Personal and company savings* have fallen significantly in Greece and Hungary since the start of the year, while rising across most EU members. Perhaps more surprisingly, deposits in the Netherlands also fell.
More than offsetting the falls, deposits increased in the UK, Italy and Cyprus – the latter may be because, as Ralph points out, withdrawals from Greece are flowing into neighbouring Cyprus. Read more
Authorities wanting to kick-start the economy using debt, take note: Russian shareholders dislike debt-financing, unlike their developed market peers. This is the implication of research from the Finnish central bank, which seeks to explain low levels of debt-financing in Russian companies.
The research considered company stock performance on days when the company announced debt financing. Most research on this subject has considered developed markets only; typically, these stocks respond positively to such announcements. Debt financing confers tax benefits – and also removes the need for potentially dilutive equity issuance.
Russian stockholders react in an equal and opposite way, however. Controlling for normal movements of the stock market index (RTS), the study finds that Russian company stocks fall by roughly the same amount that Western stocks rise, when a debt announcement is made. Why the debt-aversion? The authors point to perceptions of risky behaviour associated with taking extra debt, and recommend improved corporate governance: Read more
House purchase borrowing rose significantly last month in France and Italy, while continuing to fall in many of their eurozone peers. Annual growth in house purchase lending rose by 50bp to 6.3 per cent in France, and 30bp to 8.6 per cent in Italy.
Lending is still contracting in Ireland, for example, and growing at a falling rate in Portugal, Spain and Greece. Even in Germany, where many economic indicators look strong, growth in house purchase lending is static, and at just 0.5 per cent annually. Read more