terça-feira, dezembro 06, 2011

Euribor less representative of true Euro interbank rates

A minor but important issue in the midst of this financial storm.

An article in a Portuguese  newspaper today says that Germany has saved €13B in funding costs thus far.

It seems that there is no stopping the divergence of fortunes  among the European countries.  This divergence in gains and losses shows that  we have a lot more to lose than the Single Currency.

Some made gains  with the convergence of interest rates in the past, and now others are gaining from the divergence, which however goes well beyond actual market trends.  

Because Euribor may no longer be a true European interest rate.  
It began as an average of inter-bank rates of 58 European banks, and is now reduced to only 44 banks.  One of these days, when nearly all European banks lose access to the "money market", the Euribor interest rate will be limited  to  the average bid-offer from Deutsche Bank.

Having helped to introduce Lisbor back in 1992, one wonders whether the current EURIBOR arrangements have now become part of the problem, instead of the solution.   When banks are routinely paying funding costs of interbank EURIBOR +3%, you have to question the EURIBOR as much as you question the banks.

Mariana Abrantes de Sousa 
PPP Lusofonia

Even the French  are now off TARGET 
See also
 Lisbor, Indexante para uma nova era,  Revista Valor 1992
Banks, Central Banks and Moral Hazard in the Eurozone