European Institute

By J. Paul Horne, Independent International Market Economist

Bond markets reacted very positively to the most comprehensive and rigorous assessment ever of EU and Euro zone banks published on Oct. 26. Barring surprises on European budgetary policies later this week, the report by the European Central Bank (ECB) and European Banking Authority (EBA) on the health of European banks is likely to boost confidence not only of financial markets but that of the overall economy. If the passing grade on Europe’s banking system contributes to improved consumption and capital spending, recent worries about deflation could be attenuated.

By Brian Beary, Washington Correspondent for Europolitics

The upset in the European Parliament hearings on the new EU Commissioner-designates was its outright rejection of Slovenia’s nominee, former Prime Minister Alenka Bratusek. After giving a poor performance during her three-hour grilling on October 6 for the energy union portfolio, Bratusek lost the parliamentary committee vote two days later by an embarrassingly large margin: 13 votes for, 112 against. She refused to go quietly, venting anger at what she felt was a setup and being especially bitter that many fellow Slovenians threw her to the wolves as she saw it.   But ultimately resignation was her only option. Slovenia moved swiftly to nominate Violeta Bulc, a recently-appointed minister, to replace her.

By James David Spellman, Principal, Strategic Communications LLC

Envisioned as a bulwark against another “systemic” banking crisis, the European Central Bank will become the Eurozone’s single banking supervisor on November 4.  This framework gives ECB wide-ranging powers, including direct supervision of the 120 largest banks in 18 countries that together hold most of the Eurozone banking assets.^[1]

By James David Spellman, Principal, Strategic Communications LLC

Leaving interest rates unchanged, the European Central Bank said last week that it would buy government bonds and other assets for at least two years in hopes of increasing bank lending to businesses and thereby stimulate growth.  Left unanswered were questions about the size of these initiatives and whether additional measures, “quantitative easing,” would be launched soon, as inflation in Eurozone countries remains stubbornly low and a new phase of recession takes hold.