Italy sells 30-year bonds and yield rose to 3% after the sale. EU leaders have a video call on Thursday to decide on common Eurozone bonds. 50-50 they will yield. But, on what terms? Wolfgang Muenchau thinks it might be all up to ECB.
At one level, it might be sad for Europeans to see the Euro project collapse. It might reduce them to individual nations with the attempt to create a bloc having failed. It might be possible for nations like China to pick them off one by one. See this:
In one survey this month, 59% of respondents said the EU as it is now makes no sense any more. In another, most Italians described China as a friend and almost half said Germany was the enemy. [Link]
This is concerning.
At another level, purely from a macro-economic standpoint, the Euro overvaluation straitjacket for Southern Europe might be gone and it might liberate them economically, at least temporarily. That might be bad news for German exporters, however. Clearly, no good answers in Europe.
The usual suspects – Martin Sandbu and Martin Wolf of FT – have their own views on the matter. Their views are as unsurprising as unoriginal they are. Sandbu favours the Spanish proposal for a special Corona budget.
Quite how it would obtain public’s approval in Norther Europe is left unsaid. It is an additional commitment even if everyone is not collectively responsible for the entire pot of borrowing. This is hairsplitting. Even with debt mutualisation, each country would have been understood to be liable only for its share of the bond issuance. So, the Spanish proposal is debt mutualisation by another name or the backdoor, as far as I understand.
Martin Wolf wants the ECB to print and give. Period. ‘Whatever it takes’ now and forever, I guess. No one knows what it would take and whether they would be prepared to give it.
Negative price for crude oil for May delivery means that investors who have to take delivery cannot store and are willing to pay others to take oil off their hands. More than being a benefit for consumers, it might spell trouble for the economy. [Link].
As Katie Martin points out here, it spells such weak aggregate demand that stock investors would be stupid not to price it in.
Neiman Marcus has stopped accepting new merchandise and this article says that department stores are toast. Nordstrom has cancelled orders to vendors via email [Link]. Lean back and reflect on this. This will have consequences for the American economy and, in turn, for geopolitics. More on the latter in a separate post.
Clive Crook says that the era of central bank independence is over. He is probably right. But, if they fund the government directly and cancel the bonds, the central bank has to be recapitalised.
The Argentine government is getting the central bank to pay its bills. [Link]