Sorry: this has nothing to do with doing-over the financial crisis of late 2008-2009 to get another chance to deal with it right, even only as it hit Belgium. Rather, I noticed from a piece by Bert Broens in that nation’s business newspaper De Tijd that two of the biggest domestic banks, KBC and Dexia, will have undergo so-called “stress tests” all over again right after they thought they were done with all that.

What these “stress tests” are all about is an auditing exercise whereby banks’ balance-sheets are subjected to a standard scenario positing a business downturn, meaning theoretically that more people would not be able to pay back their loans, there would be lesser demand for new loans, and the like, and so you see how the bank would do in such a situation – first of all whether it would even stay solvent and so survive (at least without receiving some sort of state aid). And, as stated, both these Belgian banks already did the exercise and came through it with OK results. But the whistles have sounded and the competitors are being directed back to their starting-blocks to do it all again, and for a good reason: those previous stress tests did not include checking for any situation in which government bonds held by the banks might not be fully repaid. That’s rather an important omission: we’re talking in particular Southern European (or PIGS, if you like) government bonds here, and KBC Bank alone has €60 billion worth of them in its portfolio.

How then could anyone have considered the previous stress tests, which did not account for those public obligations, anything but a waste of time? Well, many cynics (or call them analysts) have felt that the real purpose of such tests was in the first place as a propaganda exercise meant to return a comforting “All OK!” for each such bank tested to calm investors’ and markets’ fears. This whole “stress test” idea was taken over in the first place from the American financial authorities, who performed them on the big American banks in spring-summer of last year, and ongoing coverage particularly from the Naked Capitalism financial weblog not only blew the whistle on that American exercise but also has found serious flaws in the European stress tests happening now. In fact a major complaint (also put forward in a related financial blog here) about the validity of the European tests was their alleged failure to take into account such sovereign risk.

Broens’ piece shows that that at least is not happening in Belgium, although he doesn’t say why, like who decided to make these exercises a bit more bona fide and call back KBC and Dexia to do them “right.” His language is in the passive tense – “in the meantime it has been decided to expand the test” – although one first guess would have to be the Belgian financial authorities.

UPDATE: A new entry on Naked Capitalism tacitly concedes that these European “stress tests” will in fact include banks’ exposure to sovereign debt in their calculations. It then goes on to sketch the great worry resulting from that: What happens when these more-honest tests reveal that too many banks in fact stand in need of more capital, possibly from governments which in many cases are no longer in a position to provide the same?

Next October 31 (a Sunday, of course) should be a rather interesting day indeed in Vatican City. According to articles in both Gazet van Antwerpen and De Tijd (the latter is actually Flanders’ main business/financial paper, but nevermind) two American victims of past sexual abuse at the hands of Roman Catholic priests will be organizing a march then on St. Peter’s Square.

They don’t intend to be alone there. Rather, the two (Bernie McDaid and Olan Home, who also challenged Pope Benedict XVI on priest sexual abuse during the latter’s visit to the US in 2008) have been busy recruiting other Catholic lay organizations to join them. Between those worshippers, other sexual-abuse victims, and reform-minded individuals showing up (including, hopefully, current priests), they expect to be leading a 50,000-strong demonstration seeking to show “that their Church is in terrible trouble.” McDaid and Home will also be pushing their own four-point reform plan:

1. Establish an independent commission to supervise how the Vatican deals with priest sexual abuse;
   
2. Screen seminarians, priests, and bishops effectively against this sort of behavior;

3. Involve lay influence in the selection of bishops;
4. Include mandatory instruction about sexual abuse at every seminary’s program of study.

You might be asking: “I know that these guys need some time to get the word out, but why are they waiting all the way until next October 31?” No, it has nothing to do with Halloween; October 31 is also historically famous as the day when, back in 1517, Martin Luther nailed his famous 95 Theses to the door of the church in Wittenberg, Germany, and so effectively kicked off the Protestant Reformation.

Sorry, we have to leave the sexy now for the serious. The big news of the past week on the European auto-manufacturing front was the announcement – finally! – of the fate of Opel, for eighty years the General Motors subsidiary operating in Europe, especially Germany. The winner for Opel’s hand is Magna, a Canadian-Austrian investment consortium working together with the Russian Sberbank as financial partner (and also with the Russian auto company GAZ). The announcement was that GM is willing to sell to Magna a majority stake (55%) in the new company, while it retains 35% (and the Opel workers the remaining 10%).

From there the story proceeded just as it always does when a company gets a new owner, especially in the case of a failing firm where that new owner is being counted on to come in and rescue its fortunes. Clearly, drastic cuts have to be made – but who will bear them?

The answer has always been pretty obvious, but it seems that “De Nile” is not just a river in Egypt, somehow it also flows through Flanders. Opel’s factory located in the harbor area in northern Antwerp was always the leading candidate to draw the short straw and face closure as part of any attempt to reorganize the company. The leading negotiator for General Motors – one John Smith – openly said as much: “In our plans Opel Antwerp is superfluous.” Nonetheless, it’s amusing to read in coverage of the new Magna deal in the Flemish business newspaper De Tijd about the refusal of many parties still to accept that reality. After all, points out Luc van Grinsven, spokesman for the ACV union that represents most of the plant’s workers, that’s only a GM official saying “superfluous,” not anyone representing Magna, i.e. the actual new owners. “The exact consequences of the take-over are not yet clear,” claims Van Grinsven. “But GM after the take-over has no more authority.” And Flemish regional president Kris Peeters is still clinging to a letter he received from Magna at the end of July, assuring him that the company intended to investigate further what possibilities there may be for the future of the plant. (more…)

Don’t look now – but Belgium is once again in a governmental crisis. Prime Minister Yves Leterme yesterday evening (Monday, 14 July) submitted his resignation to King Albert II, after having served in that capacity for thirteen months. You’ll recall that Leterme – leader of the Flemish political party Christen-Democratisch en Vlaams (CD&V) – had been the compromise candidate for prime minister in the first place, voted in by the kaleidoscope of Dutch-, French-, and German-speaking parties of the Belgian political landscape pretty much in desperation after nine months of haggling after the latest national elections of June, 2007. July 15 (i.e. today) was the deadline he had set to be able to present a new plan for re-structuring Belgium’s governmental structure. It seemed that the deadline was coming up fast and little to no progress on forming such a plan had been made. So Leterme resigned. The Economist weblog “Certain ideas of Europe” is keeping on top of developments with an summary entry Time to dissolve Belgium?. (more…)

Belgium finally has that new government, after a month of negotiations between the various political parties following the general election of mid-May. And one of its first acts has been to put forward legislation which would replace the “law of universal competence” about which so much has been written in these web-pages – a somewhat extraordinary law which, back during its strapping youth, could be used by anyone, from anywhere, to bring suit in a Belgian court against anyone, from anywhere, for alleged genocide, violations of human rights, and that sort of thing. While it lasted, it provided for great political theater – with personages such as Ariel Sharon and Donald Rumsfeld wondering whether it was safe for them to even set foot on Belgian soil, and Belgium’s hosting of NATO headquarters thrown into doubt – but it has finally met its end – at least so it seems. (more…)