Sunday, July 25, 2010

European Stress Tests: Not very stressful

by Bill McBride on 7/25/2010 07:32:00 PM

It was announced last week that the stress tests didn't consider a sovereign default, and here is more ...

From David Enrich at the WSJ: Europe's 'Stress Tests' Relied on Mild Assumptions (ht jb)

In some of the 20 countries that conducted the tests, regulators figured that property values would keep rising or hold steady in a worst-case economic scenario.

In other cases, unemployment rates in a double-dip recession crept up by as little as 0.1 percentage point from the tests' so-called benchmark scenario, which is based on current economic conditions.
These are the two assumptions that put the most stress on households - lost jobs and negative equity. I guess in some European countries property prices only go up, and the unemployment rate only goes down.

Earlier today: Weekly Summary and Schedule, July 25th

Yesterday: Sovereign default Part 5B. What Happens If Things Go Really Badly? More Things Can Go Badly: Credit Default Swaps, Interest Swaps and Options, Foreign Exchange