The impact of the scenario of Greece’s exit from the euro zone is hard to estimate - panic is one dangerous input for the final result. Europe’s deleveraging process is another factor that would overlap with this scenario. The buffers that Romania has at its disposal, the new legislation regarding financial stability and the current state of the economy will ease the impact as compared to what we’ve seen in 2008.
In annual terms the national currency credit growth decelerated to 3.3% in April, down from an average of 5%yoy in Q1 2012. Regarding the hard currency credit stock, although it is 5.5% higher compared to one year ago (expressed in euro in order to diminish the exchange rate impact), the latest trend reflects consistently deteriorating growth.
Residents’ deposits in commercial banks showed continued improvement in April, rising for the fourth consecutive month.
On Monday, the NBR held its usual 1W repo auction at 5.25%. The total amount injected into the system was RON 7.9bn via 9 participants, showing larger numbers than usual, reflecting the liquidity squeeze that occurred during May.
No significant changes were seen in sovereign yields, with the yield curve moving 1-4bps higher than one week ago, although the risk aversion remained high in the region given the uncertainties related to Greece. MoF sold RON 417.2m in 7Y bonds at 6.40%.
The risk aversion continued to affect the markets last week, with the emerging European currencies depreciating against euro. The EUR-RON climbed to a new historical top, 4.4900 on the interbank market.
The European leaders have expressed their will to keep Greece in the euro zone, while Greece should accept the bailout commitments. EUR-USD touched 1.25 last week, a level last seen two years earlier when problems related to Greece’s bailout first emerged.