The reason I believe the amount of hidden losses in bank balance sheets is ultimately quite large is the sheer number and scale of the accumulated crises during which European banks managed to lose money in recent years: the US subprime crisis, a eurozone housing bubble, the Greek debt restructuring, the Cypriot bank failures and the short and sharp 2009 recession followed by the Great Recession of 2011-13, with no end in sight for southern Europe.
One would hope that an asset quality review by the European Central Bank, envisaged for next year, would provide clarity. But I am doubtful. In the past, bank transparency exercises were undertaken with the intention of hiding the truth. Remember the stress tests of 2011? Or the apparently independent audit of the Spanish banking system, which concluded that Spanish banks only needed a teeny weeny bit in new capital?
Assume now that my estimate is wildly wrong, and deduct the size of the Italian economy from that back-of-the-envelope number. You still end up with €1tn. With this order of magnitude it mattered relatively little whether the ESM could contribute €60bn, €80bn or zero. Europe’s national governments are clearly incapable and unwilling to fill the gap. And without the money for bank resolution, it barely matters whether the European Commission will become the resolution authority that does not do the job or whether someone else does not do it.2. Norway's military to conscript women:
That leaves a long period of regulatory forbearance as the most likely outcome – a policy version of pretend and extend. They pretend not to see the losses, and extend the crisis.
Norway will soon become the only country in Europe to extend its military conscription to women in peacetime, after parliament reached agreement on the issue. All of the parties represented in parliament, with the exception of the small Christian Democrat party, agreed on Friday to back a proposal by the centre-left government for a "gender neutral" military conscription. In practice, that means Norway's mandatory one-year military service will be extended to women, probably as of 2015, according to the defence ministry's proposal."Norway will be the first European country to draft women in peacetime," a defence ministry spokesman, Lars Gjemble, said.
A number of other European countries have gone in the opposite direction in recent years, moving away from conscription towards professional armies.
Norway's parliament is expected to adopt the bill by a broad majority, but a date has yet to be set for the vote.On a related note, former Norwegian Defense Chief today said that Norway's military lacks preparedness needed to meet the threats that the country faces. Here's the link, and here's the original article on the Aftenposten.