Wednesday, February 18, 2009

UBS on Eastern Europe: Move Along, Nothing to See Here

As a follow-up to Monday's post "Creditanstalt Redux?: Failure to save East Europe will lead to worldwide meltdown" which elicited our thoughtful analysis ("Yikes!"), here is FT Alphaville's take on today's UBS note:

UBS have appointed themselves defenders of the East, apparently. U B of ‘Save our Eastern Europe.’

They’re taking issue with recent reports of imminent EE/CE “meltdown“.

We don’t normally respond directly to articles in the financial press, but quite a number of clients have requested clarification on recent reports that Eastern Europe is now facing a financial “meltdown”, and one that threatens to take the stability of Western European banking systems down with it (this theme has suddenly appeared in quite a few articles, including those on gold, commodities and banks, but the one that was forwarded to us most often was “Failure To Save East Europe Will Lead to Worldwide Meltdown“, Daily Telegraph, 17 February 2009)....

For what it’s worth, we think the point about “orderly default rather than an outright meltdown” is probably valid. But this is mostly semantics.

Anyway, UBS has some charts to support their premise. Click below to enlarge....

...So, UBS is hanging their hopes on Russia of all places.
For many readers, the natural response to the above charts is that we seem to be putting a lot of faith in the health of the largest emerging European economies — and in particular Russia’s ability to “hold it all together” at a time when all the recent numbers in the Russian economy seem to be pointing the other way....MORE

Read it all for a taste of what happens when a journalist who knows what they're talking about decides to take out the knife. For some reason the phrase "Skewers 'em like a Canadian guide gutting fish. Very efficient." comes to mind.