IN SPAIN Despite the positive outlook for the Spanish economy in 2021, Andrea Schaechter, head of the IMF’s Spain mission, warned that the economy would not reach its pre-pandemic level until 2023 •
T.C. | The Spanish economy will grow by 6.4% in 2021, making it the fastest growing European country.
It will also be one of the fastest growing globally amongst the advanced economies, along with the US, where growth is also estimated at 6.4%. This is according to the International Monetary Fund’s biannual ‘World Economic Outlook’ report published yesterday.
With respect to its previous forecast, the IMF has boosted the rise in Spain’s GDP by five tenths of a percentage point in 2021. For 2022, the forecast for Spain is that GDP will grow by 4.7%, almost one percentage point above the European Union (3.8%).
However, the revised estimates leave a bitter aftertaste. The IMF calculates that Spain will record an unemployment rate of 16.8% this year, the highest in Europe, •••
T.C. | The Consumer Price Index (CPI) rose by 1% in March compared to the previous month, taking it to 1.3%, almost 1.5 points higher than in February (0.0%), according to preliminary data published today by the National Statistics Institute (INE)
With this upturn, with which the annual CPI marks its third consecutive positive rate, inflation climbs to levels unseen for almost two years. In fact, such a high CPI rate had not been reached since April 2019, when it stood at 1.5%. In addition, the year-on-year rate of inflation had not recorded such a hefty jump (of 1.3 points) since the end of 2016, when it rose from 1.6% in December of that year to 3% in January 2017. The sharp increase in prices in March is mainly due to the rise in the price of electricity and fuels, compared with the decline they saw in March 2020. The INE includes in the preliminary CPI data an estimate of core inflation (without unprocessed food and energy products), with a figure of 0.3% on a year-on-year basis for March, the same rate as in February and one point below the general rate.•••
FUNCAS | Funcas | With the prolongation of the crisis, and the successive phases of opening and closing of the economy, the financial situation of many companies and small businesses has deteriorated, threatening the survival of part of the productive fabric.
There is the prospect of massive bankruptcies and an increase in defaults, with the risk that this implies for financial institutions and for the financing of the economy as a whole. So European governments have been opting to implement direct aid and refinancing operations.
The aim of this note is to outline the recent initiatives in terms of direct aid from the governments of Germany, Spain, France and Italy. •••
MORE • SPAIN
Intermoney | A statement sent yesterday to the CNMV announced Masmovil’s friendly takeover bid for 100% of Euskaltel’s capital for €1.995 Bn, equivalent to a price of €11.17/share in cash. The offer price represents a premium of 16.5% over Friday’s closing price, +25.1% over the average price of the last month and +26.8% over the average price of the last six months. •••
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IN EUROPE Although it is true the Treaty of the European Union explicitly forbids the ECB from financing governments, it does not express explicitly that debt restructuring is not possible.
Gemma Cairó i Céspedes (University of Barcelona) | A few weeks ago, a group of prestigious economists addressed a proposal to the ECB.
In it, they called for the restructuring of the Eurozone countries’ public debt and proposed the need for the ECB to write off their public debt (or swap it for perpetual debt). In exchange, the states would commit themselves to invest these resources in ecological and social reconstruction policies. Despite the quick refusal of both the ECB and the Spanish authorities, this is a legitimate and sustainable proposal. But such a refusal is consistent with what the Eurozone really is: a market whose main objective is the free movement of goods, money and workers, together with monetary stability. •••
Morgan Stanley | Comments on dividends and buybacks for Q4’21 have dominated the publication of banking sector results.
Although regulatory restrictions still apply, most banks want to compensate their shareholders for the dividends they did not pay through special dividends and buybacks in Q4’21. This will result in high payouts at the end of the year. So far, dividend futures of December 2021 STOXX Banks EUR Price index are up 55% year- to-date versus the index which is up 12%. Based on proposed dividends, banks offer a dividend yield of 5% on average in 2021 and some more than 10%. On aggregate, the sector’s capital is very ample at 14.7% CET1, some 480bp above minimum requirements. During 2021/2022 we expect 18 banks to do buybacks (46% of those we cover), a sharp increase compared to the 7 which executed buybacks before the pandemic. With the sector trading at 0.7x Tangible Book Value, it makes perfect sense for them to make use of buybacks.•••
Hans-George Betz (Via Fair Observer) | There is an unwritten rule in politics: If you are incompetent, at least you should not be corrupt. It seems nobody ever informed the German Christian Democrats that this was the way of things.
How else to explain why Christian Democratic MPs thought it was perfectly fine to take advantage of Germany’s COVID-19 crisis to line their own pockets? In German, we have a word, “Raffzahn,” to refer to somebody who cannot get enough, never satisfied with what they have. In the concrete case, a member of the German Bundestag from the Christian Democratic Union (CDU) pocketed €250,000 ($298,000) in commissions for brokering a deal involving the procurement of FFP2 face masks •••
IN THE WORLD
Atradius | Corporate insolvencies continued to decrease in 2020 by temporary adjustments to insolvency laws and fiscal support packages. As support measures are phased out, global corporate insolvencies are forecast to increase by 26% in 2021.The percentage increase of insolvencies in 2021 is highest in Australia, France, Singapore and Austria. •••
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