23/8/2014: Real Cost of Capital: Euro 'Periphery' Dilemma
Staying on the topic of debt (see earlier post: http://trueeconomics.blogspot.ie/2014/08/2382014-that-pesky-problem-of-real-debt.html ) here is IMF research on real cost of corporate capital (linked to the cost of debt) in the Euro area 'periphery' (this is from an IMF July 2014 publication that accompanied its Article 4 paper on Euro Area). I highlighted with the red the range of recent capital costs range in each country to trace out historical comparatives. Starting with the Euro area as a whole: Two points: Current real cost of capital across the euro area is relatively benign, compared to both 1990s - early 2000s period and shows low volatility in recent (crisis) years post 2009 peak 2009 peak is pronounced but moderate compared to the one found in some 'peripheral' countries. In basic terms, this means that euro area's capital costs are benign - above the 2004-2007 trough, but historically well below those observed in the 1990s. Spain: Two points: Current ca...