PIGS Are Flying Again.
Remember the “PIGS,” short for Portugal, Italy, Greece and Spain?
Four of the top-10 performers in the Stoxx Europe 600 index over the past year are Italian and Spanish banks: Banca Monte dei Paschi di Siena, Banco de Sabadell, Banca Popolare di Sondrio and UniCredit.
In Greece and Italy, yields on 10-year government bonds have gone from trading roughly 2 percentage points above Germany’s to around 1 percentage point.
This is an impressive turnaround for nations that many investors saw as irredeemable basketcases following the eurozone crisis of 2011 and 2012.
in Europe, though, fiscal austerity is back. The European Parliament last month approved a new set of fiscal rules designed by the 27 EU states.
They will allow for more bespoke adjustment plans, but nevertheless force national governments to return to an arbitrary “structural” deficit below 1.5% and a debt-to-GDP ratio below 60%.
This is a self-inflicted wound as the bloc tries to catch up with American and Chinese industrial policy.
Wall Street Journal 17 May 2024
https://www.wsj.com/world/europe/pigs-are-flying-again-can-they-stay-aloft-bbe5e941
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