• Home
  • Politics
  • Health
  • World
  • Business
  • Finance
  • Tech
  • More
    • Sports
    • Entertainment
    • Lifestyle
What's Hot

Trump Announces First Post-Tariff Trade Deal

May 8, 2025

100 Funny Father’s Day Quotes for Hilariously Relatable Humor (and Plenty of Love Too)

May 8, 2025

Top 10 Benefits Of Acupuncture

May 8, 2025
Facebook Twitter Instagram
  • Contact
  • Privacy Policy
  • Terms & Conditions
Thursday, May 8
Patriot Now NewsPatriot Now News
  • Home
  • Politics

    Security video shows brazen sexual assault of California woman by homeless man

    October 24, 2023

    Woman makes disturbing discovery after her boyfriend chases away home intruder who stabbed him

    October 24, 2023

    Poll finds Americans overwhelmingly support Israel’s war on Hamas, but younger Americans defend Hamas

    October 24, 2023

    Off-duty pilot charged with 83 counts of attempted murder after allegedly trying to shut off engines midflight on Alaska Airlines

    October 23, 2023

    Leaked audio of Shelia Jackson Lee abusively cursing staffer

    October 22, 2023
  • Health

    Disparities In Cataract Care Are A Sorry Sight

    October 16, 2023

    Vaccine Stocks—Including Pfizer, Moderna, BioNTech And Novavax—Slide Amid Plummeting Demand

    October 16, 2023

    Long-term steroid use should be a last resort

    October 16, 2023

    Rite Aid Files For Bankruptcy With More ‘Underperforming Stores’ To Close

    October 16, 2023

    Who’s Still Dying From Complications Related To Covid-19?

    October 16, 2023
  • World

    New York Democrat Dan Goldman Accuses ‘Conservatives in the South’ of Holding Rallies with ‘Swastikas’

    October 13, 2023

    IDF Ret. Major General Describes Rushing to Save Son, Granddaughter During Hamas Invasion

    October 13, 2023

    Black Lives Matter Group Deletes Tweet Showing Support for Hamas 

    October 13, 2023

    AOC Denounces NYC Rally Cheering Hamas Terrorism: ‘Unacceptable’

    October 13, 2023

    L.A. Prosecutors Call Out Soros-Backed Gascón for Silence on Israel

    October 13, 2023
  • Business

    Trump Announces First Post-Tariff Trade Deal

    May 8, 2025

    Electric Vehicle Sales Nosedive As GOP Takes Buzzsaw To Biden’s Mandate

    May 7, 2025

    Tyson Foods Announces It Will Bend The Knee To Trump Admin’s New Rules

    May 7, 2025

    Federal Reserve Holds Interest Rates Steady Despite Pressure From Trump

    May 7, 2025

    ‘Wait Them Out’: John Kennedy Tells Larry Kudlow One Lie He Suspects China’s Telling US

    May 7, 2025
  • Finance

    Ending China’s De Minimis Exception Brings 3 Benefits for Americans

    April 17, 2025

    The Trump Tariff Shock Should Push Indonesia to Reform Its Economy

    April 17, 2025

    Tariff Talks an Opportunity to Reinvigorate the Japan-US Alliance

    April 17, 2025

    How China’s Companies Are Responding to the US Trade War

    April 16, 2025

    The US Flip-flop Over H20 Chip Restrictions 

    April 16, 2025
  • Tech

    Cruz Confronts Zuckerberg on Pointless Warning for Child Porn Searches

    February 2, 2024

    FTX Abandons Plans to Relaunch Crypto Exchange, Commits to Full Repayment of Customers and Creditors

    February 2, 2024

    Elon Musk Proposes Tesla Reincorporates in Texas After Delaware Judge Voids Pay Package

    February 2, 2024

    Tesla’s Elon Musk Tops Disney’s Bob Iger as Most Overrated Chief Executive

    February 2, 2024

    Mark Zuckerberg’s Wealth Grew $84 Billion in 2023 as Pedophiles Target Children on Facebook, Instagram

    February 2, 2024
  • More
    • Sports
    • Entertainment
    • Lifestyle
Patriot Now NewsPatriot Now News
Home»Finance»Europe is in denial about the banking crisis engulfing it
Finance

Europe is in denial about the banking crisis engulfing it

March 25, 2023No Comments6 Mins Read
Facebook Twitter Pinterest LinkedIn Tumblr Email
Europe is in denial about the banking crisis engulfing it
Share
Facebook Twitter LinkedIn Pinterest Email
Central bank complacency seems to have been particularly bad at Christine Lagarde's ECB - OLIVIER MATTHYS/POOL/AFP via Getty Images

Central bank complacency seems to have been particularly bad at Christine Lagarde’s ECB – OLIVIER MATTHYS/POOL/AFP via Getty Images

“We’ve been assured there really isn’t a problem in the eurozone banking system”, the finance minister of one member state told me last week in the wake of the Credit Suisse collapse. “I’m not worried by current developments”.

Lessons had been learned from the crisis of 2009-12, I was told, with regulation, oversight and management immeasurably improved down to the smallest bank.

Olaf Scholz, the German Chancellor, was similarly reassuring. There was no reason to be concerned, he insisted.

There’s only one problem: the markets don’t seem to believe it.

Germany’s largest bank, Deutsche Bank, was the centre of a renewed rout in financial stocks on Friday as fears over the health of the eurozone financial system once again took hold. It won’t take much to trigger another full blown panic.

All three major Western central banks – the US Federal Reserve, the European Central Bank and the Bank of England – have nevertheless continued to tighten policy regardless, as if almost daring the financial system to keel over.

Resurgent inflation, not financial instability, is the main problem, they all parrot in unison, confirming the old truism that central banks are forever doomed to look backwards at the last mishap, rather than forward to the next one.

It is admittedly the case that Credit Suisse and Silicon Valley Investment Bank were special cases, where internal controls were sadly lacking. Both of them were also essentially bankers to the rich; this made them particularly vulnerable to a run.

Belief that the wider European banking system is in some way immune to any such affliction is nevertheless naive. It doesn’t matter how much capital and liquidity a bank may have – it’s finished if depositors lose faith.

See also  ‘A Horrible Situation’: Kevin O’Leary Predicts Commercial Real Estate Crisis

Central bank complacency seems to have been particularly bad at the ECB, which while seeking to extend its influence into unmandated fields such as climate change, took its eye off the ball and seems to have wholly missed the escalating risks to both inflation and financial stability.

After its near-death experience in the eurozone debt crisis a decade ago, the European banking system is no doubt stronger and more resilient than it was. But not so much the underlying health of the national economies on which the system rests. This continues to look as worrying as ever.

While America and China are on a tear, Europe by contrast still languishes in post-Covid torpor, made worse by its lack of energy self-sufficiency and legacy of heavy reliance on cheap Russian gas.

By the way, I don’t exclude Britain from this sweeping generalisation. Far from it. With deep structural issues all of its own, the UK managed to take a bigger economic hit from the pandemic than almost anywhere else. The costs were off the scale. The subsequent inflationary problem and impact on living standards has also been significantly worse in Britain than elsewhere.

Be that as it may, it’s Continental Europe that is again fast becoming the focus of concern. Attempts to force through a minor increase in the pension age in France has prompted a state of anarchy so bad that it has prompted the cancellation of King Charles’s state visit. What hope for serious reform in a country whose lavish system of entitlements is a growing threat to national solvency itself?

Little noticed in Britain’s own shame over spiralling levels of government indebtedness, France’s debt to GDP rose to a staggering 113.4pc last year, far worse than the UK. The numbers are more alarming still in Greece, Italy, Portugal and Spain, and not much better in Belgium.

See also  Russia’s Diesel Exports Ban Is Risky for Moscow and World Alike

It’s true that Europe’s banking system is today better placed to withstand the “doom loop” of cross infection that threatened to destroy the euro back in the sovereign debt crisis of 2009-12. But nor has the threat entirely gone away; rising interest rates have substantially reduced the market value of banks’ holdings of government bonds, rendering all banks, big and small, far less solvent than they were.

We’ve not yet seen countries unable to repay or refinance their government debt, as happened last time. There is also the backstop of the ECB and the eurozone’s various other bailout mechanisms to help distressed banks this time around.

All the same, it’s easy to see why depositors should be spooked. Just to add to this tale of woe, Germany’s economic model seems to be breaking down before our very eyes. Its two great strengths – cheap energy from Russia to feed an industrial powerhouse substantially centred on internal combustion engine technology – are both spent forces.

The cheap energy has already gone, and the internal combustion engine is about to be made obsolete. Trapped in the past, and despite belated attempts to catch up, Germany badly trails the US and China on re-engineering its auto industry to electric vehicles.

BYD cars - GREG BAKER/AFP via Getty Images

BYD cars – GREG BAKER/AFP via Getty Images

Europe’s half-hearted package of incentives and subsidies for galvanising the wider green transition is meanwhile proving no match for America’s “Inflation Reduction Act”, which is hoovering up all the best tech and expertise.

I cannot tell you where today’s rolling series of banking crises will end. Don’t believe anyone who tells you they can. But what’s clear is that the main culprits are again our old friends, the central banks.

See also  Sri Lanka’s Debt Restructuring Deal: Economic Relief or Creditor Windfall?

They knew even at the time they embarked on ultra easy monetary policies in response to the economic dislocations of the last banking meltdown that there would be a high risk of further financial stability the moment they tried to reverse it.

Perhaps that’s why they were so slow to act when inflation came roaring back, dismissively characterising it as “transitory”, rather than structural as it has now turned out to be.

Belatedly recognising the danger, they slammed on the brakes with a tightening of unprecedented speed and quantity. Having acted too slowly, they then acted too abruptly, giving the system no time to adjust to the new world order.

In addressing their primary mandate – controlling inflation – central banks have undermined their equally important purpose of preserving financial stability, which until the events of the past few weeks has been little more than an afterthought.

In any case, the turmoil is by no means over. The eye of the storm has moved from London’s Liability Driven Investment debacle, via America’s Silicon Valley Bank, and now back to Europe again, first engulfing Zurich’s Credit Suisse and now threatening even Frankfurt’s Deutsche Bank.

There is no reason to worry about our largest bank, Germany’s Scholz insists, as indeed he must, regardless of whether he believes it or not. To say anything else would only fuel the panic.

Even so, it sounds worryingly like the football club chairman who expresses complete confidence in his erring manager; this acts only as confirmation that the manager is about to get the bullet. We must hope Scholz is right about Deutsche. But in the meantime, Europe’s woes keep compounding.

Banking Crisis denial engulfing Europe
Share. Facebook Twitter Pinterest LinkedIn Tumblr Email

Related Posts

Ending China’s De Minimis Exception Brings 3 Benefits for Americans

April 17, 2025

The Trump Tariff Shock Should Push Indonesia to Reform Its Economy

April 17, 2025

Tariff Talks an Opportunity to Reinvigorate the Japan-US Alliance

April 17, 2025

How China’s Companies Are Responding to the US Trade War

April 16, 2025
Add A Comment

Leave A Reply Cancel Reply

Top Posts

100 Easter Captions for a Positive, Fun and Happy Holiday (and Your Instagram)

March 5, 2025

‘My Third Home’: Damar Hamlin Honors Hospital Staff Who Saved Him

July 25, 2023

Indonesia Announces Hefty Tariffs on Chinese-made Goods

July 2, 2024

Powell expects more Fed rate hikes ahead as inflation fight ‘has a long way to go’

June 21, 2023
Don't Miss

Trump Announces First Post-Tariff Trade Deal

Business May 8, 2025

President Donald Trump announced Thursday the U.S. has reached a trade agreement with the U.K.,…

100 Funny Father’s Day Quotes for Hilariously Relatable Humor (and Plenty of Love Too)

May 8, 2025

Top 10 Benefits Of Acupuncture

May 8, 2025

Electric Vehicle Sales Nosedive As GOP Takes Buzzsaw To Biden’s Mandate

May 7, 2025
About
About

This is your World, Tech, Health, Entertainment and Sports website. We provide the latest breaking news straight from the News industry.

We're social. Connect with us:

Facebook Twitter Instagram Pinterest
Categories
  • Business (4,110)
  • Entertainment (4,220)
  • Finance (3,202)
  • Health (1,938)
  • Lifestyle (1,626)
  • Politics (3,084)
  • Sports (4,036)
  • Tech (2,006)
  • Uncategorized (4)
  • World (3,944)
Our Picks

Blackstone to invest $150 million in London-based hedge fund Astaris

July 19, 2023

NBA Legend Michael Jordan Celebrates His 60th Birthday With ‘Largest Individual Donation’ In Charity’s History

February 16, 2023

Accusations of Hazing at Northwestern Allege ‘Barbaric’ Forced Sex Acts

July 10, 2023
Popular Posts

Trump Announces First Post-Tariff Trade Deal

May 8, 2025

100 Funny Father’s Day Quotes for Hilariously Relatable Humor (and Plenty of Love Too)

May 8, 2025

Top 10 Benefits Of Acupuncture

May 8, 2025
© 2025 Patriotnownews.com - All rights reserved.
  • Contact
  • Privacy Policy
  • Terms & Conditions

Type above and press Enter to search. Press Esc to cancel.