So the news that French banks are still on a borrowing spree wont raise many eyebrows, as their dependency on the European Central Bank (ECB) was heavily used against most of the French banks that were recently downgraded.
According to DJ newswires:
The markets know all too well how disappointed and vehement French politicians have been to safeguard their AAA status despite statistics suggesting anything but.
Meanwhile, Euromoney has presented the case for France and its banks relinquishing its AAA status for sometime now.
Its no wonder S&P placed all eurozone sovereigns on credit watch, for a downgrade, with five AAA-rated sovereigns on a list for a one-notch downgrade. A sixth, France, has been highlighted by S&P for a potential downgrade by two notches.
But the question as to whether or not the ECB can keep the banks afloat is another matter altogether.
Recently, Euromoney did an investigative piece on how politicians and market participants who have seen investors turn their backs on the EFSF and abandon the European government bond markets are pressing the ECB to save the day and increase its buying.
That recent ECB borrowing data shows this. With the rise to 158.5 billion in October following the surge from 69.8 billion in August, the ECB will surely buckle underneath the weight.
Euromoney asked if an already stressed ECB balance sheet could even cope with the demands that such a programme would entail.
In an exclusive interview with Euromoney, one of the worlds most distinguished macroeconomists Willem Buiter, chief economist at Citi, said that the ECB would fail European Banking Authority (EBA) stress tests, which are usually reserved for corporate financial firms miserably:
For the full report on the ECB: The end of the last resort click here
- Euromoney Skew Blog