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Sovereignty is over-rated.
International creditors are demanding Greece begin a six-day workweek as part of heavy-handed conditions for the country's second bailout, a letter indicates. The European Commission, European Central Bank and International Monetary Fund, known as the troika, are also requiring other radical labor reforms affecting wages, overtime and work flexibility in return for a $37.6 billion bailout next month, the letter leaked to the British newspaper The Guardian said.
Sovereignty is over-rated.
http://www.cnbc.com/id/48924212European Central Bank Chief Mario Draghi said the "euro is irreversible" as he announced a "unlimited" new bond-buying program at a press conference in Frankfurt, after the central bank decided to keep its benchmark interest rate on hold.
The program called "Monetary Outright Transactions" or MOT would focus on the secondary sovereign bond market. Draghi said it was necessary to deal with "severe distortions" in the bond markets.
Bond yields have risen in recent months for Spain and Italy, sparking worries the debt crisis was spreading.
Draghi confirmed reports that the ECB would only buy bonds with maturities of up to three years; the purchases would be sterilized, i.e. the central bank would mop up the extra liquidity that was created; and the ECB would not have seniority over private creditors.
The ECB chief said troubled euro zone countries could choose either a full bailout or a precautionary program. He said ECB bond buying would include strict conditionality and would happen only in concert with the European Financial Stability Facility (EFSF) and the new euro zone bailout fund, the European Stability Mechanism (ESM).
He also said the involvement of the IMF would be sought for the design and monitoring of any aid program.
Could you do those of us yokels who don't register for all these happy sites the small favor of an occasional pertinent copy/paste?
Have you noticed that the half-life of eurozone optimism is getting shorter? It was only three weeks ago that Mario Draghi, the European Central Bank president, announced his outright monetary transactions, a programme of sovereign bond purchases with no upfront limit. It seemed that the consensus was that this had either ended the crisis, or its acute phase.
Last week investors – and Spanish journalists – suddenly discovered to their horror that Germany will not after all allow Spain to dump the risk of its banks on to the European Stability Mechanism, the eurozone rescue fund. That seems to contradict the June 29 eurozone leaders’ summit statement, which said it was “imperative to break the vicious circle between banks and sovereigns”. EU leaders reached this agreement in the early hours of the morning after a diplomatic ambush by the Italian and Spanish prime ministers. Whatever may have been agreed that morning, it was understood differently in Spain than in Germany. The Spanish interpretation had been that the EU would adopt a banking union by the beginning of next year. This would then automatically trigger a shift in the burden of the recapitalisation of the Spanish banking sector from Spain to the ESM.
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This is not how Angela Merkel, the German chancellor, and Wolfgang Schäuble, her finance minister, understood the deal at all. Over the past few days, they clarified what kind of banking union they want. This is how I would summarise the German position:
First, we do not really want a banking union all, but if we have to have it, we would like to limit the remit of the pan-European supervisor to a few large cross-border banks.
Second, ideally the supervisor should not be the ECB; if it has to be the ECB, there must be safeguards, stronger than those proposed, to ensure that monetary policy remains independent from the banking supervisor.
Third, there shall be no joint deposit insurance.
Fourth, the banking union shall not deal with any legacy risk, only problems that arise in the future. The Spanish bank programme remains a Spanish bank programme.
Fifth, the ESM should not be able to undertake direct bank recapitalisations until the banking union is fully implemented. This will take many years.
Whether or not you call this a banking union, or a breach of the June 29 agreement, is irrelevant. The point is that you cannot force through a banking union against the explicit will of the German government, the German parliament, the German public at large and the Bundesbank. I suspect the EU will ultimately agree on a fudge. But it would be irrelevant for the resolution of this crisis.
Jens Weidmann, president of the Bundesbank, last week said a banking union was a disguised transfer mechanism. On this point, he is right. A banking union would recapitalise Spanish banks at the expense of northern European taxpayers. This is the whole point of having it. It would be dishonest to deny that. A banking union, properly constructed, thus cons utes a fiscal union. This is not something you do before Christmas, or through a directive.
I wrote earlier that a banking union is an even bigger deal than a eurozone bond. You can construct a eurozone bond with lots of safeguards. There are even proposals on the table that would turn a eurozone bond into an instrument to deliver austerity – a so-called debt redemption bond. I would rather have a banking union and no eurobonds, than the other way round. I would rather have nothing than a debt redemption bond.
Judging from the political debate, Germany is not ready for a fiscal transfer mechanism of any kind. In particular, Germany is not ready for a banking union. Ms Merkel never made a political case for a banking union in Germany. All she did was play down the implications. I would counsel readers against falling into the trap of thinking that next year’s German elections will miraculously clear all the hurdles. All the various probable outcomes favour a continuation of the present policy.
The dwindling chances of a banking union put Mr Draghi in a tight spot. His OMT programme needs a banking union to work. The ECB’s liquidity backstops guarantees the banks, for now. The OMT guarantees the sovereign debt. As these programmes run out – which they eventually will – the eurozone needs an ins utional framework in place to deal with the two intertwined risks of banks and sovereigns. A banking union would end that vicious circle. But even with a banking union in place, the eurozone still faces an equally formidable vicious circle of austerity and recession. The dynamics of the recession are alarming.
Whenever the ECB helps, the political process slows down. This is the true tragedy of the eurozone’s crisis management. We are now back at the point before Mr Draghi announced his programme – where the stated policies are inconsistent with a survival of the eurozone.
^ Thanks
Heard on NPR this morning on a suggestion to let Greece drop out of the monetary union 10 years, but remain in the EU.
The original opposition to Greece joining has proved correct. Greece really isn't a modern economy. Of course, Goldman Sacks helped Greece defraud the bond market by showing Greece how to hide/understate its debts. GS escapes without punishment, and will $Ms in fees.
http://www.reuters.com/article/2012/...8B907420121210Prime Minister Mario Monti tried to reassure rattled financial markets on Monday that Italy would not be left adrift following his surprise decision to resign and Silvio Berlusconi's return to frontline politics.
Monti's weekend announcement that he would quit soon because Berlusconi's People of Freedom (PDL) party had withdrawn its support for his technocrat government pushed up Italy's borrowing costs and prompted a stock market sell-off on Monday.
"I understand market reactions. They need not be dramatized," Monti told reporters in Oslo where he attended the award of the Nobel Peace Prize to the European Union and where other EU leaders queued up to praise him.
The former European Commissioner said he was confident the elections would produce a responsible government "which should be in line with the huge efforts already pursued by Italy ... Markets should not fear a decision-making vacuum."
He added: "Let me remind markets that the current government has not left; it's fully in charge and will be so until a new government comes in after the elections."
I'm quite confused that a rather high income country like Greece was allowed to have debt reduction in their economic crisis, the way their debt was "rearranged" by the EU monetary authority (bondholder taking voluntary debt hair cut). My country -which was a developing, low income country at that time- had to endure economic crisis in the late 90's without any debt reduction at all -but indeed Indonesian's debt back then is mostly bilateral, not using market mechanism. Can you imagine your currency devalue by 500% in just 2 year ? We have to crawl out of that hole ourselves, while being badly helped by IMF regarding their misfit economic policy prescription.
all animals are equal, but some are more equal than others . . .
The EU’s general court has blocked an attempt to force the European Central Bank to release files showing how Greece used derivatives to hide its debt in the run-up to the financial crisis. The case was brought by Bloomberg News under the EU’s freedom of information rules in August 2010 but was thrown out on Thursday by the court in Luxembourg.
…
The ruling means European taxpayers who are footing the bill for the €240bn Greek bailout will not find out whether EU officials knew of irregularities in Greece’s national accounts before they became public in 2009.
http://firedoglake.com/2012/11/30/th...oz-has-spoken/
Goldman Sucks advised Greece, for a fantastic fee of course, how to hide Greek debt so bond purchasers would pay a lower rate, aka, how to defraud the bond market, aka, the "irregularities" above.
G-S, along with other vulture capitalists, has scavenged $Bs of Greek bonds at $0.30 per dollar. Now the capitalists are demanding to sell the bonds back to Greece at $0.35.
Remember when Argentina defaulted? p/e equity vultures swept in. That story continues.
Argentine Ship Held in Ghana Causing Political Fallout in Argentina
http://latino.foxnews.com/latino/new...#ixzz2Ek0EGRpR
IMHO, a country which default and renegade from its debt unilaterally, must be treated as a total pariah, not only by the financial community, but also bilaterally in every aspect of living.
The USA monetizing debt isn't much different. That's what Greece would do if they still had their own currency.
http://www.reuters.com/article/2012/...8BB00820121212Germany signaled on Wednesday it was ready to back plans to give the European Central Bank new powers to supervise banks across the bloc, raising the prospect of a breakthrough on the European Union's most ambitious financial reform.
Last week France and Germany had clashed openly over parts of the plan, but with little time left for the EU to meet a commitment to complete the framework for a common bank supervisor by the end of the year, both countries redoubled efforts to settle their differences.
"We think that we have a good chance to reach a deal today," Germany's Finance Minister Wolfgang Schaeuble told journalists ahead of a meeting with his European Union peers to agree a plan. "My intention is that we find a solution to the banking union on time before Christmas."
His French counterpart Pierre Moscovici told his colleagues in the meeting that "all the parameters" for an agreement were in place.
After three years of piecemeal crisis-fighting measures, governments are inching towards the creation of a so-called "banking union" that would prevent troubled banks from dragging down sovereign states, as they have in Ireland and Spain.
A single banking supervisor for the euro zone and most other EU states would be a crucial step towards that goal. But even if the bloc agrees to that, other difficult issues will remain, including setting up a resolution authority to close down failed banks and a scheme to protect deposits.
Among the outstanding questions ministers are trying to settle on Wednesday are how many banks the ECB should directly supervise and whether the central bank gets longer than one year, as planned, to take on its role.
A compromise do ent, obtained by Reuters, won broad backing at the meeting from the ECB and countries including Spain and France.
watch markets take off.
lol last month germany got rid of the beastality law
weakening the banks to stave off another credit crunch? ominous.
http://www.bloomberg.com/news/2013-0...roup-deal.htmlGlobal central bank chiefs gave lenders four more years to meet international liquidity requirements and watered down the measures in a bid to stave off another credit crunch.
Jan. 7 (Bloomberg) -- Bank of England Governor Mervyn King, chairman of the Group of Governors and Heads of Supervision, and Sweden's Riksbank Governor Stefan Ingves, chairman of the Basel Committee on Banking Supervision, speak about an agreement by global central bank chiefs to water down and delay a planned bank liquidity rule to counter warnings that the proposal would strangle lending and stifle the economic recovery. Lenders will be allowed to use an expanded range of assets including some equities and securitized mortgage debt to meet the so-called liquidity coverage ratio. King and Ingves spoke yesterday at a news conference following a meeting of regulatory chiefs in Basel, Switzerland. (Source: Bloomberg)
Banks won the delay to fully meet the so-called liquidity coverage ratio, or LCR, following a deal struck by regulatory chiefs meeting yesterday in Basel, Switzerland. They’ll be able to pick from a longer list of approved assets including equities and securitized mortgage debt as they seek to build up buffers of liquidity for use in a financial crisis.
yep, delaying and/or weakening the LCR is supposed to assure that banks actually have enough liquidity to lend to businesses and individuals, which is really a losers' game compared gambling their liquidity on high-risk/high-reward gambling in the financial casino.
http://blogs.telegraph.co.uk/finance...-unemployment/Comrade Barroso, the existential threat to the euro is mass unemployment
By Ambrose Evans-Pritchard Economics Last updated: January 8th, 2013
523 Comments Comment on this article
European Commission President Jose Manuel Barroso. (Photo: Reuters)
A day after European Commission chief Manuel Barroso said the "existential threat to the euro has essentially been overcome", we have the monthly jobless data from Eurostat.
Unemployment has reached a record 26.6pc in Spain, rising to 56.5pc for youth.
It is almost the same in Greece: 26.0, (57.6). but Greece's data is old. It will soon be worse.
Followed by:
Portugal: 16.3, (38.7)
Ireland: 14.6, (29.7) … but improving, since Ireland is highly compe ive in EMU
Slovakia: 14.5, (35.8)
Italy: 11.1, (37.1) … though be cautious of the Italian data because it famously undercounts discouraged workers. Italy's rate is probably nearer 14pc, comparing like with like.
It is a record 11.8pc for EMU as a whole.
Mr Barroso may well be right about the debt crisis. The ECB's `Draghi Put' has effectively taken default risk off the table (though not entirely, since political strings are attached to any rescue).
But the EMU disaster is not at root a public debt crisis, and never was. As EMU leaders themselves say – correctly – Euroland's aggregate public debt is lower than in the UK, US, and Japan as a share of GDP.
What Europe faces is a north-south incompatibility crisis, the result of ramming together misaligned economies and countries into a single currency.
Whether you think this matters depends on whether you think the democracies of southern Europe will tolerate slow grinding depression – with no light at the end of the tunnel – for year after year.
The denouement is hard to predict in such situations. Political upheavals are famously non-linear. But the situation in Spain is remarkable, with the added nitroglycerine of a ruling party determined to exploit the crisis to take power back from the regions, and Catalonia determined to resist with all means at its disposal.
Data from Tinsa released today shows that Spanish house prices fell 11.3pc last year, and are now down 33.3pc from the peak in 2007. This will continue.
As I reported two weeks ago, RR de Acuña & Asociados expects home prices in Madrid, Barcelona and other big cities to fall a further 30pc in a relentless slide until 2018.
Fresh losses could reach 50pc and drag on for 10 to 15 years in parts of the overbuilt sunbelt. "The market is broken. We calculate that there are almost 2m properties waiting to be sold. We have made no progress at all over the past five years in clearing the stock," said Fernando Rodríguez de Acuña.
"There are 800,000 used homes on the market. Developers are sitting on a further 700,00 completed units. Another 300,000 have been foreclosed and 150,000 are in foreclosure proceedings, and there are another 250,000 still under construction. It's crazy."
Indeed. Yet there is almost nothing Spain can do within EMU to mitigate the disaster or to bring about the currency adjustment needed to clear the stock of houses and attract buyers again from Northern Europe.
The stoicism of the Spanish people so far has been impressive. But willingness to put up with an intolerable state of affairs depends on belief that the pain is ultimately worthwhile.
That is being questioned already. Should such doubts become pervasive, we will see an entirely new dynamic play out. The risk of being expelled or forced out of the euro is changing into the risk of voluntary withdrawal (with capital controls, "corralitos", and redenomination of debt into national currency by sovereign decrees)
Mr Barroso may be right that the euro will not implode in 2013. But what matters henceforth is whether the victim nations wish to stay in a project that is causing so much damage, or indeed whether is any moral purpose in holding the euro together at this stage.
The march towards fiscal union (overtly, or by ECB stealth) strips elected parliaments of the final control over tax and spending. It thus eviscerates democracy. The Project breaks the back of historic nation states that are the only real defence of liberal representative government.
So one has to ask, what is the euro for? Why is it self-evidently a positive public good for the peoples of Europe?
Why sacrifice the lifeblood of parliaments for an economic experiment that is not even offering a `Chinese' trade-off of prosperity in exchange for abridged liberties. Why sacrifice democracy for a Barroso Model that has generated a youth jobless rate of 56.5pc in Spain?
These are the questions that Mr Barroso and his successor will have to answer over the next three years as the Club Med slump grinds on. We are no longer in the frothy – dare I say trivial – phase of financial crisis. We are by now in the deadly serious phase of economic and political crisis.
Mr Barroso was once a Maoist and a student activist in Portugal's Carnation Revolution against the reactionaries. Good for him.
Which side would he be on now if he were 40 years younger?
http://dealbook.nytimes.com/2013/03/...uropean-banks/Just as pressure was easing on Europe’s financial sector, the situation in Cyprus has once again created chaos.
After a proposed levy on retail deposits in Cyprus, shares in many of Europe’s largest financial ins utions tumbled on Monday. Shares of Barclays fell 4.9 percent, while shares in Deutsche Bank were down 3.3 percent.
Investors are worried that other banks, especially those in highly indebted countries like Italy and Spain, could face further troubles.
In a rare move, Cyprus is trying to raise around 5.8 billion euros ($7.5 billion) from a one-time bank charge on local deposits. Unlike in other European countries, local banks only have a small amount of outstanding bonds, which have their own set of legal complications. So the Cypriot government was unable to require the banks’ creditors to take major losses to finance the bailout.
NPR says the higher 10% rate of stealing from accounts over $100K is aimed at Russian and other money launderers that use the famously slimy Cypriot banks.
the 99% will get pinched too. I suppose the higher rate on richies makes that alright by boutons.
As in USA, the very richies in Cypriot banks are criminals, too.
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