Europe: Belgium, Italy and Greece in the limelight - BBH

Analysts at BBH list down the three most important developments to note from Europe.  

Key Quotes

“First, at the very end of last week, Fitch downgraded Belgium from AA to AA-.  It cited the high debt-to-GDP ratio for an AA rating and noted that fiscal consolidation has been weak.  There does not appear to be much of a market reaction.  The 10-year yield is up half a basis point, in line with the change in French yields today.”  

“Second, Italy is finding that supporting Monte Paschi may be more expensive than it may have anticipated.  The ECB has argued that due to the deterioration in liquidity, the troubled bank needs 8.8 bln euros rather than five bln.   Also, the Bundesbank has expressed concerned that the new EU rules are not being respected.  Italy's bank stock index is off 0.6%, or about what it had gained before the holiday weekend.  Italian two and 10-year yields are half a basis point higher.”  

“Third, after a short disagreement over what Greece could do given that its revenues surpassed targets and expenditures were below targets.  The Greek government insisted on an extra pension payment to civil servants and a VAT break for a few islands overwhelmed by refugees.  It appears that an agreement was reached.    Greece's 10-year bond yield is off nearly 12 bp.”