globoTRENDS blog (from Summit Global Education)

In Asia, the question is whether China’s attempts to rein in its housing market will prompt a broader slowdown (see article).

Barclays Capital calculate that the hit from domestic legislation alone could amount to 16% of banks’ profits in 2013.

Overnight deposits with the European Central Bank also reached a 10-month high of 315 billion euros ($387 billion) on May 10, signaling banks are wary of lending to each other on concern about exposure to high-deficit countries.

Spain lost its AAA credit grade at Fitch Ratings, which said the country’s debt burden is likely to weigh on economic growth. The ratings company cut the grade one step to AA+ and assigned it a “stable” outlook, according to a statement from London today. Spain has held the top rating since 2003. Spain’s parliament yesterday approved the country’s deepest budget cuts in 30 years by a single vote, casting doubt on the future of the government as Prime Minister Jose Luis Rodriguez Zapatero seeks to garner support for his 2011 budget. Spain has the third-largest budget deficit in the euro region

Moral Hazard in action: “The Bear Stearns comparison contains a further lesson. The bailout of Bear lulled investors into complacency: Some felt they needn’t prepare for the collapse of other banks because the government would stop the worst from happening. But the moral hazard created by a Greek bailout would be far more dangerous. At least the U.S. government can fight the effects of moral hazard by regulating risk-taking at banks. European institutions can’t discipline their member states — witness the fact that nearly all violated the 3 percent limit on their budget deficits.

Just as U.S. authorities saved a small investment bank (Bear Stearns) but balked at saving a bigger one (Lehman Brothers), so the Europeans may rescue Greece in the name of the system and yet see the system collapse anyway.