Syriza may be troika's best hope for Greek deal

2015 ◽  
Keyword(s):  
Stock Market ◽  
European Commission ◽  
Financial Market ◽  
Euro Area ◽  
The Political ◽  
Costs And Benefits ◽  
Content Type ◽  
Political Left ◽  
Unexpected Outcomes ◽  
Market Exuberance

Subject Unexpected outcomes in the Greece-troika imbroglio. Significance Negotiations between Greece and its 'troika' of official-sector creditors (the European Commission, ECB and IMF) are taking place amid two meetings of the euro-area finance ministers and one summit of EU leaders before the end of February. While it is impossible to know now what the result will be, it is possible to speculate on the costs and benefits of any given scenario. Impacts If Syriza fails to achieve meaningful debt reduction, it could discredit the political left as well as the notion of EU solidarity. Greek sovereign yields and the Greek stock market are likely to react extremely positively to any deal between the troika and Greece. Financial market exuberance towards Greece will be unwound as the implications of Greece's continuing high debt load become clearer.

China and 'Grexit' risks weigh on EMs globally

2015 ◽  
Keyword(s):  
Stock Market ◽  
Euro Area ◽  
Emerging Market ◽  
Listed Companies ◽  
Equity Market ◽  
Foreign Investors ◽  
Content Type ◽  
Emergency Measures

Significance This month, 3 trillion dollars had been wiped off the value of all listed companies since a seven-year high on June 12, undermining confidence in the government's ability to steer the market. These developments along with the lingering risk of a Greek exit ('Grexit') from the euro-area, despite the provisional agreement reached on July 12, are taking a toll on emerging market (EM) asssets more broadly. Impacts The emergency measures aimed at stemming the sell-off in Chinese equities will help stabilise the stock market. Foreign investors' exposure to China's retail-based equity market is likely to remain limited. The renewed Brent crude price fall, down 14.2% since early May, will pressure oil exporters' currencies while benefiting oil importers.

The ECB will set the speed of global credit tightening

2018 ◽  
Keyword(s):  
Financial Market ◽  
Euro Area ◽  
Market Volatility ◽  
Government Bonds ◽  
Content Type ◽  
Bank Of Japan ◽  
Global Growth

Significance The ECB's plan could tip the scales towards tighter credit conditions globally. However, there are concerns about global growth -- particularly in the euro-area -- and government bonds are proving extremely sensitive to hawkish policy, fuelling financial market volatility. Impacts The VIX index of anticipated US equities volatility is back near a record low, but volatility may rise and remain higher than recent years. Fed rate hikes and US growth outpacing the euro-area will strengthen the dollar although the euro briefly rose on the news of ECB tapering. The ECB trails the Fed by some years in policy tightening and forming a plan for unwinding QE; this divergence will also boost the dollar. The Bank of Japan is buying vast quantities of government bonds and has no plans to remove stimulus as inflation is far below the 2% target. Investors are appreciating and trusting Fed Chair Jay Powell's attempts to speak plainly and less formulaically than predecessor Yellen.

Four disintegration risks may threaten the EU’s future

2017 ◽  
Keyword(s):  
Euro Area ◽  
Presidential Election ◽  
The Political ◽  
Economic Downturn ◽  
Political Uncertainty ◽  
National Front ◽  
Content Type ◽  
Marine Le Pen ◽  
Decisive Victory ◽  
The Eu

Subject Four European disintegration risks. Significance After the French presidential election, which saw the decisive victory of Emmanuel Macron over National Front leader Marine Le Pen, a sigh of relief could be heard in European capitals: the worse had been avoided; the EU would thrive again. This relief could be premature. At least four disintegration risks are still threatening the EU. Impacts Even though its economic prospects are positive, the euro-area remains fragile and could plunge back into chaos if left unreformed. An economic downturn would benefit Eurosceptic populist parties. The political uncertainty of a caretaker government in Germany will increase its officials' reluctance to agree to any euro-area reforms.

EU state aid plans will concern some trade partners

2020 ◽  
Keyword(s):  
Competitive Advantage ◽  
European Commission ◽  
Euro Area ◽  
State Aid ◽  
Economic Recovery ◽  
Content Type ◽  
Eu Countries ◽  
Foreign Takeover ◽  
Trade Partners ◽  
Trade And Investment

Subject EU state aid. Significance The European Commission has approved more than EUR2.1tn (USD2.4tn) in state aid since March. This significant relaxation of state aid rules -- aimed at preventing businesses from collapsing and protecting them from foreign takeover -- could last for another year or two. At the same time, the Commission is preparing to bolster its scrutiny of aid by non-EU states which gives their firms a competitive advantage over EU ones. Impacts After aviation, those sectors most in need of state aid are other transport sectors, hospitality and tourism. Richer EU countries’ ability to provide much more state aid to its firms will fuel a disjoined economic recovery across the euro-area. The EU’s crackdown on foreign subsidies will likely make it more difficult to reach a trade and investment partnership with China.

What do European stock markets prefer? Left or right governments?

2015 ◽  
Vol 41 (10) ◽  
pp. 1096-1111
Author(s):  
Andreea Stoian ◽  
Delia Tatu-Cornea
Keyword(s):  
Stock Market ◽  
Stock Markets ◽  
Fixed Effects ◽  
Large Body ◽  
The Political ◽  
Right Wing ◽  
Left Wing ◽  
Data Set ◽  
Content Type ◽  
European Stock Markets

Purpose – The purpose of this paper is to examine the influence of the political partisanship of government in charges of returns on the European stock markets. The authors found a large body of research investigating this issue for the case of US stock market but less evidence for the European stock markets. Design/methodology/approach – The authors employ a panel data model with fixed-effects and an additional dynamic panel model using the bias-corrected LSDV estimator on a data set consisting of monthly and quarterly data. The data range from 2000 to 2010 and cover 20 European Union (EU) countries. The authors test several hypotheses, and run distinct regressions using political, financial, and economic variables. The authors also divide the data set into two sub-samples in order to reveal the distinctions between advanced and emerging economies in the EU. Findings – The authors find that stock markets perform better under right-wing administrations. The result is consistent for the advanced EU economies, but the authors found no robust evidence in that sense for emerging countries. Additionally, the authors show that European stock market preferences for right/left-wing administrations is not necessarily related to the beliefs about the size of unemployment, inflation, deficit, and/or debt, which opens the field for further research in this area. Originality/value – The study contributes to existing knowledge. It examines if Wall Street folklore, asserting for many decades that stock markets perform better under right-wing governments, also holds for European stock markets given the distinctions in the political and financial systems between USA and Europe. Moreover, the authors underline the introduction in the analysis of the Central and Eastern European countries.

Draft budget will increase Greek taxpayers' burden

2016 ◽  
Keyword(s):  
Euro Area ◽  
Financial Assistance ◽  
Economic Recovery ◽  
The Political ◽  
Tax Revenue ◽  
Unequal Distribution ◽  
Content Type ◽  
The Third ◽  
Private Households ◽  
Political Backlash

Significance Clearing state arrears to the private sector depends on the quartet of international creditors' timely disbursement of financial assistance tranches. The finance ministry is in no position to generate additional tax revenue or cut expenditure. Thus, it is vital to conclude the second review of the third programme and disburse the next 2.8-billion-euro (3.1-billion-dollar) tranche. Impacts The political backlash from angry taxpayers may just be an election away. No euro-area country has achieved economic recovery after seven years of recession on the back of excessive taxation. The 2017 budget draft only increases the unequal distribution of the rising tax burden for private households and corporates.

Prior actions passed will unlock Greek bailout cash

2015 ◽  
Keyword(s):  
Euro Area ◽  
Pension Reform ◽  
The Political ◽  
Content Type ◽  
The Government

Significance This allowed the Eurogroup of euro-area finance ministers to authorise the release of 12 billion euros (12.8 billion dollars) from the latest bailout package of 86 billion -- 2 billion euros to supplement budget needs and 10 billion for bank recapitalisation. Impacts There could be more parliamentary cliff-hangers over approving implementing legislation in such areas as pension reform. The opposition may support the government on some issues, but this could undermine Tsipras's authority. Another election is possible, but might not change the political balance.

Italy’s woes expose euro-area governance failures

2016 ◽  
Keyword(s):  
Euro Area ◽  
Banking Sector ◽  
Capital Requirements ◽  
Bank Loans ◽  
The Political ◽  
Political Uncertainty ◽  
Content Type ◽  
Core Inflation

Significance The political uncertainty in Rome is hampering efforts to restore confidence in MPS and poses a challenge to the implementation of the EU’s controversial ‘bail-in’ rules. Impacts Euro-area core inflation is just 0.8%, less than half the ECB’s 2.0% target despite a gradual pick-up in growth. Despite surging nearly 50% from a July record low, the Stoxx 600, the euro-area’s banking sector index, is still 5% down year-to-date. From 2017 to 2019, 550 billion euros of EU banks' senior debt will mature -- a lifeline, if the most vulnerable can survive until then. Further euro-area capital requirements will come in in 2017, but could be introduced gradually to minimise the disruption. Nearly 18% of Italian bank loans are non-performing, three times the euro-area average.

Moderation is waning in Italy-EU conflict

2019 ◽  
Keyword(s):  
European Commission ◽  
Euro Area ◽  
Fiscal Rules ◽  
Right Wing ◽  
Content Type ◽  
Borrowing Costs ◽  
Deficit Reduction ◽  
Parallel Currency ◽  
Excessive Deficit Procedure ◽  
The Eu

Subject Italy's budget conflict. Significance June 5 marked a resumption in hostilities between Italy and the EU, after the European Commission sent a letter to Rome saying its spending plans were breaking EU fiscal rules. The Commission will now begin the process of implementing an excessive deficit procedure (EDP) against Italy aimed at reducing its deficit and debt. This will likely involve deficit reduction measures that could precipitate the collapse of the populist government. Impacts If an EDP is blocked, efforts to launch it will start again in September if Italy’s budget preview shows Rome not complying with EU rules. An EDP could lead to higher borrowing costs and make it more difficult for Rome to reduce its excessive debt, which is around 132% of GDP. A League-led right-wing government would push for aggressive tax cuts, potentially leaving Italy in the same predicament that it faces now. The implementation of a parallel currency to boost the supply of money would fuel concerns that Italy is prepared to leave the euro-area.

Political risks and financial markets: emerging vs developed economies

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Bechir Ben Ghozzi ◽  
Hasna Chaibi
Keyword(s):  
Stock Market ◽  
Financial Markets ◽  
Political Risk ◽  
The Political ◽  
Arch Model ◽  
Excess Returns ◽  
Market Returns ◽  
Content Type ◽  
Political Risks ◽  
The Impact

PurposeThe authors provide a comparative analysis between emerging and developed financial markets in terms of the effects of political risks on stock market returns and volatility. The authors also examine whether this impact depends on the nature of political risks. Therefore, this study aims to detect which financial markets are the most profitable and the riskiest in terms of political risks.Design/methodology/approachThe authors investigate the impact of political risks on the excess stock market return and its conditional volatility using the generalized ARCH model for a sample of 46 developed and emerging markets over a period ranging from 1995 to 2019. In order to test how the nature of political risks affects equity excess returns and volatility differently in different markets, the authors employ (1) a composite political risk score, (2) the four subgroups of political risks as defined by Bekaert et al. (2005, 2014) and (3) the individual dimensions of political risks.FindingsThe findings indicate that the composite political risk is priced into both stock markets. The effect of political risks is positive for excess returns and negative for volatility. The authors show that the political risk leads to more volatility in developed markets. Nevertheless, the effect of individual components varies according to the market category.Practical implicationsThe authors provide a framework for predicting market returns and volatility using changes in the political risk of the country. The findings help investors make investment decisions based on the political decisions of governments. In other words, investors should consider political uncertainty when determining their expected earnings.Originality/valueThe authors engage monthly panel data methodology in terms of the political risk stock market relationship. In addition, the authors consider recent and very long data covering the period 1995–2019. Furthermore, this study combines three various political risk measures, and both equity returns and volatility.

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