Wednesday, June 17, 2009
Right. Except Valls failed to explain, and Pujadas failed to ask, what he meant by the comment that came before the quelques blancs remark. There he was, walking through the flea market, and what he said was, "Look at that. What an image that gives of Evry. Give me some whites ..." (italics mine).
Would whites shopping in a flea market really improve the image of Evry? Even upscale towns have their brocantes, their itinerant street markets, their open-air stalls. Shopping in them, you don't usually find the upper crust, though we tourists often find them charming. Republicanism isn't going to eliminate the need for places where the less affluent can buy things secondhand.
I like Valls. I don't think he's a racist. I don't think politicians should be vilified for every politically incorrect slip of the tongue. But his comment does trouble me. I can't quite be sure what lies behind it. And his slick reversal--the attempt to pass off a gaffe as the battle cry of a crusader for republican equality--rubs me the wrong way.
The Euro Area has performed remarably badly in this downturn. This is partly due to the ECB, whose policy stance has been less expansionary than that of the Fed and the Bank of England. Its official policy rate still stands at 1.00 percent, around 100 basis points above the level it should be at, and the Eurosystem has expanded its balance sheet less than the Fed and the Bank of England. A more serious problem is that addressing the solvency of the banking system in the Euro Area has not yet begun in earnest. There have been government capital injections (or announcement of such) when banks were about to fall over (Commerzbank and assorted Landesbanken in Germany, ABN-Amro and ING in the Netherlands, and many other banks in Belgium, Ireland, France, Italy and now Spain), but it has been even less systematic and on a smaller scale than in the US.
In addition, the Euro Area banks have managed to keep the problem assets they have on their balance sheets under wrap. No stress tests whose methodology and/or outcomes are in the public domain have been performed. The European Commission now wants a uniform set of EU-wide stress tests, but only to give it and supervisors/regulators a sense of what the risk-map is, not as a prelude to mandatory capital raising and/or a restructuring of funding strategies.
The Euro Area banks have used every accounting trick in the book to avoid revealing the existence of troubled or toxic assets and marking them to market. The ECB recently estimated the additional capital required by the Euro Area bans at between €212 and €283 bn. People close to the industry assure me that the true figure is at least twice that amount. So Euro Area banks are likely to be or become zombie banks to a much greater degree than their US and UK counterparts. They have revealed little, recognised less and are, to an unknown degree, still subject to material insolvency risk because of undeclared horrors on their balance sheets. Their high degree of leverage also makes them extremely vulnerable to further balance sheet deterioration and conventional household, industrial and commercial loans go belly-up in increasing numbers as the recessions deepens and lengthens.