September 29, 2011

Head of Unicredit Securities declares Euro death

The Head of UniCredit global securities Attila Szalay-Berzeviczy, and former Chairman of the Hungarian stock exchange, has written an unbelievable oped in the Hungarian portal which, frankly, make Alessio "BBC Trader" Rastani's provocative speech seem like a bedtime story.

Only this time they cannot say Szalay-Berzeviczy is an inexperienced naive.
If someone knows the truth, this guy at the top of UniCredit is the one.
Among the stunning allegations (stunning in that an actual banker dares to tell the truth) are the following:  
"the euro is “practically dead” and Europe faces a financial earthquake from a Greek default"... “The euro is beyond rescue”... “The only remaining question is how many days the hopeless rearguard action of European governments and the European Central Bank can keep up Greece’s spirits.”...."A Greek default will trigger an immediate “magnitude 10” earthquake across Europe."..."Holders of Greek government bonds will have to write off their entire investment, the southern European nation will stop paying salaries and pensions and automated teller machines in the country will empty “within minutes.”
and Bloomberg is adding:
The impact of a Greek default may “rapidly” spread across the continent, possibly prompting a run on the “weaker” banks of “weaker” countries, he said.

“The panic escalating this way may sweep across Europe in a self-fulfilling fashion, leading to the breakup of the euro area,” Szalay-Berzeviczy added.

Szalay-Berzeviczy has just arrived in Hungary from a trip abroad and can’t be reached until later today, a UniCredit official, who asked not to be identified because she isn’t authorized to speak to the press, said when Bloomberg called Szalay-Berzeviczy’s Budapest office to seek further comment.
Full op-ed from, translated via Google from Hungarian. Something may be lost, but the message is quite clear.

Europe's common currency is virtually dead. The euro's doomed situation. The only open question now is, that European governments and the European Central Bank's desperate rearguard action even number of days to keep the spirit in Greece. For the moment, when Athens is declared bankrupt, a "10 magnitude" earthquake will shake Europe, which will be the overture to a whole new era in the life of the old continent.
Indeed, Greece is not only bankruptcy will mean that the Greek government securities holders did not get back their money invested, but also to the interior of the state will not be able to meet its debts.
From the moment only Greek teachers, doctors, police, army, ministry and local government employees will not receive a salary, just as the seniors did not expect nyugdíjukra good time. The ATM is emptied in minutes. The local banks are stuck holding government securities, an immediate liquidity crisis, devaluation of the Greek banking system in total collapse. Thus the savings of depositors is totally wasted because the Greek government deposit insurance or guarantee was now living. Bankkártyájukról since then, not only at home will not be able to withdraw some money, but the world's only automatájából not. The benzinkutakból run out of fuel, as well as food from the grocery store. Greece is practically a full stop at least a decade of life and dramatic drop in poverty in the country as a whole.
The problem is that in this case, the disaster can not stop at the Greek border, but great speed and momentum tovagy?r?z?dik then the entire euro zone, Europe, and finally shake the world. Channel for the spread of infection, of course, such a scenario would also back the banking system. Indeed, the international banks in Greece suffered hundreds of billions of euros t?kevesztésükön too soon be forced to lock hitelkereteit other banks, which will have to do with a country where - according to investors' expectations - the Greek thunderbolt strike again.
And when the banks no longer trust each other, not to lend to each other, the international financial markets stop. This in turn means that all financial institutions left alone with clients.
Poor countries with weak banks start to panic withdrawals of retail funds. But since the retail and corporate deposits and loans are allocated in the form of inter-bank market, these banks can not borrow bridging purposes, may be an immediate liquidity crisis. This is, to all financial institutions can be put into bankruptcy, which is stable and there is no capital behind strong, creditworthy countries. European countries are now, of course, guarantee the safety of their deposits, but the collapse of the banking system would be in financial straits due to the governments of the countries whose banking systems should extend under his arm. Thus, the escalating self-fulfilling panic söpörhet way through Europe, the euro zone which then leads to disintegration.
Of course, Angela Merkel, Nicolas Sarkozy and Jose Manuel Barroso repeated daily unos-untalan to disintegration of the euro zone there is no question of the euro remains in any case, as an alternative to this would be a huge cost to all Member States. But the currency union dissolution is probably one of the main features will be managed from Brussels, it is not a process but an uninvited guest arriving as a result of financial apocalypse. The euro area break-up, timing, strength of the human factors as well as money and capital market forces and trends will define the politicians was only with us panic watching the developments as three years ago was when Lehman Brothers collapsed.
The now four-year, and is constantly raging crisis in the greedy, selfish human nature too is certainly not the banks, not brokers, not the weather and no natural disasters, but above all, and especially at any price with economic growth, power libertine policy responsible for the global elite. Namely, those legislators, the majority of whom have never been able to see through the international financial developments, therefore, the corresponding pre-crisis legislation will only have been available, when in 2008 the world has collapsed.
However, the banks should be regulated, not criminalized or stigmatized.
The American politicians, at least it has always been understood that the money and capital markets are efficient economic policy allies of the investor for the company are responsible for. In contrast, their counterparts in Europe, unfortunately, still do not understand the nature of markets, most of them think that the financial system, the ancient enemy, because it does not work the way it is dictated by their own political interests.
Was a huge mistake and irresponsibility on the part of the political elite of the international crisis in 2009, the easing of its own negligence and error concealment of public passion in order to make a scapegoat of feltüzelésével from financial institutions. When everyone knows exactly that the taxpayers 'money to government banks are not rescued, but the corporate, retail and municipal depositors' money. This was not a political decision - like, say, airlines or car manufacturers for - but a serious system troubleshooting.
The two reasons people moved their money to the bank: I want to know it is safe and hope the interest on their savings. The bank has to create the security, interests, it must produce. It will only be able to do so, it assigns to the deposits in the form of credit to where money is needed for the operation, growth and job creation. It is sufficient interest to be collected by then to be able to pay interest to depositors.
Banks are so important to the economy, fuel carriers, which in times of crisis in the economies most vulnerable points, which therefore must be protected and safeguarded at all costs. Eventually, this belátva "after the rain the rain jacket," the way Europe was born in the EU capital adequacy directive, the United Kingdom, Vickers Commission's recommendation, the United States, the Dodd-Frank Act, while at the global level, the Basel Committee (Basel Committee on Banking Services) III. package. These are all one and all of the banking capital and liquidity position on increasing. The regulations, restrictions - which is no small effect on the Hungarian banking capital and liquidity position as well - but the price that banks in lending rates to curb forced a diminishing impact on economic growth and increase unemployment.
There is a country ...
However, there is still a country in Europe where the political elite in recent years not learning from the crisis of economic policy impasse will continue its adventures. A place where politicians continue to irresponsibly mantrázzák that banks are the source of every problem and an imaginary part of the economic Patriotic War must convince them, instead of strengthening their capital rohannának the upcoming Euro final before the onset of disaster. And is still seriously they think the country will benefit if long-term processes in the international market against marching.
This, unfortunately, no other country like Hungary, where governments, businesses and a significant proportion of the population indebted up to the neck, near the Swiss franc will spend his days. By now almost everyone's favorite topic of "what the devizahiteleseinkkel start" in the story, which is again due to the political elite of our society began to polarize. Despite the disagreement is not really suffering, and lack of solidarity between runs, but the solution and a further deterioration of the situation. Finally, the Government of a sudden, shocking everyone with lightning speed by dragging points in the debate. For many, the record speed in the parliament adopted legislation relevant music for the ears. I, however, the minority that the government of the country for the wrong, dangerous and immensely unjust solution.
Who is responsible for the credibility of the currency situation that has evolved?
To determine if this is not necessary to set up committees of inquiry. The situation that has evolved over the past decade, the whole Hungarian political elite is responsible for short-sighted and self-serving politizálásával the following four steps as a result of our country to benefit vulnerable position.
1) The spectacular public debt in 2000, started by the then Urban's government overspending as part of a drastic cut in home loan into a generous budget kamattámogatásába. This was the hope that in the 2002 elections will help the start-up in domestic demand growth path to make the country an international crisis in the middle. Eventually won the elections, Socialist Party of Free Democrats coalition that he is "hundred-day program," observed head (which was then in opposition Fidesz is automatically voted on) that some further policy steps complete with an amazing total indebtedness of the country. Both political side hoped that the expansion of domestic demand BOOST artificial, accelerated through the distributing political economy, that will then automatically produces a cover to hide the resulting deficits. However, this hypothesis was wrong, the more so because the supercharged domestic demand stimulated imports only, and this is only exploited by the country's trade balance. The resulting fiscal imbalance is a false illusion of wealth, causing catalyzed by the growing demand for consumer credit.
2) The Hungarian population is not the currency of their own band, not to loans after the country's deteriorating economic condition of the forint faced having to pay the interest rate premium. In the nine years of failed economic policy (unsustainable pension, health and housing subsidy system, beyond the minimum 50 percent increase for public servants carried out under 50 percent wage increase, a 19 thousand forints single pension supplement, the 13th month pension, the introduction of the minimum wage, tax exemptions make the reckless áfaváltoztatások, the state and the private sector, real or imagined, a partnership of PPP investments proliferation, unrealistically expensive highway construction), an abnormally low taxpayer morale, coupled with a growing hole in the state household, and this is the country's indebtedness resulted. A short well-being of our economy and substance of political change in direction instead of the current Hungarian Government to finance its foreign investors, who do all this, of course, the increased risks due to a high interest rate premium they would do next.
3) The current Hungarian government's fault that 21 years after the regime change in the financial and economic fundamentals are still not subject to the compulsory part of secondary school education and the maturity of. The reason people can not just lending a little, but have no idea what's the difference between the interest rate and the APR, there is no sufficient information about themselves on the bank, a financial trader. For this reason, then vulnerable, defenseless, non-savers are active, spend more strength above. What megtakarítanak yet, I want to keep it under his pillow, and averse from the Stock Exchange do not understand the fundamental economic relationships are not. So, of course, are highly susceptible to demagogic politicians banking and capital market, anti-rhetoric, when the situation rather than solutions themselves instead of trying to find those responsible.
4) The adóforintjainkból reserved for government and the financial market supervisory bodies to be surprised at the deepest crisis in his sleep in 2008. They were not able to perform a task, and therefore unprepared for the crisis in Hungary, it was more severe effect. The current government, parliament, central bank supervision and the responsibility to monitor, if necessary, regulate the market trends and anomalies if large or dangerous trends are seen, it is time to take action early - applying for the relevant law must drive everyone back on track. (For example, if a bank responsible wanted to act and therefore does not give franc loan to the customer, the customer response passed from another bank, which serve them.) Therefore, the Socialist-Free Democrats government enormous mistake when unleashed in Hungary in foreign currency lending, instead of restrictive legislation would have created that all banks are equally strong against the standards of the franc would have corroborated related lending. This of course does not dealt with the then opposition in parliament.
The government in the role of Don Quixote
The Hungarian government, the fiscal position to deal with a simple but populist solution. The problem with all of its declared banks began systematically stamping: the crisis in the banking system, taxes were imposed, a moratorium on the enforcement of mortgages, a three-year rate lock maximizing debtors' monthly repayments. These measures, of course, painful lives of all financial institutions, but also understandable and tolerable in view of the crisis. The government's latest idea, a stream of foreign exchange price fixed mortgage repayments, however, is beyond all the existing boundary of sanity.
The banks seem to be borne by the strokes well, because they are the eyes of external sources of unrestricted funds (but not their own money to the banks, the depositors and shareholders should have). But the reality is that domestic banks in these lépéssekkel lose their profit and a significant part of their capital, which puts a dangerous situation in the Hungarian banking system just when the world, the banks' capital and liquidity, strengthening the position of working with governments. The current situation at home, in response to the banks to curb lending further forced the mostly foreign-owned banks are a part of our opt for the departure. Of course, this last step we can say that this is who cares: just because it will improve under the leadership of the Hungarian financial institutions, market-making opportunity.
But the situation is far more complex. Firstly, the total size of Hungarian banks are not enough large to be financed only from domestic sources themselves the entire Hungarian economy. Second, any taxpayer suicide in terms of budget, job-creating companies elüldözni, especially when it leads to the purchase of Hungarian government securities. And last but not least, a shrinking national economy and increasingly risky financial institution operating in a responsible one is not increasing market shares. If it is the country where the bank is also home country, this means increase in the risk of increasingly sidelined in international financial markets and is also much more expensive than the current one, or none at all will not be able to involve funds from abroad.
Therefore, higher interest rates and forint dramatically in need of corporate and household lending in Hungary can be expected that we all have bad news. Especially when considering the lawfulness that each percentage point of economic growth should grow in the order of four percent each year, the bank's loan portfolio. Failing this, the road remains a continuing recession and rising unemployment direction. Same point in the past three years has shown that the unlimited and unregulated credit expansion is what can lead to trouble. But that is a credit to the economy in which the living body of water: an essential and irreplaceable. It is not to mention that the lack of competition in supply and rising bank costs, and declining service quality leads.
Long live the social implications
A favorable exchange rate for foreign currency loans, repayment options and money market of the real economic problems are a very important set of issues it raises: the action is extremely unfair to socially as well.
1) Take yourself, who adósodott not it?
We turn to a bank loan, because we decided against that and not because of this gun to force bank. A man with a credit consumer, who is living beyond its capabilities with real, or better living conditions than that you can afford. But this is not a problem per se, but only in private. Especially if the forint borrowing rather than foreign currency. The foreign debt is nothing more than speculation in the currency weakening. The borrower to receive foreign currency, the forint strengthened or will increase, so the repayments are lower, or even weaken, the depreciation rate will never exceed the forint and Swiss franc relative kamatkülönbözetb?l from profits. The customer decides the bank to credit the HUF will be required over 10 per cent interest or more on selected franc loan 6 percent. One man's debt burden is higher, but there is no exchange rate risk, while the other smaller interest burden, coupled with exchange rate risk. So the possibility of the borrower, risk tolerance in relation to the choice. Responsibility for the judgments of others do not sew the neck, once it did not work for what we expected. However, the government decided that the losses for the banks to take over. This means that if a crisis of financial institutions to the edge of collapse because of their capital szétporladó are, the Hungarian government, the taxpayers will have to set their feet so as not to lose there money to depositors, since they guarantee. That is simplistic: while the forint was strong, the currency authentic nyer?ben were, and when the partially self-constructed position weakened forint due to losses incurred when the government that tries them be required to pay, who did not want a loan, but instead saved a and deposit bankjuknál form affixed. Those who are indebted in HUF, are now beyond their own pain authentic solidarity even in the foreign exchange burden themselves may assume, therefore, double-pay. This is extremely unfair to those who lives without borrowing to the extent possible is held responsible, thinking the more expensive or forint loans was recorded, compared to a profit for many years a relatively foreign credit insurance.
The exchange of authentic reference that no one told them to such an extent, the forint weakened and discredited simply unacceptable. In addition, point in a country with a population over many decades, they were socialized to be the best foreign currency savings, as the forint has already been countless times leértékelve. Not to mention that the man, after long and careful consideration in choosing real estate. It is difficult to imagine that a funding condition can not inquire about the system thoroughly.
2) Support those who took the rose hill francs their apartment?
The saving on foreign exchange authentic parliamentary decision that the existing foreign currency loan will only be able to repay, whose savings are adequate or sufficiently stable income and good relations among the living, that this new fund is now forint-based loans. The decisions of the government due to the weakening forint started to plunge even more difficult situation is really in need credible currency, even though at the expense of others throws lifeline to those who hitelükb?l luxury apartments and holiday homes at Lake Balaton meeting.
3) Trash the sanctity of property rights
The government has just sent a message to voters: the sense of responsibility to the community and handle finances, because if it goes wrong, you will help the paternalistic state. The parliament's decision on Monday, however, has virtually legislated that Hungary should rob banks.
The banks do not stuff themselves with money bags, where they can and can extract any number of free money. They are companies whose owners are its shareholders. Who had invested money in this industry because earnings are expected. The income is derived from those customers who have placed their savings to the bank as security in exchange and interest rate are expected. The bank will need to generate the operation, the cost of the depositors and the interest rate on dividends to shareholders. If this process the government all sorts of sober reflection, without prior consultation and say, you have the savings of depositors and the shareholders' investment risk. This would not only lead to bankcs?dhöz worse, but the extent undermines the confidence towards Hungary to deter those who have money want to invest Hungary economy.
A reliable and well-functioning market economy, democratic country built on two main criteria: the sanctity of private property, and the megkérd?jelezhetetlensége FAKTUM to repaying the debt is still all right. And these two factors can not only political power and does not want megpiszkálni. Because everyone knows that the country where the prime minister during breakfast work out the same day regardless of which operator will be something to take away, which was then a parliamentary lunch already constitution also to the President on the same day before dinner underneath write and publish the investors to avoid the sight of a banana republic.
What is medicine?
The people, companies, municipalities and the state foreign debt of the current level of real macroeconomic risks, which need to be addressed. The pékt?l doctors and bankers to bus drivers is the same for all of us an equal interest in the more tolerable rate of repayment. But it does not matter what method is achieved. The parliament adopted the Law on foreign credit repayments in the short term as to help affluent debtors, but it is extremely unfair and harmful to the greater part of the country. This is a money market and real activity leads to start had to sooner rather than later to 300 forint euro exchange rate over the direction of take. There are some steps that might sound good now, but in fact points to a fast-track court sent the country after the Greeks. While other ideas are not sound popular, but in the medium term, stable and reasonable solution to the problem of genuine currency.
The latter are the authentic economic policy decisions that the government reduce the size of the pension and health and public administration reform will help improve competitiveness. Measures to attract investors and investment, increase tax revenues are put into place to increase - making it finally fall in unemployment - may be less public debt and, last but not least, appreciation can start the forint to finally fall to start a foreign currency mortgage payments.
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