–2013
Figure 2.7 The relationship between the banks and the European Central Bank
Figure 2.8 The management of the collateral by the ECB (2000–2007)
Figure 2.9 Holdings of bonds (sovereign or not) in the assets of the banks (€ billion)–June 2014 figures
Figure 2.10 The key relationships in the European financial system
Figure 2.11 The outflow of financial assets from Europe to the US
Figure 2.12 The depreciation of the Euro/Dollar exchange rate
Figure 2.13 The outflow of financial assets from the US to Europe
Figure 2.14 The appreciation of the Euro/Dollar exchange rate
Figure 2.15 Exchange rate Italian Lira/German Deutschmark–(January 1995–December 1998)
Figure 2.16 Exchange rate Italian Lira/French Franc–(January 1995–December 1998)
Figure 2.17 Interest rate on 10-year government bonds of different Eurozone countries
Figure 2.18 Summary of the convergence trade strategy
Figure 2.19 Inflation rate differentials of “peripheral countries” with respect to the Eurozone average (January 1995–December 1998)
Figure 2.20 The outflow of financial capitals from Europe to the US with an irrevocably fixed exchange rate
Figure 2.21 The increase of real interest rate in Europe
Figure 2.22 The outflow of financial capitals from the US to Europe with an irrevocably fixed exchange rate
Figure 2.23 The increase of the real interest rate in the US
Figure 2.24 Correlation between the economic cycles of the Eurozone countries and the economic cycle of Germany
Figure 2.25 % Exports + imports of different Eurozone countries as a percentage of GDP
Figure 2.26 % Exports and imports in terms of GDP for the giants of the world economy
Figure 2.27 Correlation coefficient between the growth of regional and aggregate employment (national and EU) 1996–2000
Figure 2.28 Correlation coefficient between the growth of regional and aggregate employment (national and EU) 2001–2006
Figure 2.29 Average inflation rates of the various Eurozone countries (1999–2007)
Figure 2.30 Average real interest rates in Eurozone countries (1999–2007)
Figure 2.31 Dollar/Euro exchange rate and theoretical cost of Italian and German exports in Dollars in 1999
Figure 2.32 Dollar/Euro exchange rate and theoretical cost of Italian and German exports in Dollars in 2007
Figure 2.33 Real effective exchange rate trend of some Eurozone countries 1994–2008 (basis 1994)
Figure 2.34 Trend of the real effective exchange rate and of the current account balance for Germany 1994–2014 (Base 1994)
Figure 2.35 Italy and Germany: percentage weight of exports compared to exports of Europe to the rest of the world (2002–2013)
Figure 2.36 Trend of the current account balance of the main Eurozone countries: 2002–2013
Figure 2.37 Accounting of financial flows in the Target2 payments system–1st Part
Figure 2.38 Accounting of financial flows in the Target2 payments system–2nd Part
Figure 2.39 ISA balance of the US Reserve Banks ($ billion 2003–2014)
Figure 2.40 Target2 net balances for different Eurozone countries (1999–2014)
Figure 2.41 Target2 net balance for peripheral and
core
countries of the Eurozone (1999–2014)
Figure 2.42 Hidden transfer of credit risks in the Target2 payments system
Figure 2.43 Infringement procedures provided by the Stability and Growth Pact
Figure 2.44 Phase 1 of the speculative attack on the Lira (August–September 1992)
Figure 2.45 Phase 2 of the speculative attack on the Lira (August–September 1992)
Figure 2.46 Phase 3 of the speculative attack on the Lira (August–September 1992)
Figure 3.1 Eurozone inflation rate (1999–2007)
Figure 3.2 % Growth rate of the GDP of some Eurozone countries (1999–2007)
Figure 3.3 Budget deficit in terms of GDP for some Eurozone countries (2002–2007)
Figure 3.4 Evolution of the real estate bubble in Spain (1998–2008)
Figure 3.5 Normalised trend of the prices of new building in Ireland and the USA (1998–2008)
Figure 3.6 Percentage weight of real estate taxes on total fiscal revenues–Ireland (2002–2007)
Figure 3.7 Percentage weight of real estate taxes on total fiscal revenues–Ireland (Period 2002–2011)
Figure 3.8 GDP change for some Eurozone countries in 2009
Figure 3.9 Budget deficit in terms of GDP of some Eurozone countries (2008–2013)
Figure 3.10 10-year government bonds' yields of various Eurozone countries
Figure 3.11 Evolution of the real effective exchange rate of some Eurozone countries 1994–2014
Figure 3.12 Evolution of the real financial effective exchange rate for some Eurozone countries: 2000–2014
Figure 3.13 BTP-BUND spread vs difference in the cost of access to credit between Italian and German companies (2009–2014)
Figure 3.14 BONOS-BUND spread vs difference in the cost of access to credit between Spanish and German companies (2009–2014)
Figure 3.15 Evolution of the inflation rate in some Eurozone countries (2004–2014)
Figure 3.16 Evolution of the inflation rate and the real interest rate in Italy (2004–2014)
Figure 3.17 Evolution of the inflation and the real interest rate in Spain (2004–2014)
Figure 3.18 Evolution of the inflation differential and of the real interest rate spread between Italy and Germany (2004–2014)
Figure 3.19 Evolution of the inflation differential and of the real interest rate spread between Spain and Germany (2004–2014)
Figure 3.20 Evolution of the interest rates differential and of the exchange rate: Italy–Germany (1993–1999)
Figure 3.21 Evolution of the interest rates differential and of the exchange rate: Spain–Germany (1993–1999)
Figure 3.22 Evolution of the interest rates differential and of the exchange rate: France–Germany (1993–1999)
Figure 3.23 Evolution of CDS spread for Spain, Germany, Italy and France (July 2009–September 2012)
Figure 3.24 Gross amount of traded sovereign CDS ($ billion)–US and Eurozone (August 2012)
Figure 3.25 Gross outstanding amount of traded sovereign CDS with respect to national public debts (US and Eurozone–August 2012)
Figure 3.26 Evolution of the Credit Default Swap spread for Spain, Germany, Italy and France (2009–2014)
Figure 3.27 Gross amount of traded sovereign CDS ($ billion)–USA and Eurozone (August 2012 vs December 2014)
Figure 3.28 Total financial assets/GDP ratio of the major world economies
Figure 3.29 Comparison of the trends of the interest rates differential and of the (true and shadow) exchange rate for Italy and Germany
Figure 3.30 Comparison of the trends of the interest rates differential and of the (true and shadow) exchange rate for Spain and Germany
Figure 3.31 Comparison of the trends of the interest rates differential and of the (true and shadow) exchange rate for France and Germany
Figure 4.1 Target2 net balance for the peripheral and
core
Eurozone countries (1999–2014)
Figure 4.2 Evolution of the current account /GDP ratio of the main Eurozone countries: 2002–2013
Figure 4.3 Germany: trend of the cumulated per capita current account surplus and of the Target2 net balance: 2004–2014
Figure 4.4 Italy: evolution of the financial account and some of its components (2004–2014)
Figure 4.5 Spain: evolution of the financial account and some of its components (2004–2014)
Figure 4.6 Italian government bonds held by the main Eurozone banking systems (2010–2014)
Figure 4.7 Spanish government bonds held by the main Eurozone banking systems (2010–2014)
Figure 4.8 Germany: evolution of the financial account and some of its components (2004–2014)
Figure 4.9 Germany: Target2 net balance and financial account to the rest of the Eurozone (2004–2014)
Figure 4.10 German government bonds held by the main Eurozone banking systems (2010–2014)
Figure 4.11 Credits of the German banks towards the Eurozone: breakdown by country (2002–2014)
Figure 4.12 Percentage weight of the credits granted by German banks to the
core
and peripheral countries (2002–2014)
