Banking sector in Romania could get hit from two sides

I have been trying to warn in this blog that the banking sector in Romania has got issues beyond its borders that could bring BIG trouble. Below is a table from an article in the WSJ which shows exactly what I have been trying to say all along: the banking sector did not restructure since 2007.

Do you think Italy listened to Milton Friedman?

In 1999 Milton Friedman wrote a letter to Antonio Martino, a founding member of Forza Italia (my highlights):

“Your views and mine are currently very much the same on the euro. . . . What most troubles me as it does you is that members of the euro have thrown away the key. Once the euro physically replaces the separate currencies, how in the world do you get out? It’s a major crisis. As a result, I would strongly agree with your view that the euro should be abandoned before January 1, 2002. At the same time, the odds are very great that it will not be abandoned. The defects of the euro will take some time to show up; nothing happens very rapidly in this area. There are fewer than three years to go. Even if difficulties deriving from the euro occur in those three years, the political system is unlikely to react quickly enough to end the euro. As a result, I think it would be very desirable for some systematic thought to be given to devising some way to get out of the straitjacket of the euro after 2002. The least Italy should do is to keep intact the plates which are used to produce lira.”

Forecasting Inflation at the NBR

NBR adjusted one more time the inflation forecast for 2011 and 2012. For both periods the NBR revised the forecast downwards. As I said after the last report, forecasting inflation is not the strongest point for this particular Inflation Targeting Central Bank.