– Can they agree on a plan to save the euro?
– If so, who will pay for it?
Good morning. Horace wrote in his Epistles “If possible, honestly; if not, somehow, make money”. Some 1700 years later Benjamin Franklin’s Advice to a Young Tradesman was to “Remember, time is money”. In the post apocalyptic banking world institutions are combining the two mottos in an effort to rebuild their broken balance sheets. Today’s Daily Mail highlights the enormous 1900-basis-point gap between deposit and overdraft rates. To add insult to injury, one nationalised bank also charges a £5 monthly fee on overdrawn accounts. Someone overdrawn by £100 for a year would pay £19.30 interest plus £60 fees. That equates to an astonishing 80% interest rate. No wonder, then, that Eric Cantona (he of kung-fu seagull fame) is organising a protest against the banks. He wants everyone to empty their bank account today. Muggers in Paris went to bed early last night with a cup of cocoa, in preparation for what could be a bumper payday.
They will have been few early nights in finance ministries across Euroland though, as the propeller-heads struggled to come up with a resolution to the euro crisis that would not involve asking German taxpayers to empty their pockets for a second time. Chancellor Angela Merkel scotched two possible solutions yesterday when she vetoed the idea of an EU-wide government bond and denied there was any need to increase the size of the European Financial Stability Fund. In the first case she said a pan-European bond, proposed by Luxembourg and Italy, would be unconstitutional. In the second she was at odds with the International Monetary Fund’s Dominique Strauss-Kahn, who believes a bigger fund is essential. He warned EU finance ministers that they are not doing enough to hold the single currency together. Those ministers meet in Brussels today. With 16 agendas and 16 very different financial resources and needs represented around the table it should be an interesting meeting.
Not that investors seemed to be particularly exercised by the euro’s problems on Monday. Nor did they have much to say about the few economic statistics that appeared. Investor confidence in Europe slipped from 14.0 to 9.7. Canadian building permits were down by a monthly -6.5% and the Ivey purchasing managers’ index (PMI) edged up by nearly a point to 57.5. In Australia AiG’s performance of construction index (a sort of PMI) dipped from 44 to 42.4 and the Reserve Bank of Australia left its cash rate unchanged at 4.75%, as expected. The British Retail Consortium reported retail sales up by 0.7% in the year to December and Swiss unemployment was steady at 3.6%.
The total impact of all that on currencies was minimal. Any net move of more than half a cent would have been a big one for the day. Sterling is unchanged from yesterday morning against the US, Canadian and Australian dollars, fractionally higher against the New Zealand dollar and the Swiss franc and a touch lower against the yen. Compared with the euro, sterling is just half a cent stronger and its range for the day was scarcely more than that.
Today’s list of statistics is hardly longer than yesterday’s with UK industrial and manufacturing production, German factory orders and the Bank of Canada’s interest rate decision. Coming tonight will be Japan’s machinery orders and trade surplus and Australia’s investment and home loans.
With so little on the data agenda there is the possibility that today will be as unexciting as yesterday. The wild card is that meeting in Brussels. Will they be able to come with a wizard wheeze to pluck victory from the jaws of defeat or is the weather chilly for the time of year?