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Philippe Legrain<\/a> is the author of several books, such as \u00abOpen World: The truth about globalisation<\/a>\u00abHe has also been and is a very influential person in EU economic policy. Not for nothing has he been a senior advisor and head of the analyst team of the Bureau of European Policy Advisers<\/a>\u00a0for the President of the European Commission Jos\u00e9 Manuel Durao Barroso. And as such, has led the team that has directly advised the EU's strategic economic policy.<\/strong><\/p>\n Well, from his privileged perspective, Legrain has recently published an article in the Financial Times entitled \u00ab.\u00abInvestors are ignoring eurozone risks<\/a>\u00abThis is in line with our opinion, which we have reiterated in several articles about the mirage of bonanza that the markets are quoting with respect to the European peripheral economies: \u00ab...the European Union's peripheral economies are in a state of crisis.\u00abM\u00e1trix and the green shoots<\/strong><\/a>\u00ab, \u00abThe double standards of bubbles<\/a><\/strong>\u00aband many others.<\/p>\n Below is a free translation and commentary of Legrain's article:<\/p>\n Peripheral bond yields are reaching bubble proportions. Markets awash with liquidity both camouflage and exacerbate long-term economic problems and insolvency. Investors and policymakers should have learned that lesson in the pre-crisis bubble years. Yet they have gone from hysterical panic to short-sighted complacency in less than two years.<\/p>\n But the Eurozone crisis is far from over and markets are discounting with excessive hopes that the ECB will imminently embrace Quantitative Easing policies, US Federal Reserve style.<\/p>\n Yields on peripheral sovereign debt have plummeted since Mario Draghi said he would do \u00abwhatever it takes\u00bb to save the Euro back in July 2012. However, while the initial price rise (yield fall) in peripheral sovereign bonds was welcome and somewhat justified, the subsequent epic rally over the last year has sent them into bubbly territory.<\/p>\n Yes, the outlook has improved compared to a year ago. Southern Europe is no longer waiting for external injections and is finally growing again (sic). But in the desperate search for yield, investors are ignoring the risks that still exist. The banking crisis has yet to be resolved. Public debt is still rising. And the recovery (sic) is still very weak.<\/p>\n Undoubtedly, with negative inflation and falling prices in some peripheral countries, GDP growth is hardly achievable. In fact it was negative by -1.21GDP3T in Ireland and another -1.21GDP3T in Spain in 2013 (the Spanish subsequently rose +0.31GDP3T in Q1 2014) and +0.11GDP3T in Italy in 2013. So the Eurozone needs to achieve and maintain positive growth for decades to stabilise its indebtedness. A very complicated scenario.<\/p>\n The debt situation in the periphery is precarious to say the least. And precisely because the panic of impending financial chaos (default, euro break-up, etc.) has abated (risk premiums at rock bottom), policies in countries with brutal unemployment and terrifying indebtedness can easily destabilise and return to the turbulence of the past few years.<\/p>\n However, even with a stagnant and unreformed economy, unstable politicians and governments, and public debt of 133% of GDP, Italy can today place 10-year debt at 3%, a record low since the Euro came into existence. The same is happening to Spain, beating yield records from 2005, when its economy was in the midst of a bubble.<\/p>\n In Ireland, 10-year yields have plunged to a paltry 2.89%, just 20 bp above US Treasuries. And this with an economy that stagnated in the fourth quarter of last year, with debt at 150% of GDP, and only 4 months out of the EU\/IMF bailout programme.<\/p>\n The Portuguese junk-rated bond pays only 3.60%, significantly less than the 4% that the market requires of Australia's triple-A bond.<\/p>\n Even bankrupt Greece, which restructured its debt into private hands only 2 years ago and owes a mountain of millions more to the EU and IMF, can still refinance itself on the Markets at an aberrantly paltry 4.95% over 5 years. With a debt of 172% of GDP and rising, its economy is highly unstable. And investors are in fact recklessly betting that the Greek government will prioritise the payment of the bonds held by these investors, while the Eurozone authorities provide some other financial gift to the Greek state. And all this by being able to lend its money to the New Zealand state for 5 years in exchange for its AAA bond at 4.2% interest.<\/p>\n However, sentiment changes quickly. For example, emerging market debt suffered a jolt when the US Federal Reserve announced the tapering of quantitative easing - or turning off the tap of infinite liquidity - just before last summer, and again when it began to be implemented. It is true that the prospect of US monetary policy tightening may at last weaken the EUR against the USD (and that this would benefit the indebted), but it is also true that such tapering presages a global interest rate hike, which would be fatal for Europe's debt-buried periphery.<\/p>\n So what, the ECB is about to launch its own QE programme and inflate bond prices? Not so fast. So far all the ECB has done is try to pay lip service to lowering the value of the Euro. Any further monetary easing would seem to be more about offering negative rates on its deposits than actually initiating QE. Recall that the Germans are happy with their inflation at 0.9%. They - and many others at the ECB - do not see falling prices in southern Europe as a problem, but as a necessary adjustment process.<\/p>\n Frankfurt will not look favourably on embarking on another experimental policy either, shortly after the German Constitutional Court outlawed the OMTs<\/a> (Outright Monetary Transactions). With the ECB still focused on assessing the quality of eurozone bank balance sheets, QE also seems premature and uncertain of positive effects. And the more bond markets rise before QE takes place, the longer the ECB will delay QE in the hope that the bond market bubble can be coupled with stronger economic growth.<\/p>\n As long as the sun is shining, governments would do well to rush to meet their borrowing needs over the longest possible time horizon. But investors should be more cautious and watch out for looming clouds on the horizon. And so should governments and politicians, who have once again claimed victory prematurely.<\/p>\n We are therefore facing a scenario in which the insolvent states of the European periphery must take full advantage of investors' current naivety in order to survive, at least for a few more years. And where, on the other hand, these investors must avoid risking their money by offering it to insolvent debtors, even if they have the ECB's complicity, since the ECB's future actions are highly uncertain. It is an unequal struggle, since the states have all the establishment<\/em> and media to their advantage in order to convince a large number of unwary investors (private and institutional) that the worst is over. After all, the worst is always it is far less traumatic for millions of investors to go bankrupt than for the states themselves to go bankrupt.<\/strong>, The former do not drag each other down like dominoes. In the same line of thought are the extraordinary measures<\/strong><\/a> bail-ins for the periphery, which are just around the corner.<\/p>\n And yet some are still surprised by the latest published outflow of money from Spain, which amounted to 8.7 billion eur during the last month of February alone. In other words, in a single month, the equivalent of almost 1% of GDP...<\/p>\n <\/p>","protected":false},"excerpt":{"rendered":" Philippe Legrain es autor de varios libros, como por ejemplo \u00abOpen World: The truth about globalisation\u00ab, y tambi\u00e9n ha sido y es una persona muy influyente en la pol\u00edtica econ\u00f3mica de la UE. No en balde ha sido asesor principal y jefe del equipo de analistas del Bureau of European Policy Advisers\u00a0para el Presidente de […]<\/p>\n","protected":false},"author":6,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[38,45,41,42,39,40,37,55],"tags":[],"class_list":["post-3769","post","type-post","status-publish","format-standard","hentry","category-actualidad","category-asesoramiento-deportistas-artistas","category-economia-y-finanzas","category-estrategia","category-crear-mi-propio-family-offices","category-gestion-financiera","category-reflexion","category-necesito-un-family-office"],"_links":{"self":[{"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/posts\/3769","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/users\/6"}],"replies":[{"embeddable":true,"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/comments?post=3769"}],"version-history":[{"count":0,"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/posts\/3769\/revisions"}],"wp:attachment":[{"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/media?parent=3769"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/categories?post=3769"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/tags?post=3769"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}