First of all, Greece is now feeling the peace before the storm as in November is going to be decided if it needs an additional bailout from the European countries. Since this would be the third substantial loan required, the minister of finance Evangelos Venizelos is trying to persuade the International Monetary Fund and the European Union that Greece may not need another bailout because it is capable to sustain its expenditure. The healthiest support would be the reintegration in the bond market by next year as it is so vital to the ongoing operation of the public and private sector. The European countries do not need to be burdened anymore since they have already bore costs of about 240 billion euros with Greece.
Secondly, it is worth to pay attention to another worrying aspect of the European zone which is Cyprus. The country is currently bearing the effects of the austerity measures which strongly affects the unemployment rate that increased with 40%. Since the dramatic episode of March when Cypriots’ bank accounts were required to contribute to help fund a restructuring of the financial sector, austerity measures have been implemented and the effects have appeared immediately. The forecast for 2014 is dark, assuming a 13% shrinking of the economy.
Thirdly, the European banking system is currently redesigning. Thus, the European Banking Authority (EBA) decided:
- To modify the shortage for the top 42 banks in the European Union (following to be applied for all banks in the E.U.) and cut it by 29.1 billion euros, compared with six months ago.
- The core capital buffer that banks must hold increased, consisting of at least 7 percent of their assets on a risk-weighted basis.
- Separate reserves of cash and government debt by 2019.
- A leverage ratio set at 3 percent from 2018 (banks are required to hold capital of at least 3% of their total non risk-weighted assets).
These regulations are part of the new global Basel III.