The Irish Success

Ireland just emitted €3,75 Billion of brand new 10 years Debt at 3.6%. In my opinion this is a big success, which will spill over to Greece and Portugal, therefore, symbolically ending the Euro debt crisis. Sooner or later, this will have a positive impact in the valuations of several European banks, supporting a long term bullish view on solid European Banks.

I am anticipating that in the following weeks, Portugal will also emit some kind of sovereign debt in the open market, with some degree of moderate success. This will be the beginning of financial normalization in Europe.

However, there is a very significant risk: deflation. The ECB has shown a more complacent attitude towards the possibility of deflation. I have expressed many times, in this blog, the belief that there is a real risk for Europe that deflation might take hold.

All in all, I think the last events point to a normalization in Europe which will favor the recovery of European banks, but will, in no way, contribute to a sudden take-off in the economy. The policies followed in the last years have most likely condemned Europe to a lost decade in terms of growth.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s