Saturday, July 24, 2010

Guigou on the Affair

Ex-justice minister Elisabeth Guigou on the Bettencourt-Woerth affair:

Qu'est ce qui vous semble le plus grave dans cette affaire ?
Pour le moment, le plus dévastateur, c'est la question du conflit d'intérêt. Certes, M. Woerth affirme qu'il n'a pas fait embaucher sa femme par Patrice de Maistre. Mais le seul fait de ne pas se rendre compte qu'il y a une difficulté à ce que la femme du ministre du budget soit embauché par des gestionnaires de fortune - dont le seul objectif est de faire ce qu'on appelle pudiquement de "l'optimisation fiscale" - dépasse le bon sens. D'autant que dans le cas qui nous intéresse, il y a eu fraude fiscale.
Est-ce le fait d'une légèreté personnelle ou d'un contexte ?
C'est un comportement général. Il y a comme une perte de conscience de ce qui peut se faire ou non. Quand le pouvoir donne l'impression, ne serait-ce que l'impression, qu'il sert des intérêts particuliers et non l'intérêt général, c'est profondément dévastateur.

I couldn't agree more.

The Stress Test

French banks pass:

The four main French banks, representing 80 percent of the banking assets in the country, passed easily. “These result shows that they remain capable of ensuring a strong financing of the economy both under the central scenario and under the highly stressed scenario,” said Christian Noyer, governor of the Bank of France.
To pass the tests, a bank’s Tier 1 capital, a measure of reserves, could not fall below 6 percent of assets in the face of a new recession and a sovereign debt crisis. 

This is good news. I guess the rumors that French banks were particularly exposed to Greek and Spanish debt were exaggerated. Or perhaps not:

Some of the assumptions used by the examiners will certainly draw criticism, particularly the way the tests treated European government debt. Authorities did not consider what would happen if Greece or another country proved unable to repay its bonds — even though many analysts have grave doubts whether Greece can ever make good on debts that currently equal more than an entire year’s economic output.
European policy makers refused to consider that possibility because they insisted they would never allow Greece to default.
Regulators did examine whether banks could survive a sharp decline in the market value of European government bonds, including a 23 percent collapse in the price of five-year Greek bonds compared with the end of 2009, and a 4.7 percent decline in German bonds.
But, in another decision that will disappoint advocates of harsh tests, regulators allowed banks to exclude bonds that they did not plan to sell. Debt that banks keep on their books, on the assumption that it will be repaid at maturity, was exempt from the tests.