Zero­Hedge News

• Small EU Firms Hold Moun­tain Of Debt, Could Be Next Major Headache For Banks
  Small EU Firms Hold Moun­tain Of Debt, Could Be Next Major Headache For Banks

  The Euro­pean Union is doing the same as they did in 2008-​09, extend and pre­tend, dish­ing out cheap loans to busi­nesses and hop­ing for a recovery.

  What’s wor­ry­ing today is that exces­sive opti­mism comes as Euro­pean gov­ern­ments invest in the recov­ery by increas­ing pub­lic spend­ing as the cen­tral bank keeps rates low and floods cap­i­tal mar­kets with liquidity.

  The prob­lem is that banks have high expo­sure to small busi­ness loans, which is the back­bone of the continent’s econ­omy. If these busi­nesses fail, another round of eco­nomic pain is dead ahead.

  WSJ inter­views Miguel Ríos, who oper­ates four karaoke bars in Barcelona, said the pan­demic and result­ing gov­ern­ment shut­down of his busi­nesses forced him to bor­row nearly $100k and put ten of his employ­ees on a gov­ern­ment wage-​support pro­gram. He said his bars had been shut­tered for almost one year as he is on the brink of finan­cial dis­as­ter, with piles of insur­mount­able debt.

  “We are resist­ing thanks to sav­ings and bank loans, but we can’t keep like this much longer,” Ríos said.

  Many small and medium-​sized enter­prise oper­a­tors like Ríos are barely sur­viv­ing through the pan­demic thanks to cheap bank loans. Regional banks across the con­ti­nent have loaned $2.43 tril­lion to them, approx­i­mately 40% of their entire loan portfolio.

  Many lenders have cleaned up their loan port­fo­lios since the last finan­cial cri­sis, but many have strug­gled to turn prof­its in a negative-​rates environment.

  WSJ spots a big prob­lem for banks: the likely rise of non-​performing loans for small and medium enter­prises could be nearing.

  Bank reg­u­la­tors fear a wave of defaults could trig­ger another Euro­pean bank­ing cri­sis, mostly since the econ­omy is set to shrink again amid the resur­gent pandemic.

  Ana­lysts at banks includ­ing JPMor­gan Chase & Co. and UBS Group AG have already down­graded the euro-​area econ­omy for the start of the year thanks to increased lock­downs and a new mutant coro­n­avirus run­ning ram­pant in the region.

  Andrea Enria, the head of bank­ing super­vi­sion at the Euro­pean Cen­tral Bank, warned non-​performing loans could exceed $1.7 tril­lion, which is more than the last finan­cial crisis.

  Sim­i­lar to the US, small busi­nesses in Europe over­whelm­ingly power the econ­omy. Com­pa­nies with 250 employ­ees account for 99.8% of all firms and two-​thirds of all private-​sector jobs on the continent.

  Small firms have mas­sive eco­nomic weight on the con­ti­nent, and with many under pres­sure, this spells bad news for a robust recovery.

  As explained by Daniel Lacalle, the chief econ­o­mist for Tres­sis SV, a cou­ple of fac­tors sug­gest 2021 recov­ery could be rather dismal.

  1. With $26 tril­lion injected by cen­tral banks, mas­sive liq­uid­ity injec­tions have been used mostly to per­pet­u­ate ele­vated gov­ern­ment spend­ing, fun­da­men­tally cur­rent spend­ing, and fund pub­lic debt.

  2. The sec­ond is that cor­po­rate bal­ance sheets have been dam­aged to a level that will make it dif­fi­cult to see sig­nif­i­cant invest­ment growth above depre­ci­a­tion. SP Global expects global cap­i­tal expen­di­ture to remain weak in 2021.

  Non-​performing loan ratios for small and medium-​sized firms remain stub­bornly high for Euro­pean banks.

  The lat­est Euro­pean Bank­ing Author­ity sur­vey shows loans for small and medium-​sized firms may dete­ri­o­rate over the next 12 months.

  While lock­downs and slow vac­ci­na­tions aren’t help­ing the recov­ery, it’s esti­mated that 25% of euro­zone com­pa­nies are likely to face cash-​flow prob­lems this year with ris­ing insol­vency risks if gov­ern­ment sup­port doesn’t continue.

  Small and medium-​sized firm trou­bles have yet to be com­pletely shifted to banks due to a series of pro­grams rolled out across the continent.

  “These include mora­to­ria on loan repay­ments, pub­lic guar­an­tees on loans and wage sub­si­dies to keep peo­ple in jobs. But reg­u­la­tors and ana­lysts say those are just post­pon­ing prob­lems,” WSJ notes.

  Cristina Par­a­disi, who owns two cloth­ing shops, said she is always wor­ried about the future. Her shops are located in the north­ern Ital­ian province of Pesaro e Urbino where strict lock­downs and gov­ern­ment restric­tions have lim­ited cus­tomers. Sales have dropped, her loan pay­ments placed under a mora­to­rium, as she may risk insol­vency if sales don’t increase this year.

  “Just by open­ing the doors of our shops, we lose money,“Par­a­disi said.

  While many Euro­pean banks in recent years increased their expo­sure to small busi­nesses due to neg­a­tive rates, which forced them to search for higher yields, a debt tsunami could be near­ing as recov­ery hopes dim.

  “We have set up an SOS line and we are get­ting calls from peo­ple who are des­per­ate and don’t know how to go on,” said Giuseppe Palmisano, pres­i­dent of an orga­ni­za­tion that rep­re­sents small com­pa­nies and entre­pre­neurs in Italy. “Peo­ple cry on the phone, I even fear some are think­ing about suicide.”

  Tyler Dur­den Fri, 01/​22/​2021 — 04:15
• UK Reports 6,500 COVID-​Related Pros­e­cu­tions In First Six Months Of Pan­demic
  UK Reports 6,500 COVID-​Related Pros­e­cu­tions In First Six Months Of Pan­demic

  Authored by Alexan­der Zhang via The Epoch Times,

  Almost 6,500 offences related to the CCP virus were pros­e­cuted in the UK in the first six months of the pan­demic, accord­ing to sta­tis­tics pub­lished by the Crown Pros­e­cu­tion Ser­vice (CPS) on Thursday.

  Between Apr. 1 and Sept. 30 last year, 2,106 defen­dants were pros­e­cuted for 6,469 CCP (Chi­nese Com­mu­nist Party) virus-​related offences, with a con­vic­tion rate of 90 percent.

  DPP @MaxHillQC said: “We are deter­mined to see crim­i­nal­ity dur­ing lock­down peri­ods reflected in court. Par­tic­u­larly appalling is the high num­ber of assaults on emer­gency work­ers and I will con­tinue to do every­thing in my power to pro­tect those who keep us safe.”

  — CPS (@cpsuk) Jan­u­ary 21, 2021

  Almost 1,200 offences were pros­e­cuted under the COVID-​19 leg­is­la­tion, which for­bids non-​essential travel and unlaw­ful gatherings.

  In cases not pros­e­cuted under the COVID-​19 leg­is­la­tion, the CPS has intro­duced a “coro­n­avirus flag” on its case man­age­ment sys­tem to high­light crimes related to the CCP virus as an aggra­vat­ing fea­ture at sentencing.

  Among all CCP virus-​related offences, assaults on emer­gency work­ers were the most com­mon, with 1,688 offences charged.

  Offi­cers of the Met­ro­pol­i­tan Police patrol in Vic­to­ria Park, east Lon­don, on April 11, 2020. (Tolga Akmen/​AFP via Getty Images)

  Many of the assaults were com­mit­ted against police offi­cers, who were coughed at, spat on, kicked, bit­ten, or hit with heavy objects when try­ing to stop sus­pected breaches of CCP virus restrictions.

  Max Hill QC, Direc­tor of Pub­lic Pros­e­cu­tions, said the high num­ber of assaults on emer­gency work­ers was “par­tic­u­larly appalling.”

  “I will con­tinue to do every­thing in my power to pro­tect those who so self­lessly keep us safe dur­ing this cri­sis,” he said.

  The UK has been under vary­ing lev­els of CCP virus restric­tions since the pan­demic began last spring.

  Ear­lier this month, Prime Min­is­ter Boris John­son put the whole of Eng­land under the third national lock­down to curb the spread of a new vari­ant first detected in south­east Eng­land, which he said had a higher trans­mis­si­bil­ity than the old variant.

  Police forces, includ­ing the Met­ro­pol­i­tan Police in Lon­don, have said they are tak­ing a stricter approach to enforc­ing the lock­down rules.

  Mar­tin Hewitt, chair of the National Police Chief Coun­cil, said on July 13 that he would make “no apol­ogy” for the almost 45,000 fixed penalty notices (FPN) that had been issued against rule-​breakers.

  Even police offi­cers have some­times found them­selves on the wrong side of the law.

  The Met­ro­pol­i­tan Police said on Wednes­day that nine of its offi­cers had been fined after they were caught din­ing in a local café.

  Tyler Dur­den Fri, 01/​22/​2021 — 03:30
• Bavaria-​Wide Ban On Alco­hol Con­sump­tion In Pub­lic Areas Over­turned
  Bavaria-​Wide Ban On Alco­hol Con­sump­tion In Pub­lic Areas Over­turned

  Ger­man Chan­cel­lor Angela Merkel, who has strug­gled to impose lock­downs by con­sen­sus with the lead­ers of Germany’s var­i­ous states, is now see­ing Bavaria, one of the most sig­nif­i­cant and most eco­nom­i­cally vital regions of Ger­many, buck the lat­est national lock­down extension.

  Accord­ing to RT News, in an unex­pected win for the peo­ple, the Bavar­ian Admin­is­tra­tive Court tem­porar­ily sus­pended the statewide ban on drink­ing alco­hol in pub­lic areas, ini­tially intro­duced by law­mak­ers to mit­i­gate the COVID-19’s spread.

  On Tues­day, Bavar­ian judges tem­porar­ily sus­pended the statewide ban on con­sum­ing alco­hol in pub­lic spaces in Pas­sau, Regens­burg, and Amberg.

  A man from Regens­burg mounted a legal suit against the Bavar­ian State Gov­ern­ment, claim­ing they over­stepped their bounds by announc­ing a com­plete ban on out­door alco­hol con­sump­tion in pub­lic places.

  Local news BR24 said judges explained that the Infec­tion Pro­tec­tion Act allows for the alco­hol ban, but only in cer­tain places. There­fore, the court tem­porar­ily sus­pended the order allow­ing local munic­i­pal­i­ties to choose whether a ban should be reinstated.

  “The deci­sion of the Bavar­ian Admin­is­tra­tive Court is regret­table, as alco­hol dis­in­hibits and con­tributes to a more lax approach to the absolutely nec­es­sary hygiene dis­tances,” the state chan­cellery stated. “We will there­fore rein­state the old reg­u­la­tion whereby munic­i­pal­i­ties deter­mine cer­tain places where alco­hol con­sump­tion in pub­lic spaces is prohibited.”

  The ban on drink­ing alco­hol in pub­lic places through­out Bavaria had been enforced since mid-​December.

  Accord­ing to the court, the man also attempted to per­suade judges to over­turn other virus mea­sures — but BR24 noted that it came with lit­tle suc­cess. He specif­i­cally wanted libraries reopened and wanted the 9.3-mile rule for day-​tourist trips suspended.

  The virus has wal­loped Ger­many. More than two mil­lion infec­tions have been recorded, along with 47,600 deaths virus-​related deaths. The coun­try is cur­rently in lock­down, with most stores and schools closed.

  Merkel extended the coun­try­wide lock­down on Tues­day for the next cou­ple of weeks, at least through Feb. 14, due to con­ta­gious muta­tions of the virus.

  Bavaria is a land­locked state in Germany’s south-​east and home to Oktoberfest.

  For the first time since World War II, Okto­ber­fest was can­celed in 2020 due to the pan­demic, crush­ing the area’s local economy.

  Over­turn­ing the bans is a mas­sive win for the peo­ple of Bavaria and the local econ­omy. As we’ve shown, lock­downs don’t work; also, the use of poly­merase chain reac­tion tests can be mis­lead­ing by reg­is­ter­ing false positives.

  Tyler Dur­den Fri, 01/​22/​2021 — 02:45