FT: Mass selloff in Eurozone bonds

[Agloco]

Europe is screwing itself with austerity in exactly the same way the US is screwing itself with austerity.

No recovery is possible without strong economic expansion.

Both have about the same amount of total debt.

America lives in a glass house, why does it throw schadenfreude stones at Old Europe?

It was America's criminally fraudulent financial sector, aka "free market capitalism", that pushed industrial countries into catastrophe, not Europe.

It was America's corrupt/whoring ratings agencies, never punished, that rated toxic shit as AAA, but now they are to be believable when rating Euro countries?

(btw, by pushing bond interest rates higher, the ratings agencies are filling the pockets of the wealthy buyers of Euro debt)

Thanks. Does it always take special requests for you to post in a cogent manner?

[Winehole23]

http://www.marketwatch.com/story/hungary-wont-be-last-to-make-bondholders-pay-2012-01-11?link=MW_story_popular

[boutons_deux]

Thanks. Does it always take special requests for you to post in a cogent manner?

my idea densities and idea hierarchies greatly surpass your comprehension.

[Winehole23]

yeah it does. lol surpassing density.

[Winehole23]

Simon Johnson and Peter Boone think the outlook is bad: http://piie.com/publications/pb/pb12-4.pdf

[Winehole23]

wrong thread

[Winehole23]

Fitch downgraded the sovereign credit ratings of Belgium, Cyprus, Italy, Slovenia and Spain on Friday, indicating there was a 1-in-2 chance of further cuts in the next two years.

In a statement, the ratings agency said the affected countries were vulnerable in the near-term to monetary and financial shocks.


"Consequently, these sovereigns do not, in Fitch's view, accrue the full benefits of the euro's reserve currency status," it said.


Fitch cut Italy's rating to A-minus from A-plus; Spain to A from AA-minus; Belgium to AA from AA-plus; Slovenia to A from AA-minus and Cyprus to BBB-minus from BBB, leaving the small island nation just one notch above junk status.
Ireland's rating of BBB-plus was affirmed.


All of the ratings were given negative outlooks.
http://ca.reuters.com/article/topNews/idCATRE80Q1RV20120128

[Winehole23]

Credit-default swaps can be dangerous because they have the ability to hit one side of the trade with a demand for an overwhelmingly large payout if a default occurs. Right now, it costs a bank $401,000 a year to insure $10 million of Italian government debt for five years, according to Markit, a data provider. If Italy took a serious turn for the worse, and its government debt seemed in real danger of default, that swap price would rapidly spike higher, as happened with Greece.


If that occurred, the bank that sold the protection might then have to post a lot of cash to ensure it would make good on the swap. Large cash calls like that might drain some banks of liquid assets, causing systemic stress.


If an important part of the financial system overhaul were in place by now, there may be fewer questions about whether banks would be able to meet cash calls in stressed times. The change involves directing most swaps trades to clearinghouses, whose job is to ensure that the money flows underlying a trade are made. Clearinghouses would standardize collateral payments across the default swap market, and they might demand higher amounts of collateral than banks currently demand from each other.


Recognizing this weakness in the derivatives market, finance ministers and central bankers from the Group of 20 leading industrialized nations said in 2009 that they wanted to have clearing in place for all standardized derivatives by the end of 2012.


Yet, as of June, only 9.4 percent of the $29.6 trillion credit-default swap market is centrally cleared, according to the Bank for International Settlements. Notably, the credit-default swaps that pay out if a European government defaults appear to have been held back from central clearing by the British regulator, the Financial Services Authority, which declined to comment on why it had not yet approved these swaps.
http://dealbook.nytimes.com/2012/01/29/u-s-banks-tally-their-exposure-to-europes-debt-maelstrom/

[Winehole23]

In Morgan Stanley’s fourth-quarter results a footnote made rivals sit up and take note: the US bank had reduced its net exposure to Italy by a whopping 69% in late 2011, from US$4.9bn to US$1.5bn.


While reduction to peripheral Europe has been a focus for many banks, the way in which Morgan Stanley pulled this off was arguably as significant as the end result. Other banks have been forced to slash government bond portfolios or buy credit default swaps to shield themselves against southern European countries.


In contrast, Ruth Porat, Morgan Stanley’s CFO , explained during an investor call on January 19 that the bank began to restructure certain derivatives positions with Italy in December. These trades settled in January, leading to a material reduction in the bank’s net exposure to peripheral Europe from US$6.4bn to US$2.3bn excluding unfunded commitments, she added.


Rival dealers admit that Morgan Stanley has killed two birds with one stone here. Beyond the immediate boon of cutting its peripheral exposure, the US bank has removed a sizeable chunk of its sovereign swaps trades, which have become a major headache for all dealers under the new Basel III regulatory regime.


“It’s a huge number, and it shows just how big the [sovereign derivatives] exposures in the industry are that Morgan Stanley can get that kind of relief, and just how painful the widening of sovereign CDS has been for banks,” said one person who looks after sovereign clients for a major bank.


Legacy derivatives trades with sovereigns have become incredibly expensive for banks over the past few years. In a hangover from the days when sovereigns were considered risk-free, most treasuries are not required to post collateral when out-the-money on a swap, but receive cash from their dealer when they are in-the-money.



Under Basel III, the funding, counterparty credit and capital charges of these collateral agreements have become material for dealers, particularly when they are owed money on the swaps. One head of structured rates said his former bank recoiled in horror when it looked at marking its sovereign derivatives portfolio correctly. The widening of European sovereign CDS, which have quadrupled in many cases over the past year, has only compounded this problem for dealers.
http://www.ifre.com/derivatives-dealers-look-to-reduce-italy%E2%80%99s-swaps-portfolio/20046258.article

[Winehole23]

Exactly how Morgan Stanley managed to reduce its exposure so dramatically has left rivals scratching their heads. Two senior traders at separate banks believed Morgan Stanley exercised a provision in its collateral agreement with Italy that allowed it to unwind a trade if its mark-to-market breached a certain level.


Traders said it most likely related to a legacy interest rate swap, which Italy had used to lock-in rates for 30 years at about 4-5% on around €3-4bn of debt. Thirty-year rates being now more like 2.5%, Italy would be significantly underwater on the trade, and would therefore have to pay up as much as €2bn to unwind it, the traders estimated. A major unwind or restructuring would also explain volatility at the long-end of the euro swaps curve late last year, they added.


Morgan Stanley and the Italian Treasury declined to comment.
same

[Winehole23]

Britain's banks slashed $50 billion (£31.8 billion) from their exposure to France, Italy and Spain during the summer as financial institutions ran scared from Europe's debt crisis, according to the Bank for International Settlements.


The latest figures from the Basel-based BIS, "the central banker's bank", revealed that UK banks' total exposure to the three European strugglers had fallen to $430.4 billion at the end of September, against $479.9 billion at the end of June.
UK banks' stocks of French, Spanish and Italian sovereign bonds were unceremoniously dumped as bond markets turned on vulnerable European nations. The BIS figures revealed UK bank holdings of French, Italian and Spanish sovereign debt dived 32% to $55.5 billion over the quarter, with holdings of Italian bonds suffering the biggest sell-off. Banks sought safety in German bunds, boosting their holdings by more than $40 billion during the period.
http://www.thisislondon.co.uk/standard-business/article-24032052-uk-banks-cut-exposure-to-three-euro-laggards-by-pound-32bn.do

[Winehole23]

The Germans thus are proposing that Greece, a sovereign country, transfer its right to national self-determination to an overseer. The Germans argue that given the failure of the Greek state, and by extension the Greek public, creditors have the power and moral right to suspend the principle of national self-determination. Given that this argument is being made in Europe, this is a profoundly radical concept. It is important to understand how we got here.
There were two causes. The first was that Greek democracy, like many democracies, demands benefits for the people from the state, and politicians wishing to be elected must grant these benefits. There is accordingly an inherent pressure on the system to spend excessively. The second cause relates to Germany's status as the world's second-largest exporter. About 40 percent of German gross domestic product comes from exports, much of them to the European Union. For all their discussion of fiscal prudence and care, the Germans have an interest in facilitating consumption and demand for their exports.

Therefore, the Germans have used the institutions and practices of the European Union to maintain demand for their products. Through the currency union, Germany has enabled other eurozone states to access credit at rates their economies didn't merit in their own right. In this sense, Germany encouraged demand for its exports by facilitating irresponsible lending practices across Europe. The degree to which German actions encouraged such imprudent practices -- since German industrial production vastly outstrips its domestic market, making sustained consumption in markets outside Germany critical to German economic prosperity -- is not fully realized.


True austerity within the European Union would have been disastrous for the German economy, since declines in consumption would have come at the expense of German exports. While demand from Greece (http://realclearworld.com/topic/around_the_world/greece/?utm_source=rcw&utm_medium=link&utm_campaign=rcwautolink) is only a small portion of these exports, Greece is part of the larger system -- and the proper functioning of that system is very much in Germany's strategic interests. The Germans claim the Greeks deceived their creditors and the European Union. A more comprehensive explanation would include the fact that the Germans willingly turned a blind eye.



Though Greece is an extreme case, Germany's overall interest has been to maintain European demand -- and thus avoid prudent austerity -- as long as possible.
http://www.realclearworld.com/articles/2012/01/31/germanys_role_in_the_european_debt_crisis_99869-2.html

[Winehole23]

Elsewhere, governments of high-income countries can continue to support their economies, largely because they possess a central bank and an adjustable exchange rate. This combination has given them the ability to run large fiscal deficits. In post-crisis conditions, such deficits are both the natural counterpart and the principal facilitator of necessary private sector deleveraging. The euro zone has no such internal mechanisms. When private external financing dried up, as happened to a number of countries, affected members needed both financing — in the short run — and a mechanism for adjusting their external accounts — in the longer run — other than via deep slumps.



The euro zone lacks both capacities. It has turned out, as a result, to have limited ability to cope with the global financial disease. As Donald Tsang, chief executive of Hong Kong, remarked in Davos: “I have never been as scared as I am now.” Astute observers have a sense that little stands between them and a wave of sovereign and banking defaults inside the euro zone, with ghastly global repercussions.
http://www.cnbc.com/id/46215427

[Winehole23]

pics (http://www.miamiherald.com/2012/02/12/2638025/riots-in-greece.html) of the Greek riots yesterday

[Winehole23]

The stench of tear gas still hung in the air on Monday morning, chocking passers-by. More than 120 people were hurt in the rioting which also broke out in other Greek cities. Authorities said 68 police needed medical care after being injured by gasoline bombs, rocks and other objects hurled at them, while at least 70 protesters were also hospitalized.

Police arrested at least 67 people, while in several cases they had to escort fire crews to burning buildings after protesters prevented access.

The rioting began Sunday afternoon ahead of a historic vote in Parliament on yet more austerity measures. Lawmakers approved the bill in a 199-74 vote, to the relief of investors who pushed the Athens stock index up 5 percent on Monday.

There was nevertheless strong dissent among the majority Socialists and rival Conservatives, who along with a small right-wing party make up Greece’s interim coalition government. The parties disciplined the dissenters in their ranks, with the Socialists and Conservatives expelling 22 and 21 lawmakers respectively, reducing their majority in the 300-member parliament from 236 to 193.
http://www.washingtonpost.com/politics/federal-government/riots-looting-engulf-central-athens-at-least-10-buildings-burnt-before-key-greek-debt-vote/2012/02/12/gIQAQxeF9Q_story.html

[Winehole23]

Sunday’s clashes erupted after more than 100,000 protesters marched to the parliament to rally against the drastic cuts, which will ax one in five civil service jobs and slash the minimum wage by more than a fifth.


The vote paves the way for Greece’s international creditors to release €130 billion ($172 billion) in new rescue loans to prevent the country from a potentially catastrophic default next month — bankruptcy could push Greece out of Europe’s euro currency union, drag down other troubled eurozone countries and further roil global markets.


The deal, which has not yet been finalized, will be combined with a massive bond swap deal to write off half the country’s privately held debt, reducing Greece’s debt load by about €100 billion.


But for both deals to materialize, Greece has to persuade its deeply skeptical creditors that it has the will to implement spending cuts and public sector reforms that will end years of fiscal profligacy and tame gaping budget deficits.


Eurozone finance ministers are to meet on Wednesday to approve the plan, after refusing to do so during a meeting last week, saying Athens had to first approve the new austerity measures.
same article

[Winehole23]

Because of the central bank’s cheap financing, some economists warn, sick banks now face less pressure to confront their problems — to clean out bad loans and other impaired assets, or even wind down operations if there is no hope of a turnaround. The European Central Bank, they say, could inadvertently spawn a cohort of “zombie banks,” burdened by nonperforming loans and assets that remain on the books, like the ones that helped make the 1990s a lost decade for Japan.



“It’s a huge bet,” said Charles Wyplosz, a professor of economics at the Graduate Institute in Geneva. “If the crisis ends up well, the E.C.B. will have pulled off a miracle. If things go wrong, then commercial banks will be in a much worse situation than they were before.”



Professor Wyplosz said the central bank might be making the banking system more fragile by encouraging institutions to load up on risky assets, especially government bonds from troubled euro zone countries like Spain or Italy. Banks can use those assets as collateral for more loans from the central bank.



In December, the European Central Bank invited banks to borrow money at the benchmark interest rate of 1 percent for three years, compared with a previous maximum maturity of one year. Banks could borrow as much as they wanted provided they posted collateral. They jumped at the opportunity: 523 banks borrowed 489 billion euros, or $647 billion.



The central bank will offer another round of three-year loans at the end of this month, and last Thursday it loosened its collateral rules to encourage smaller banks to join in. http://www.nytimes.com/2012/02/13/business/global/low-interest-loans-to-european-banks-prompt-concern.html?_r=1

[Winehole23]

As the experience of Japan showed in the 1990s, zombie banks tended to keep lending to troubled borrowers to avoid recognizing losses from bad loans. As a result, the healthiest and most productive companies struggled to find credit.



“Zombie banks support zombie companies,” said Nicolas Véron, a senior fellow at Bruegel, a research organization in Brussels. “Zombie banks will not extend credit to borrowers that need it. This is bad for the economy.”
same

[Agloco]

http://www.realclearworld.com/articles/2012/01/31/germanys_role_in_the_european_debt_crisis_99869-2.html

I read this with fascination a few weeks back. It seems that the Germans are on the march again, albeit in a more abstract fashion.

Sie werden über Griechenland nehmen mit Geld diesmal. Ziemlich unglaublich. (RG will need to check my German....... :lol)

[Winehole23]

As anticipated in November 2011, Moody's Investors Service has today adjusted the sovereign debt ratings of selected EU countries in order to reflect their susceptibility to the growing financial and macroeconomic risks emanating from the euro area crisis and how these risks exacerbate the affected countries' own specific challenges.
Moody's actions can be summarised as follows:



- Austria: outlook on Aaa rating changed to negative



- France: outlook on Aaa rating changed to negative



- Italy: downgraded to A3 from A2, negative outlook



- Malta: downgraded to A3 from A2, negative outlook



- Portugal: downgraded to Ba3 from Ba2, negative outlook



- Slovakia: downgraded to A2 from A1, negative outlook



- Slovenia: downgraded to A2 from A1, negative outlook



- Spain: downgraded to A3 from A1, negative outlook



- United Kingdom: outlook on Aaa rating changed to negative


http://www.moodys.com/research/Moodys-adjusts-ratings-of-9-European-sovereigns-to-capture-downside--PR_237716

[TDMVPDPOY]

greece is pretty dumb man, without the bailout and declaring bankrupt...they are still in the same shit with govt cuts anyway

[Winehole23]

shitstorm is bigger, tbh

[Winehole23]

Holland and Italy, two of the Eurozone’s largest economies, have gone into recession, new figures show.


The economies of both countries suffered a second successive quarter of shrinkage, each contracting by 0.7 per cent during the last three months of 2011.
Germany’s economy also contracted in the fourth quarter, down 0.2 per cent from the previous quarter. This was the country’s first shrinkage since 2009.


Together, all 17 nations making up the Eurozone witnessed a 0.3 per cent contraction in the fourth quarter, but have managed to avoid a collective recession with growth of 0.1 per cent in the third quarter.
http://www.myfinances.co.uk/investments/2012/02/15/italy-and-netherlands-slide-into-recession

[Winehole23]

A Spanish town is looking to the past to safeguard the future of its ailing economy by reintroducing the peseta.


Fed up with the failing euro, rebellious locals in Villamayor de Santiago have reverted to using the old currency, which was phased out a decade ago.
Read more: http://www.dailymail.co.uk/news/article-2100565/Spanish-village-goes-peseta-euro-crisis-takes-hold.html#ixzz1mTRRO4of

[Winehole23]

The country introduced the peseta in 1868, joined the euro in December 2001 and phased out the old currency in February 2002.


However, unlike other euro countries such as France and Italy, it never set a deadline for exchanging pesetas into euros.
http://www.dailymail.co.uk/news/article-2100565/Spanish-village-goes-peseta-euro-crisis-takes-hold.html#ixzz1mTRpag2u

[Winehole23]

(Moody's) said among 17 banks and securities firms with global capital markets operations, it might cut the long-term credit rating of UBS, Credit Suisse and Morgan Stanley by as much as three notches following the review. It said the guidance was indicative.


Among the banks that might be downgraded by two notches are Barclays, BNP Paribas, Credit Agricole, Deutsche Bank, HSBC Holdings, and Goldman Sachs.
Bank of America and Nomura were included in those that might be downgraded by one notch.
http://www.reuters.com/article/2012/02/16/us-moodys-europe-idUSTRE81E2I820120216

[Winehole23]

The European Commission plans to suspend 495m euros (£417m; $655m) of Hungary's EU funds next year because of the country's budget deficit.
The penalty is "unprecedented" for an EU nation, said a statement from the commission - the EU's executive arm.


The sum represents 29% of Hungary's cohesion (development) fund allocation.
Last month the commission threatened Hungary with legal action over new laws said to restrict the independence of its central bank and courts.


Hungary has until 1 January next year to improve its budget finances - otherwise the EU funds will be frozen.
http://www.bbc.co.uk/news/world-europe-17127792

[Winehole23]

The Spanish rebellion has begun, sooner and more dramatically than I expected.


As many readers will already have seen, Premier Mariano Rajoy has refused point blank to comply with the austerity demands of the European Commission and the European Council (hijacked by Merkozy).
Taking what he called a "sovereign decision", he simply announced that he intends to ignore the EU deficit target of 4.4pc of GDP for this year, setting his own target of 5.8pc instead (down from 8.5pc in 2011).
http://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100015432/spains-sovereign-thunderclap-and-the-end-of-merkels-europe/

[Winehole23]

http://www.ft.com/intl/cms/s/0/3e736dd2-74d9-11e1-ab8b-00144feab49a.html#axzz1qG2YuB7N

[Agloco]

En Ingles herr Winehole?

Seems to be a lot of trouble on the horizon for Eurozone?

[Winehole23]

well within the horizon of possibility, it would seem.

I don't really do predictions but anyone who reads enough news can tell the EU has rekindled nationalism and economic union prevents defaulters from devaluating the currency in one country. Germany loves the catbird seat but doesn't want to pay full price to sit there -- full price being picking up the tab for deadbeats....

a wave of sovereign defaults is possible...not inevitable, or even necessarily likely, but possible.

con cuidado...

[GSH]

I want to see them fall and fall hard. I really am so angry at what that group of companies did to the world and I think the only way to stop them is through their own doing. Even if it means we all suffer I think its better in the long run.

When I supported the bailouts, I did so under the hope (and maybe the extremely naive hope) that there would be large scale changes done through forced legislation as a result. Now that I see that is simply an impossibility, I just want to see them fall flat on their face so we can move on.

Do you have any creative way to cut the umbilical cord to our politicians, so that they aren't the only ones not destroyed? I'd settle for some wanton destruction, as long as we kill the beast.

[Winehole23]

In March, a record 4.75 million Spaniards were unemployed, taking the jobless rate to 23.6 per cent, the highest in the 17-country euro zone. The youth unemployment rate is just above 50 per cent, also the zone’s highest. Both figures are greater than those of Greece, whose economy is in tatters after two bailouts and a sovereign default.


“Spain is in a critical situation,” Spanish budget minister Cristobal Montoro said Tuesday.


His warning came during a presentation in parliament of Madrid’s budget plan for 2012. Mr. Montoro said the country plans to raise €186.1-billion of gross debt this year, which translates into a net debt increase of €36.8-billion. Spain’s debt costs have been rising. For most of last year, its bond yields were well below Italy’s. Now the situation has reversed. Italy’s bond yields are fallen to about 5 per cent. Spain’s are at about 5.5 per cent, and rising.


Spain’s climbing debt and jobless rates, combined with its weak banking system and the overhang from an out-of-control construction spree that came to a sudden halt in 2008, leaving tens of thousands of apartments without owners or tenants, are reminders that the euro zone debt crisis is far from over. Spain, the zone’s fourth-largest economy, is back in recession and some economists and politicians fear it will require a bailout from the so-called troika – the European Commission, the IMF and the European Central Bank (http://www.theglobeandmail.com/report-on-business/international-news/european/spains-rapid-descent-into-crisis-raises-spectre-of-troika-bailout/article2391076/#).
In late March, Citigroup chief economist Willem Buiter said in a research note, “Spain looks likely to enter some form of troika program this year, as a condition for further European Central Bank support for the Spanish sovereign and/or Spanish banks.”


Mr. Buiter, who is a former member of the Bank of England’s monetary policy committee, said Spain may lack the financial strength to recapitalize the domestic banks, which are still hurting from the housing collapse. Fresh data shows that toxic loans – bank loans that are at serious risk of default – have gone from 1 per cent of outstanding loans in 2008 to 7.6 per cent today. The value of potentially dud loans is €136-billion, equivalent to 13 per cent of Spanish GDP.
http://www.theglobeandmail.com/report-on-business/international-news/european/spains-rapid-descent-into-crisis-raises-spectre-of-troika-bailout/article2391076/

[Winehole23]

http://www.ft.com/intl/cms/s/0/1e6836ee-3140-11e1-a62a-00144feabdc0.html#axzz1rfwE1BeV

[Winehole23]

Italy's leading MIB index plunged 5pc and Spain's Ibex fell 3pc amid fears that the eurozone's third and fourth biggest economies were in the grip of a deadly and uncontrollable spiral of debt and recession.




The borrowing costs of both "sinner states" soared. The yield on Italy's benchmark 10-year bonds jumped to 5.7pc, heading into the danger zone that is considered unsustainably high. The equivalent Spanish debt climbed to 6pc. Meanwhile, the yield on safe-haven German bunds was pushed to an almost record low of 1.6pc. UK gilts benefited, too, dropping to 2pc.




The yields reflected a level of fear on the bond markets not seen since the fraught period before Christmas when traders bet that the eurozone could collapse.

http://www.telegraph.co.uk/finance/financialcrisis/9196534/Stock-and-bond-markets-rocked-by-fears-of-Italian-and-Spanish-debt-spirals.html

[CosmicCowboy]

This is carrying over to the US with the stock market taking a shit and bond prices increasing. This should force US mortgage rates solidly back intro the 3's again.

Damn I'm glad I'm refinancing now.

[Winehole23]

http://www.bloomberg.com/news/2012-04-27/equity-fund-redemptions-in-april-are-largest-in-17-years.html

[Winehole23]

http://www.ft.com/cms/s/0/55d4f61c-9cd9-11e1-9327-00144feabdc0.html#ixzz1um9mqzZi

[coyotes_geek]

Goldman Sachs cuts Italian debt holdings by 92% (http://finance.yahoo.com/news/goldman-sachs-cut-italy-debt-121410493.html)

Goldman Sachs Group Inc. (GS), the fifth- biggest U.S. bank by assets, cut its holdings of Italian sovereign debt by 92 percent in the second quarter after boosting them in the first three months of the year.

Goldman thinking the shit is about to hit the fan in Italy?

[Winehole23]

Banks are particularly worried. "Banks and companies are starting to finance their operations locally," says Thomas Mayer who until recently was the chief economist at Deutsche Bank, which, along with other financial institutions, has been reducing its risks in crisis-ridden countries for months now. The flow of money across borders has dried up because the banks are afraid of suffering losses.
According to the ECB, cross-border lending among euro-zone banks is steadily declining, especially since the summer of 2011. In June, these interbank transactions reached their lowest level since the outbreak of the financial crisis in 2007.


In addition to scaling back their loans to companies and financial institutions in other European countries, banks are even severing connections to their own subsidiaries abroad. Germany's Commerzbank and Deutsche Bank apparently prefer to see their branches in Spain and Italy tap into ECB funds, rather than finance them themselves. At the same time, these banks are parking excess capital reserves at the central bank. They are preparing themselves for the eventuality that southern European countries will reintroduce their national currencies and drastically devalue them.


"Even the watchdogs don't like to see banks take cross-border risks, although in an absurd way this runs contrary to the concept of the monetary union," says Mayer.
Since the height of the financial crisis in 2008, the EU Commission has been pressuring European banks to reduce their business, primarily abroad, in a bid to strengthen their capital base. Furthermore, the watchdogs have introduced strict limitations on the flow of money within financial institutions. Regulators require that banks in each country independently finance themselves. For instance, Germany's Federal Financial Supervisory Authority (BaFin) insists that HypoVereinsbank keeps its money in Germany. When the parent bank, Unicredit in Milan, asks for an excessive amount of money to be transferred from the German subsidiary to Italy, BaFin intervenes.


Breaking Points

Unicredit is an ideal example of how banks are turning back the clocks in Europe: The bank, which always prided itself as a truly pan-European institution, now grants many liberties to its regional subsidiaries, while benefiting less from the actual advantages of a European bank. High-ranking bank managers admit that, if push came to shove, this would make it possible to quickly sell off individual parts of the financial group.


In effect, the bankers are sketching predetermined breaking points on the European map. "Since private capital is no longer flowing, the central bankers are stepping into the breach," explains Mayer. The economist goes on to explain that the risk of a breakup has been transferred to taxpayers. "Over the long term, the monetary union can't be maintained without private investors," he argues, "because it would only be artificially kept alive."


The fear of a collapse is not limited to banks. Early last week, Shell startled the markets. "There's been a shift in our willingness to take credit risk in Europe," said CFO Simon Henry.


http://www.spiegel.de/international/business/investors-preparing-for-collapse-of-the-euro-a-849747.html

[Winehole23]

The German economy continued to defy the euro crisis and grew 0.3 percent in the second quarter, buoyed by exports and consumer spending, but economists warned that GDP could contract in the third quarter.




The growth rate, released by the Federal Statistics Office on Tuesday, marked a slowdown from 0.5 percent in the first quarter. "Positive impetus came from consumption as well as from the net exports," the office said in a statement. That offset a decline in investments, particularly in industrial equipment.

Compared with other euro-zone countries, German is doing well. The second-quarter growth compares with declines of 0.7 percent in Italy, 0.6 percent in Belgium and 0.4 percent in Spain. The French economy stagnated and the entire 17-nation euro zone is expected to show a GDP contraction of 0.2 percent in the same period.



Economists say the German economy may shrink in the third quarter to end-September. Leading indicators such as the Ifo business climate index point to a slowdown in economic activity due to falling demand for German exports in Europe, the US and emerging markets, especially China, which has been a major source of German export growth.



In July, the Ifo index, based on a survey of 7,000 German firms, fell to its lowest level since March 2010. The German government recently admitted that there are "considerable risks" attached to the country's economic outlook.
http://www.spiegel.de/international/germany/german-economy-slowed-in-second-quarter-gdp-figures-show-a-849936.html

[Winehole23]

Yet it would be foolish to bet on an extended lull in the euro crisis. The Greek economy is in deep recession, and Germany seems adamant that no more money will be made available to help it out. Germany’s central bank remains opposed to the ECB buying bonds in order to cap the borrowing costs of Spain and Italy. To these familiar concerns is added a newish one: that efforts to shore up the euro might be scotched not in Berlin but in another austerity-minded northern capital: Helsinki.

Last month Finland’s finance minister, Jutta Urpilainen, caused a stir when she said that her country would “not hang itself to the euro at any cost” and that it would not be prepared to shoulder the debts of other states. More recently the foreign minister, Erkki Tuomioja, revealed that Finland had made contingency plans for the break-up of the euro. Uniquely, Finland has demanded collateral for its part of Greece’s second bail-out and for the funds it underwrites to support Spain’s crippled banks. If a grand bargain on the mutualisation of debts is ultimately required to keep the euro together, the Finns could block it. A few observers even think a “Fixit” (a Finnish exit from the euro) is more likely than a Grexit.


Fix it or Fixit?

It is true that Finland has the most to lose from a pooling of sovereign debts. The IMF reckons the combined gross debt of euro-area countries will peak at 91% of GDP next year, when the ratio in Finland will be just 53%, the lowest of any euro-zone country bar Estonia and Luxembourg. Finland’s borrowing costs are roughly the same as Germany’s. After Japan and Italy, Finland has the most rapidly ageing population among rich countries, so it is wary of adding to its debts. And having recovered from a nasty banking crisis in the 1990s through their own efforts (albeit with a favourable tailwind from the world economy), Finns are hostile to bail-outs.


Finland might also have least to gain from keeping the euro show on the road. Its banks have little direct exposure to the euro zone’s troubled periphery, in contrast to those of France and Germany. Its economy is less integrated into the euro zone than those of other northern bail-out grumps, such as the Netherlands. Only 31% of Finnish exports go to other euro-zone countries, a smaller share than is sold by Eurosceptic Britain. Five of Finland’s seven biggest foreign markets lie outside the euro zone. Its biggest supplier is Russia and its largest single customer is Sweden, whose economy is growing more quickly than Finland’s (see article (http://www.economist.com/node/21560865)).Norway is also doing better. Finns fed up with being asked to stump up for Greece and the rest cannot have missed that their nearest neighbours seem to be thriving outside the euro.
http://www.economist.com/node/21560879

[Winehole23]

Bundesbank President Jens Weidmann said a proposed new wave of sovereign bond purchases by the European Central Bank (http://topics.bloomberg.com/european-central-bank/) may increase governments’ reliance on such funding and won’t help solve the euro-area debt crisis.



“We shouldn’t underestimate the danger that central bank financing can become addictive like a drug,” Weidmann said in an interview with Der Spiegel (http://topics.bloomberg.com/der-spiegel/). “Such policy is too close to state financing via the money press for me.”



ECB President Mario Draghi (http://topics.bloomberg.com/mario-draghi/) said earlier this month that the central bank may intervene in the secondary market to lower yields in countries that ask Europe (http://topics.bloomberg.com/europe/)’s bailout fund to buy its bonds in the primary market. While such a move would ensure conditionality, the Bundesbank has been critical of the plan.



“In democracies, parliaments rather than central banks should decide on such an encompassing mutualization of risks,” Spiegel cited Weidmann as saying in an e-mailed summary of the interview today. The plans are becoming “concerted actions by the state rescue mechanisms and the central bank. That causes a link between fiscal and monetary policy.”
http://www.bloomberg.com/news/2012-08-26/weidmann-says-ecb-purchases-could-become-addictive-like-a-drug-.html

[Winehole23]

Europe’s failure to resolve its sovereign-debt crisis will force investment-banking chiefs in the region to consider shuttering entire businesses rather than rely on piecemeal job reductions to revive profit.



Dealmaking fees may drop 25 percent this year from 2009, when the crisis began in Greece, research firm Freeman & Co. estimates. European banks, including UBS AG and Barclays Plc (BARC) (http://www.bloomberg.com/quote/BARC:LN), have cut about 172,000 positions since then, according to data compiled by Bloomberg, the same strategy they used after Lehman Brothers Holdings Inc. collapsed in 2008.

http://www.bloomberg.com/news/2012-08-21/last-man-standing-means-europe-investment-banks-resist-shrinking.html

[Winehole23]

Buying Bonds

“Unlimited intervention by the ECB in the bond markets would be the ultimate game-changer in the euro zone (http://topics.bloomberg.com/euro-zone/) debt crisis,” said Steven Major (http://topics.bloomberg.com/steven-major/), global head of fixed income research at HSBC Holdings Plc in London (http://topics.bloomberg.com/london/). “Not only would it drive spreads down, it would keep them down.”



Keeping the yields of peripheral nations within a preset range of those of core economies could require the ECB to spend as much as 7 billion euros ($8.8 billion) per week buying bonds, Major estimates. The gap between two-year (http://www.bloomberg.com/quote/GDBR2:IND) German and Spanish bonds could almost halve to 200 basis points from more than 370 currently, he said.
The ECB “will always act within the limits of its mandate,” Draghi wrote in a commentary for German newspaper Die Zeit provided by the Frankfurt-based ECB yesterday. “Yet it should be understood that fulfilling our mandate sometimes requires us to go beyond standard monetary policy tools.”
Steering Yields

While speculation has mounted the central bank may try to cap bond yields outright, Goldman Sachs Group Inc. economist Huw Pill predicts it will avoid explicit targets for rates or spreads and instead try to steer market yields within wider bands depending on economic performance.



The central bankers may even hold fire. ECB Executive Board member Joerg Asmussen said Aug. 27 that the bank shouldn’t buy bonds before the rescue fund intervenes. Two officials said last week it may even hold off furnishing full details of its plan until Germany (http://topics.bloomberg.com/germany/)’s Constitutional Court rules on the legality of the European Stability Mechanism.



So Sept. 12 provides investors with two flashpoints, the German court ruling and a Dutch election. The ESM cannot operate without Germany’s say so and its 500 billion-euro cash pile is needed if Europe is to have enough cash to recapitalize banks and support Spain and Italy.
http://www.bloomberg.com/news/2012-08-29/september-offers-15-days-to-cement-crisis-solutions-euro-credit.html

[velik_m]

So Sept. 12 provides investors with two flashpoints, the German court ruling and a Dutch election. The ESM cannot operate without Germany’s say so and its 500 billion-euro cash pile is needed if Europe is to have enough cash to recapitalize banks and support Spain and Italy.

And Portugal, and Ireland, and Slovenia...there is no point in re-capitalizing the banks if nothing changes, it just delays the inevitable and puts us all further behind.

[Winehole23]

Julio and Eva Vildosola and one of their two children. Mr. Vildosola will join a small software company in Cambridge.



After working six years as a senior executive for a multinational payroll-processing company in Barcelona, Spain, Mr. Vildosola is cutting his professional and financial ties with his troubled homeland. He has moved his family to a village near Cambridge, England, where he will take the reins at a small software company, and he has transferred his savings from Spanish banks to British banks.



“The macro situation in Spain is getting worse and worse,” Mr. Vildosola, 38, said last week just hours before boarding a plane to London with his wife and two small children. “There is just too much risk. Spain is going to be next after Greece, and I just don’t want to end up holding devalued pesetas.”



Mr. Vildosola is among many who worry that Spain’s economic tailspin could eventually force the country’s withdrawal from the euro (http://topics.nytimes.com/top/reference/timestopics/subjects/c/currency/euro/index.html?inline=nyt-classifier) and a return to its former currency, the peseta. That dire outcome is still considered a long shot, even if Spain might eventually require a Greek-style bailout. But there is no doubt that many of those in a position to do so are taking their money — and in some cases themselves — out of Spain.
In July, Spaniards withdrew a record 75 billion euros, or $94 billion, from their banks — an amount equal to 7 percent of the country’s overall economic output — as doubts grew about the durability of Spain’s financial system.



The deposit outflow in Spain reflects a broader capital flight problem that is by far the most serious in the euro zone. According to a recent research note from Nomura, capital departing the country equaled a startling 50 percent of gross domestic product over the past three months — driven largely by foreigners unloading stocks and bonds but also by Spaniards transferring their savings to foreign banks.
http://www.nytimes.com/2012/09/04/business/global/money-and-people-leave-spain-as-economic-gloom-deepens.html?_r=1

[Winehole23]

The downturn in private-sector activity in the 17-nation euro zone deepened in August, the Markit euro-zone composite purchasing-managers' index, or PMI, for the region indicated Wednesday. The PMI fell to 46.3 from 46.5 in July and was down from a preliminary reading of 46.6. The index for the services sector fell to 47.2 from 47.9 in July and was down from a preliminary figure of 47.5. A reading of less than 50 signals a contraction in activity. "The final August PMI came in only slightly below its earlier flash estimate, leaving the euro-zone economy on course to fall back into technical recession in the third quarter," said Rob Dobson, senior economist at Markit. "Sharp declines in new orders at manufacturers and service providers, plus further job losses, mean that there is little prospect of a sustained improvement in economic conditions over the near-term," he said. http://www.marketwatch.com/story/euro-zone-august-composite-pmi-falls-to-463-2012-09-05?dist=beforebell

[Winehole23]

Spain suffered the highest level of joblessness in the eurozone in July, as overall unemployment in the region held steady at a record high.


One out of every four citizens in Spain is unemployed, according to the latest statistics from Eurostat. The situation is even worse for young Spaniards. The unemployment rate for those under 25 years old is now approaching 53%.


Spain has been dealing with high unemployment for years. The nation's jobless rate has been above 20% since May 2010, according to data from the European Central Bank. In July, the rate rose to 25.1%.


The Spanish economy slipped back into recession during the first quarter and activity has continued to deteriorate. Spanish gross domestic product declined 0.4% in the second quarter.
http://buzz.money.cnn.com/2012/08/31/spain-unemployment/?iid=HP_LN

[CosmicCowboy]

Holy shit. 53% unemployment for those under 25?

Fucked up numbers like this cause revolutions.

[Winehole23]

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.


Read more: http://www.upi.com/Business_News/2012/09/05/Greece-told-rescue-requires-6-day-workweek/UPI-52471346826600/#ixzz25bV6swmy

[TeyshaBlue]

Read more: http://www.upi.com/Business_News/2012/09/05/Greece-told-rescue-requires-6-day-workweek/UPI-52471346826600/#ixzz25bV6swmy


Sovereignty is over-rated.

[Winehole23]

European 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.
http://www.cnbc.com/id/48924212

[Winehole23]

http://www.ft.com/intl/cms/s/0/b21f3840-072a-11e2-92b5-00144feabdc0.html#axzz282XmCwao

[RandomGuy]

http://www.ft.com/intl/cms/s/0/b21f3840-072a-11e2-92b5-00144feabdc0.html#axzz282XmCwao

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?

[TeyshaBlue]

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.
•
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 constitutes 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 institutional 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.

[ElNono]

^ Thanks

[boutons_deux]

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.

[Winehole23]

Prime Minister Mario Monti tried to reassure rattled financial markets on Monday that Italy (http://www.reuters.com/places/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."

http://www.reuters.com/article/2012/12/10/us-italy-vote-idUSBRE8B907420121210

[SpursIndonesia]

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.

[Winehole23]

all animals are equal, but some are more equal than others . . .

[boutons_deux]

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/the-great-and-powerful-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/news/2012/10/19/argentine-ship-held-in-ghana-causing-political-fallout-in-argentina/#ixzz2Ek0EGRpR

[SpursIndonesia]

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.

[CosmicCowboy]

The USA monetizing debt isn't much different. That's what Greece would do if they still had their own currency.

[Winehole23]

Germany (http://www.reuters.com/places/germany) signaled on Wednesday it was ready to back plans to give the European Central Bank new powers to supervise banks (http://www.reuters.com/sectors/industries/overview?industryCode=128&lc=int_mb_1001) across the bloc, raising the prospect of a breakthrough on the European Union's most ambitious financial reform.

Last week France (http://www.reuters.com/places/france) and Germany (http://www.reuters.com/places/germany?lc=int_mb_1001) 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 (http://www.reuters.com/places/ireland) and Spain.


A single banking supervisor for the euro zone (http://www.reuters.com/subjects/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 document, obtained by Reuters, won broad backing at the meeting from the ECB and countries including Spain (http://www.reuters.com/places/spain) and France.

http://www.reuters.com/article/2012/12/12/us-eu-banking-idUSBRE8BB00820121212

[Drachen]

http://www.reuters.com/article/2012/12/12/us-eu-banking-idUSBRE8BB00820121212

watch markets take off.

[TDMVPDPOY]

all animals are equal, but some are more equal than others . . .

lol last month germany got rid of the beastality law

[Winehole23]

weakening the banks to stave off another credit crunch? ominous.


Global 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.


(http://www.bloomberg.com/photo/boe-governor-mervyn-king-/275863.html) 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.

http://www.bloomberg.com/news/2013-01-06/banks-win-watered-down-liquidity-rule-after-basel-group-deal.html

[boutons_deux]

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.

[Winehole23]

Comrade Barroso, the existential threat to the euro is mass unemployment
By Ambrose Evans-Pritchard (http://blogs.telegraph.co.uk/finance/author/ambroseevans-pritchard/) Economics (http://blogs.telegraph.co.uk/finance/category/economics/) Last updated: January 8th, 2013
523 Comments (http://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100022145/comrade-barroso-the-existential-threat-to-the-euro-is-mass-unemployment/#disqus_thread) Comment on this article (http://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100022145/comrade-barroso-the-existential-threat-to-the-euro-is-mass-unemployment/#dPostComment)

http://blogs.telegraph.co.uk/finance/files/2013/01/barroso_2347717b-460x288.jpg (http://blogs.telegraph.co.uk/finance/files/2013/01/barroso_2347717b.jpg)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 (http://www.telegraph.co.uk/finance/financialcrisis/9787018/Threat-to-the-euro-is-over-claims-EU-chief-Barroso.html)", 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 competitive 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://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100022145/comrade-barroso-the-existential-threat-to-the-euro-is-mass-unemployment/

[Winehole23]

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 institutions tumbled on Monday. Shares of Barclays (http://dealbook.on.nytimes.com/public/overview?symbol=BCS&inline=nyt-org) fell 4.9 percent, while shares in Deutsche Bank (http://dealbook.on.nytimes.com/public/overview?symbol=DB&inline=nyt-org) 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.

http://dealbook.nytimes.com/2013/03/18/cyprus-bailout-puts-new-pressure-on-european-banks/

[boutons_deux]

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.

[Winehole23]

the 99% will get pinched too. I suppose the higher rate on richies makes that alright by boutons.

[boutons_deux]

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.

[Winehole23]

http://www.ft.com/intl/cms/s/0/b501c302-8cea-11e2-aed2-00144feabdc0.html#axzz2NuMCG3jV

[Winehole23]

Talk about buying low and selling high. Gazprom, Russia’s state-owned oil company, reportedly offered to bail out (http://greece.greekreporter.com/2013/03/18/gazprom-offers-cyprus-restructuring-deal-to-avoid-eu-bailout/) Cyprus’s troubled financial sector in exchange for exploration rights to the country’s natural gas.


Cyprus is holding a bank holiday until Thursday as it works to finalize a deal with European leaders that would rescue the country, but the tentative agreement includes a controversial provision taxing bank depositors (http://qz.com/63923/cyprus-bailout-blunder/), one that even conservative German newspapers think is a bad idea (http://www.spiegel.de/international/europe/outcry-over-cyprus-bailout-taxing-bank-accounts-a-889511.html).


Hence Gazprom sweeping in with its “friendlier” rescue offer. It’s not clear if they wanted to take over the entire bailout, which would cost roughly €16 billion, or merely the depositor bail-in of €5.8 billion, but either way they’d be getting a pretty rock-solid deal: The gas reserves could be worth as much as €300 billion, though it would likely take about seven years of development (http://www.guardian.co.uk/world/2013/mar/18/doubts-cyprus-gas-bonanza)to start exporting gas and collecting revenue, not to mention fears of competing claims on the reserves from Turkey.


Cyprus rejected the offer, preferring to refine the fiscal program it is negotiating with the European Central Bank, European finance ministers, and the International Monetary Fund, which will likely include some concessions from the Russian government, which made an emergency loan to the country last year.

http://qz.com/64143/gazproms-audacious-offer-to-bail-out-cyprus-in-return-for-its-natural-gas/

[Winehole23]

Cyprus’s parliament rejected an unprecedented levy on bank deposits (http://topics.bloomberg.com/bank-deposits/), dealing a blow to European plans to force depositors to shoulder part of the country’s rescue in a standoff that risks renewed tumult in the euro area.

Protestors cheered outside the parliament in the Cypriot capital, Nicosia, as lawmakers voted 36 against to none in favor of the proposal. There were 19 abstentions. Hammered out by euro-area finance chiefs last weekend, the deal sought to raise 5.8 billion euros ($7.5 billion) by drawing funds from Cyprus bank accounts in return for 10 billion euros in external aid.

http://www.bloomberg.com/news/2013-03-19/cyprus-rejects-deposit-levy-in-blow-to-european-bailout-plan.html

[Winehole23]

“This is not the end of the process, but instead kicks off a further round of negotiation with Moscow and Berlin,” Alexander White, a European political analyst at JPMorgan Chase & Co. in London (http://topics.bloomberg.com/london/), said in a note. “The Cypriot authorities wanted to conduct the vote so that they could reaffirm the extent of their difficulties to the Europeans.”


Cypriot Finance Minister Michael Sarris missed the ballot as he flew to Moscow to hold talks about financial assistance.same

[Winehole23]

what's the difference between a tax on depositors and forced losses? anyone?


The deal, struck after hours of meetings here, was approved by the finance ministers from the euro zone, the 17 countries that use the common currency. It would drastically prune the size of Cyprus’s oversize banking sector, bloated by billions of dollars from Russia and elsewhere in the former Soviet Union.


The deal would scrap the highly controversial idea of a tax on bank deposits, although it would still require forced losses for depositors and bondholders.


“We have a deal,” President Nicos Anastasiades was quoted as saying by Greek media. “It is in the interests of the Cypriot people and the European Union.”


The head of the finance ministers, Jeroen Dijsselbloem of the Netherlands, said the agreement could “be implemented without delay” without a new vote by the Cypriot Parliament, which had rejected a deal last week. Lawmakers on Friday passed legislation that set the framework for the new action, he said.


“This has indeed been an arduous week for Cyprus,” he said.


He did not have exact timing for when Cyprus’s banks, which have been closed for more than a week, would reopen. Cyprus would receive the first payment of the bailout package worth 10 billion euros, or $13 billion, in early May.
Under the agreement, Laiki Bank, one of Cyprus’s largest, would be wound down and senior bondholders would take losses.


Depositors in the bank with accounts holding more than 100,000 euros would also be heavily penalized but the exact amount of those losses would need to be determined.


The plan to resolve Laiki Bank should allow the Bank of Cyprus, the country’s largest lender, to survive. But the Bank of Cyprus will take on some of Laiki’s liabilities in the form of emergency liquidity, which has been drip-fed to Laiki by the European Central Bank. That short-term financing, which the E.C.B. had threatened to cut off on Monday, is expected to continue.


Depositors in the Bank of Cyprus are likely to face forced losses rather than any form of tax. That plan, which set off outrage last week in Cyprus and as far away as Moscow, has now been dropped entirely.

http://www.nytimes.com/2013/03/25/business/global/cyprus-and-europe-officials-agree-on-outlines-of-a-bailout.html?pagewanted=all

[velik_m]

http://www.washingtonpost.com/blogs/wonkblog/wp/2013/03/24/move-over-cyprus-slovenia-is-the-new-tiny-country-you-should-worry-about/

[velik_m]

what's the difference between a tax on depositors and forced losses? anyone?

http://www.nytimes.com/2013/03/25/business/global/cyprus-and-europe-officials-agree-on-outlines-of-a-bailout.html?pagewanted=all

Less equal distribution of money loss? Eg. some lose all (those above 100k), some none (those bellow 100k)?

[Winehole23]

article was a bit sketchy on the details, but I also gathered non-insured deposits would take the hit in addition to bondholders and stockholders.

[Winehole23]

Krugman puts the finger on capital controls, or rather, the lack thereof


It’s hard to imagine now, but for more than three decades after World War II financial crises of the kind we’ve lately become so familiar with hardly ever happened (http://www.economics.harvard.edu/files/faculty/51_Banking_Crises.pdf). Since 1980, however, the roster has been impressive: Mexico, Brazil, Argentina and Chile in 1982. Sweden and Finland in 1991. Mexico again in 1995. Thailand, Malaysia, Indonesia and Korea in 1998. Argentina again in 2002. And, of course, the more recent run of disasters: Iceland, Ireland, Greece, Portugal, Spain, Italy, Cyprus.


What’s the common theme in these episodes? Conventional wisdom blames fiscal profligacy — but in this whole list, that story fits only one country, Greece. Runaway bankers are a better story; they played a role in a number of these crises, from Chile to Sweden to Cyprus. But the best predictor of crisis is large inflows of foreign money: in all but a couple of the cases I just mentioned, the foundation for crisis was laid by a rush of foreign investors into a country, followed by a sudden rush out.


I am, of course, not the first person to notice the correlation between the freeing up of global capital and the proliferation of financial crises; Harvard’s Dani Rodrik (http://www.hks.harvard.edu/fs/drodrik/Research%20papers/essay.PDF) began banging this drum back in the 1990s. Until recently, however, it was possible to argue that the crisis problem was restricted to poorer nations, that wealthy economies were somehow immune to being whipsawed by love-’em-and-leave-’em global investors. That was a comforting thought — but Europe’s travails demonstrate that it was wishful thinking.


And it’s not just Europe. In the last decade America, too, experienced a huge housing bubble fed by foreign money, followed by a nasty hangover after the bubble burst. The damage was mitigated by the fact that we borrowed in our own currency, but it’s still our worst crisis since the 1930s. http://www.nytimes.com/2013/03/25/opinion/krugman-hot-money-blues.html?hp&_r=1&

[Winehole23]

The euro fell on global markets after Jeroen Dijsselbloem, the Dutch chairman of the eurozone, announced that the heavy losses inflicted on depositors in Cyprus would be the template for future banking crises across Europe.http://www.telegraph.co.uk/finance/financialcrisis/9952979/Cyprus-bail-out-savers-will-be-raided-to-save-euro-in-future-crisis-says-eurozone-chief.html

[Winehole23]

According to the Telegraph (http://www.telegraph.co.uk/finance/debt-crisis-live/9951727/Cyprus-bailout-live.html) the Kremlin is considering freezing German assets in Russia as payback for the bailout deal.

Read more: http://www.digitaljournal.com/article/346440#ixzz2Oa7bwX7I

[TDMVPDPOY]

Read more: http://www.digitaljournal.com/article/346440#ixzz2Oa7bwX7I


without the bailout, cyprus would go broke and all those russian depositers would be pissed, the bailout didnt help either...

freezing german accounts dont do shit anyway

[Winehole23]

As in USA, the very richies in Cypriot banks are criminals, too.as usual, the reality is a bit more complicated:


Cyprus is often talked about as a money laundromat for ill-gotten Russian money, and as a tax shelter, but the more accurate description is probably “haven.” Some of Russia’s wealthiest tycoons (http://www.huffingtonpost.com/2013/03/21/russian-billionaires-cyprus_n_2927252.html?utm_hp_ref=business&__hstc=215845384.5154f3d6f7317e6fb38fd105fc1d3842. 1363623613556.1363623613556.1364314586413.2&__hssc=215845384.1.1364314586413) have money stashed in Cyprus, but so do people from the humble ranks of Russia’s many, many millionaires, not to mention droves of the merely upper-middle class. (The big dogs have their money all over the world—Isle of Man, Switzerland, London real estate, the Cayman Islands—but Cyprus is the starter haven, the gateway to the world of offshore accounts.) The reason, as former Russian finance minister Alexei Kudrin explained (http://tvrain.ru/articles/kudrin_ob_ofshorah_tsentrobanke_i_navalnom_otets_l otkovoj_o_tom_chto_proizoshlo-339314/?__hstc=215845384.5154f3d6f7317e6fb38fd105fc1d3842 .1363623613556.1363623613556.1364314586413.2&__hssc=215845384.1.1364314586413), is simple: Cyprus was once an English colony (http://en.wikipedia.org/wiki/Cyprus#British_Cyprus?__hstc=215845384.5154f3d6f73 17e6fb38fd105fc1d3842.1363623613556.1363623613556. 1364314586413.2&__hssc=215845384.1.1364314586413), which means that it has English law, which the Russians revere for its ability to fairly settle business disputes.1 (http://www.newrepublic.com/article/112762/cyprus-bailout-russia-could-buy-friend#footnote-1) Not only is Cyprus an Orthodox Christian country, with an alphabet from which Cyrillic was derived, it is also a place with rule of law and a functioning, independent court system. Russians do not have this at home, where money or property can be yours one day, and someone else’s the next, without any legal recourse. So yes, money gets laundered in Cyprus, but money is also kept safe there from other Russians, specifically those working in the Russian government.http://www.newrepublic.com/article/112762/cyprus-bailout-russia-could-buy-friend

[TDMVPDPOY]

french wankers earning 1m or more to be taxed at 75% lol socialism bitches

[velik_m]

as usual, the reality is a bit more complicated:

http://www.newrepublic.com/article/112762/cyprus-bailout-russia-could-buy-friend

Those poor russian "middle class" millionares, how will they feed their family, my heart bleeds for them...

They didn't have the money in cyprus because of court system or religion or their wine, they had it there, because it was a tax haven. Greedy people got screwed, cry me a river...

[Winehole23]

I'm not crying. depositing money in a bank isn't without risk. but characterizing everyone who lost money as a crook or a greedy person is simplistic.

[CosmicCowboy]

Setting this precedent in Cyprus could destroy the banks in Spain and Greece.

[boutons_deux]

french wankers earning 1m or more to be taxed at 75% lol socialism bitches

US wankers were taxed about that level until 1960, and at 90% in the 1940s. Capitalism, bitches

[CosmicCowboy]

US wankers were taxed about that level until 1960, and at 90% in the 1940s. Capitalism, bitches

Nobody paid those tax rates moron. The high rates were offset by generous deductions and credits.

[velik_m]

I'm not crying. depositing money in a bank isn't without risk. but characterizing everyone who lost money as a crook or a greedy person is simplistic.

I'm sorry, but anyone that moved his money to Cyprus did so because of greed.

[Winehole23]

ok

[TDMVPDPOY]

I'm sorry, but anyone that moved his money to Cyprus did so because of greed.

lol russians

[Th'Pusher]

Nobody paid those tax rates moron. The high rates were offset by generous deductions and credits.
While that's true, the paid much higher effective federal tax rates than they do now...in the 50% range.

[CosmicCowboy]

While that's true, the paid much higher effective federal tax rates than they do now...in the 50% range.

Only if they were stupid. There was a thriving tax shelter industry with multiple ways to avoid paying taxes.

[Th'Pusher]

Only if they were stupid. There was a thriving tax shelter industry with multiple ways to avoid paying taxes.

Wait, are you saying top earners paid a lower effective tax rate on average than they do today?

[Winehole23]

CC spouts off. Giving support for his own opinions he's not so great at.

Assuming his own premises are correct generally suffices. If you call him on it he'll usually just call you names.

[Winehole23]

Most posters here want to hear an echo. Failing to give one generally draws abuse.

[Th'Pusher]

^ He was right in that no one actually paid the top tax rate of 90%, but the tax code was still highly progressive, especially at the very top. CC's lack of intellectual curiosity is dumbfounding. Lazy mf.

[boutons_deux]

Only if they were stupid. There was a thriving tax shelter industry with multiple ways to avoid paying taxes.

We'll take your word for it, it's always good as gold as are your supporting references.

Maybe there was also a thriving civic sense among the 1%, a sense long departed (Repugs say its patriotic for every citizen to cheat on his taxes) that dissuaded them evading paying their fair share to pay down the WWII debt.

They were certainly profiting from the huge govt stimulus, aka Marshall Plan, to get Europe, AS MARKET FOR US CORPS, able to buy again. Marshall Plan was US taxpayer money to Europe that Europe then transferred back to US corporations as purchaes. That's the kind of wealth distribution right-wingers love, lining their own pockets.

[Winehole23]

http://www.nasdaq.com/article/eganjones-downgrades-uk-to-a-from-aa-cm231499#.UVSQBle2-7R

[Winehole23]

Portugal faces deep cuts to school and hospital funding after a court ruled it was unfair to cut perks enjoyed by protected civil servants.


The government must now scramble to find other areas to make savings as it tries to meet the terms of its international bailout programme.


The decision deepens the divide between a protected class of civil servants and other workers, whose lives have become far more precarious during the worst recession since the 1970s.

Although public sector pay has fallen faster than in the private sector during Portugal's economic crisis, state workers still earn on average double the wages of the private sector.

Meanwhile, all Portuguese have been hit since January by the largest tax hikes in living memory, and many economists believe more austerity measures will prolong and deepen the slump.




'This decision left me very worried. Civil servants benefit, but not the private sector. It's in the public sector where the government has to cut,' said Sonia Castro 39, an unemployed secretary.


Jose Manuel, a 56-year-old taxi driver from Lisbon, said the only outcome he sees is that 'our lives will get worse.'The European Commission and particularly Germany have urged Lisbon to waste no time in coming up with new savings in order to keep its bailout programme on track. http://www.dailymail.co.uk/news/article-2305876/Portugal-faces-HUGE-new-public-spending-cuts-Europe-pay-bailouts.html

[boutons_deux]

Troika Demands Another €6 Billion from Cyprus, Making “Rescue” Bigger Than GDP (http://www.nakedcapitalism.com/2013/04/troika-demands-another-e6-billion-from-cyprus-making-rescue-bigger-than-gdp.html)


Nothing like dramatic proof that austerity is a failure. Less than one month forcing Cyprus to take a “bailout” (which in reality was paid for entirely by the Cypriots (http://www.nakedcapitalism.com/2013/03/pop-quiz-how-big-is-the-bailout-of-cyprus.html)) under the threat of effectively throwing them out of the Eurozone, a leaked Debt Sustainability Report (http://blogs.r.ftdata.co.uk/brusselsblog/files/2013/04/DSA-9-April2013.pdf) shows that that the Troika will demand another €6 billion from Cyprus, increasing the total cost from €17 to €23 billion. From the Guardian (http://www.guardian.co.uk/business/2013/apr/11/cyprus-bailout-leaked-debt-analysis-bill):


Cypriot politicians have reacted with fury to news that the crisis-hit country will be forced to find an extra €6bn (£5bn) to contribute to its own bailout, much of which is expected to come from savers at its struggling banks.

A leaked draft of the updated rescue plan, which emerged late on Wednesday night, revealed that the total bill for the bailout has risen to €23bn, from an original estimate of €17bn, less than a month after the deal was agreed – and the entire extra cost will be imposed on Nicosia.


The worst is, as Pawel Morski demonstrated in an impressive shred of the Debt Sustainability Report is that it is ludicrously optimistic in terms of how the economy will fare with Germany having decided to kill its international banking sector (this while the EU is funding advertising for Bulgaria (https://twitter.com/mouts/status/321332704501194752/photo/1), which is low tax jurisdiction, the very sin Cyprus was guilty of):

1) the economic forecasts are worse than literally laughable (table) . The drops in consumption and investment look dementedly optimistic given the events of the past month. Exports to drop a mere 5% with the destruction of the banking industry and the introduction of capital controls. The wealth effect wiping deposit worth 60% of GDP will apparently barely register on consumption – the Troika must think the deposits are all Russian. Compare with Iceland (50% drop in investment) or Latvia (40%), the former boosted by devaluation the latter by an intact financial system. Public consumption drops 9% – Iceland held the line here, and we have bitter experience from Greece on how big fiscal multipliers are. These projections cross the line from wild optimism into contemptuously half-hearted fable. This table is a bare-faced lie.



http://www.nakedcapitalism.com/2013/04/troika-demands-another-e6-billion-from-cyprus-making-rescue-bigger-than-gdp.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+NakedCapitalism+%28naked+capi talism%29

See what happens to an economy, Cyprus, Greece, when it has no control over its own currency. this would happen to USA if tea-bagger, hyper-inflation-mongering "gold bugs" ever peg the US $ to a "metallic" base.

[Winehole23]

Last summer you could barely find a soul who was bullish on Europe beyond maybe Jim Rickards and a few other contrarian commentators, including myself.

I have always taken a contrary view toward the so-called European debt crisis.

The problems with the so-called PIIGS -- Portugal, Ireland, Italy, Greece, and Spain -- has been blown out of proportion. Out of these countries, Italy is the only real player (Spain is large, but not gigantic) on a global scale. Few realize that if you actually take the eurozone (http://www.minyanville.com/business-news/markets/articles/The-Bull-Market-No-One-Is/10/25/2013/id/52410#) as a whole, its deficit is half of that of the United States (about 3% of GDP as opposed to 6%) because of the strength of the northern nations.

In addition, Germany is forcing its model of austerity and productivity on the rest of Europe -- that is, a production model rather than one of consumption. Furthermore, as most of the PIIGS have seen domestic consumption decline, it has actually put many of their trade budgets into surplus.

Very quietly the euro broke its high for the year and hit a near two-year high of 1.37 against the US dollar. The funny thing is that no one is talking about this. In addition, Global X Funds (NYSARCA:GREK (http://finance.minyanville.com/minyanville?Page=QUOTE&Ticker=GREK)), the iShares (http://www.minyanville.com/business-news/markets/articles/The-Bull-Market-No-One-Is/10/25/2013/id/52410#) MSCI Italy Index (NYSEARCA:EWI (http://finance.minyanville.com/minyanville?Page=QUOTE&Ticker=EWI)), the Spanish iShares (NYSEARCH:EWP (http://finance.minyanville.com/minyanville?Page=QUOTE&Ticker=EWP)), and the iShares MSCI Austria Investable Mkt ETF (NYSEARCA:EWO (http://finance.minyanville.com/minyanville?Page=QUOTE&Ticker=EWO)) have all had huge rallies since the summer, way outperforming the S&P 500 Index (INDEXSP:.INX).

So why is no one talking about these rallies? I think since the debt crises picked up steam in 2011, it was easy for the media to point fingers at Europe as some sort of dysfunctional socialist mess with an unfixable political situation. However, through austerity and some cleaning of its government structures, Europe is now about to recover. Don't get me wrong -- there are still many problems, such as negative demographic trends and an overleveraged banking (http://www.minyanville.com/business-news/markets/articles/The-Bull-Market-No-One-Is/10/25/2013/id/52410#). However, in the short term, Europe should outperform.

I think painting Europe as a mess politically, when the US is just as big as a mess politically, was an easy way to divert attention from the 18-trillion-pound gorilla in the room that is the US national debt (which at some point has to be dealt with).

Most of all, what the European situation of the past decade has taught us is that if something becomes cheap enough, you should buy it. In June 2012, Greek stocks had a 10-year trailing P/E of two. That is not a typo -- two . The stocks were down over 95% from their lows, which is more than the Dow Jones (http://www.minyanville.com/business-news/markets/articles/The-Bull-Market-No-One-Is/10/25/2013/id/52410#) (INDEXDJX:.DJI (http://finance.minyanville.com/minyanville?Page=QUOTE&Ticker=%5EDJI)) fell during the 1929 to 1932 crash (89%).

At their lows last year, markets in Spain and Italy were about 70% off their highs. At its bottom, Exxon (NYSE:XOM (http://finance.minyanville.com/minyanville?Page=QUOTE&Ticker=XOM)) had a larger market cap than the Italian market. Italy is a rich country which has car makers like Porsche (OTCMKTS:POAHY (http://finance.minyanville.com/minyanville?Page=QUOTE&Ticker=POAHY)) and Fiat (OTCMKTS:FIATY (http://finance.minyanville.com/minyanville?Page=QUOTE&Ticker=FIATY)), retailers such as Gucci (OTCMKTS:GUCG (http://finance.minyanville.com/minyanville?Page=QUOTE&Ticker=GUCG)) and Dolce & Gabbana, plus many more industries.

So yes, European stocks (http://www.minyanville.com/business-news/markets/articles/The-Bull-Market-No-One-Is/10/25/2013/id/52410#) will continue their rallies and the euro will continue to hit new multiyear highs -- and virtually everyone will continue to not notice.

Read more: http://www.minyanville.com/business-news/markets/articles/The-Bull-Market-No-One-Is/10/25/2013/id/52410#ixzz2j2B9dfFo

[velik_m]

Read more: http://www.minyanville.com/business-news/markets/articles/The-Bull-Market-No-One-Is/10/25/2013/id/52410#ixzz2j2B9dfFo


Yeah everyone but Cyprus and Slovenia will be out of recession next year. Doesn't help us at all though, we're fucked and unfuckable as boutons would put it.

[boutons_deux]

Italy Breaks Your Hearthttp://www.nytimes.com/2013/10/27/opinion/sunday/bruni-italy-breaks-your-heart.html?src=me&ref=general

[Winehole23]

http://blogs.reuters.com/felix-salmon/2013/12/03/the-5-trillion-dilemma-facing-banking-regulators/

[boutons_deux]

http://blogs.reuters.com/felix-salmon/2013/12/03/the-5-trillion-dilemma-facing-banking-regulators/

absolutely no limit, regulations on $Ts of liquidity, aka free movement of capital, sloshing between continents is the root problem. a country's bond rate is high, money flows in, rate lowers, flow out, stressing, crashing the economy

[Winehole23]

To conclude, what we appear to have in play here is a game of Musical Chairs, but it may prove to be a game with remarkably high stakes. Once the music stops – or even the hint of the music stopping filters out across institutional investors – everyone will race for a chair (i.e. try to sell NTYM bonds). The absence of a GF at that point in time means there will be no buyer, at least not until yields spike sufficiently to warrant taking on the perceived risk, which will probably be quite high under those circumstances, as longer maturity bonds at low nominal yields have high durations – that is, bond prices react a lot to small changes in nominal yields.


The Draghi Doom Loops traced above are probably features of the ECB’s current QE and NDRP policy that either have not been recognized by investors, or have not been thought through by ECB, or both. Indeed, one could argue institutional investors are quite happy to have government guaranteed returns (that is, government subsidies in the form of capital gains for wealthy bondholders as the ECB bids up bond prices in its PSPP operations) from the GF/ ECB all the way out to September 2016 termination of QE. But to mash up metaphors, these institutional investors may be picking up pennies in front of a steamroller, and caught (unwittingly, and in part by the demands of the quarterly relative performance objectives that largely dictate their behavior) in a game of Musical Chairs that is likely to end sooner than they think – and end very badly, at that.

http://www.nakedcapitalism.com/2015/04/rob-parenteau-draghis-doom-loops-just-euthanasia-rentiers.html

[Winehole23]

But analysts are warning the market for the government debt is now becoming dangerously mispriced.


German bonds are vulnerable to a "potentially poisonous cocktail of resurgent inflation and wage increases," according to David Roberts of Kames Capital.
“If you look at bunds in anything other than the shortest possible timescale, the risk becomes very clear,” said Mr Roberts.


Strategists at Bank of America Merril Lynch also warn that a "swift rise in German bund yields" would burn many investors.


"We think bund yields look mispriced given the strong German real estate market, strong economy and jump in inflation expectations," said BoAML.

http://www.telegraph.co.uk/finance/economics/11532033/Germanys-benchmark-borrowing-costs-set-to-tumble-into-negative-territory.html

[Winehole23]

Draghi signals more QE:


Mario Draghi unveiled a revamp of quantitative easing and signaled officials might expand stimulus if the rout in financial markets continues to weigh on growth and inflation.

The European Central Bank president said in Frankfurt on Thursday that the Governing Council raised the share of bonds the ECB can buy to 33 percent of each issue from 25 percent, and that policy makers are ready to make more adjustments to ensure the full implementation of the 1.1 trillion-euro ($1.2 trillion) program. A weaker global outlook prompted an across-the-board reduction of the institution’s growth and consumer-price forecasts through 2017. The euro slid to a two-week low.


The reset of the ECB’s stimulus program after a six-month review gives officials more flexibility as they prepare to continue bond purchases until at least September 2016. Weaker commodity prices, slowing trade and volatility in global equities have fueled speculation that more stimulus is on the way.


“The issue limit by itself isn’t particularly significant, but the signal it sends is,” said James Nixon, head of forecasting for EMEA at Oxford Economics Ltd. in London. “It’s a clear signal to the market that they’re ready to do more. If the economy weakens further and inflation doesn’t come back as expected they’ll definitely extend the QE.”

http://www.bloomberg.com/news/articles/2015-09-03/draghi-unveils-revamped-qe-program-as-ecb-cuts-economic-outlook

[Winehole23]

the slow motion train wreck continues:


There's no longer any pretending that the issue is confined to smaller lenders, such as the four that Italy's government rescued (http://www.bloomberg.com/news/articles/2015-11-22/italy-approves-resolution-plans-for-four-troubled-lenders) last November. Complacency of that sort ended when the European Central Bank asked six banks for more information. One was Banca Monte dei Paschi di Siena, Italy's oldest and third-largest lender. Since the start of this year the bank's market value halved before recovering somewhat toward the end of last week.




If Monte dei Paschi is an extreme case, it isn't by much. Italy's ratio of nonperforming loans, at 17 percent, is more than four times (https://www.imf.org/external/pubs/ft/wp/2015/wp1524.pdf) the European average (and Europe's banks are in worse shape than America's).

http://www.bloombergview.com/articles/2016-01-25/a-fix-for-italy-s-banks-can-t-wait

[boutons_deux]

Wolf Richter: Moody’s Explains Why Junk Bonds Will Sink Stocks Further (http://www.nakedcapitalism.com/2016/01/wolf-richter-moodys-explains-why-junk-bonds-will-sink-stocks-further.html)


http://www.nakedcapitalism.com/2016/01/wolf-richter-moodys-explains-why-junk-bonds-will-sink-stocks-further.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+NakedCapitalism+%28naked+capi talism%29

[Winehole23]

how does Moody's take on US junk bonds relate to the EU?

[boutons_deux]

how does Moody's take on US junk bonds relate to the EU?

the economic system is planetary now, infections spread instantaneously. There several US signs of an impending recession

[Winehole23]

the economic system is planetary now, infections spread instantaneously.this is glib bullshit, not an explanation. it allows you to connect anything to anything, because, global connectivity.

it's also false that economic conditions spread instantaneously from one country to others. the Panic of 2008-9 didn't shake out all at once -- we're still feeling the effects nearly eight years on.

[RandomGuy]

how does Moody's take on US junk bonds relate to the EU?

The important thing (the hard thing) to keep in the back of one's head is that yield works opposite of demand.

The spread there indicates a collapse in demand for junk debt or a spike of demand for safe treasuries, with a spread like that it is reasonable to assume both are at play.

A flight to safety is underway. Effects on EU will vary according to which economy you are talking about, I would guess. German government will get to issue more cheaply... Greece will be taken out to the cleaners again. Just my thinking it through, no data to support that.

[RandomGuy]

The volatility in markets, meanwhile, is causing takeovers and issuance of shares and debt to atrophy. There is supposed to be a bright side to the turmoil, since volatility typically boosts trading revenues. But many investment banks have curtailed their trading operations under regulatory pressure. That has left them ill placed to capitalise on the turmoil. Banks have been beefing up wealth-management arms even as they curb trading, in the hope they will provide steadier profits at less risk. But falling markets also harm these, since costs are fixed but revenues come in the form of a percentage of the shrinking value of assets under management.

http://www.economist.com/news/finance-and-economics/21688937-good-times-are-ending-they-had-really-begun-not-yet-out-woods

Bit on the banks. The flight to safety has made it a bit harder to finance things.

[Winehole23]

flight to safety?

a BlackRock poll last month suggests institutional investors are lightening up on stocks and bonds, and plowing their money into illiquid assets instead:



With reductions in equities and bonds, what are they going to buy?


“Long-dated illiquid strategies,” that’s where asset allocations are heading. In order of magnitude of the shift: private credit (“over half” plan to increase their portfolios), real assets (53% increase v. 4% decrease), real estate (47% increase v. 9% decrease), and private equity (39% increase v. 9% decrease).


The report offered two reasons why investors are fleeing into illiquid assets: to earn the higher return premia that illiquid assets offer, and most prominently, to escape the volatility of stocks and bonds.


Illiquid assets — because they aren’t regularly traded, there is no pricing data — have an advantage over stocks and bonds for institutional investors in these trying times: their losses don’t have to be booked every time a statement goes out. Losses aren’t known, and certainly aren’t disclosed, until years down the road.


If the stock and bond markets crash, if junk bonds completely collapse, so be it. The values of these illiquid assets will remain stable, and the pension fund managers can sleep at night. This is not a strategy to reduce risk — some of these illiquid assets are very risky. It’s a strategy to reduce the requirement to book losses when asset prices head south.

http://wolfstreet.com/2016/01/25/this-stock-market-is-really-sick-and-big-institutional-investors-are-bailing-out/

[Winehole23]

Varoufakis with a very clear synopsis of how the EU monetary union essentially caused the debt crisis:

https://varoufakis.files.wordpress.com/2016/06/syd-u-lecture-creditors-uninterested-in-getting-their-money-back-the-eurozone-paradox.pdf

[CosmicCowboy]

Varoufakis with a very clear synopsis of how the EU monetary union essentially caused the debt crisis:

https://varoufakis.files.wordpress.com/2016/06/syd-u-lecture-creditors-uninterested-in-getting-their-money-back-the-eurozone-paradox.pdf

Good read. Thanks!

[boutons_deux]

Good read. Thanks!

yep, lots of economics, and politics, in plain English by someone with ESL.

I've read before that "bailing out Greece" was really bailing out BigFinance. And Goldman Sacks showed Greece how to defraud lenders and get lower rates.

[Winehole23]

Deutche Bank's chief economist calls for a bail out -- currently prohibited by EU rules -- for Italian banks:


David Folkerts-Landau, chief economist at Deutsche Bank, says “Europe is Seriously Ill”, and EU banks need a €150 billion bailout program.

Via translation from Die Walt: German Bank Chief Economist Calls for €150 Billion Bank Bailout (https://translate.google.com/translate?hl=en&sl=auto&tl=en&u=http%3A%2F%2Fwww.welt.de%2Ffinanzen%2Farticle156 924408%2FDeutsche-Bank-Chefoekonom-fordert-150-Milliarden-Euro.html).


Europe risks a new banking crisis says David Folkerts-Landau, chief economist at Deutsche Bank. He suggests a huge EU bailout program. Private creditors should not participate.


Rules prohibit state aid. However, bail-ins are not politically feasible because it would take out a lot of private savers in Italy, and possibly even trigger an onslaught of creditors and customers of the banks. “Strictly to keep to the rules would cause greater harm than they suspend them” said Folkerts-Landau.


The decline in bank stocks is only the symptom of a much larger problem, namely a fatal combination of low growth, high debt and a proximity to dangerous deflation. “Europe is seriously ill and needs to address very quickly the existing problems, or face an accident,” said the chief economist.


https://mishtalk.com/2016/07/10/deutsche-bank-chief-economist-europe-is-seriously-ill-banks-need-e150-billion-bailout/

[boutons_deux]

"currently prohibited by EU rules"

:lol

When EU bailed out Greece, Greece got almost nothing, while Deutsche Bank and other big banks that over-lent to Greece (behind the fraud advised to Greece by Goldman Sacks) got nearly all of it.

[Winehole23]

that was a bail in: Greek citizens got squeezed, the EU paid nothing, reckless lenders were made whole.

[Winehole23]

the great boutons is quick to mock, slow to grasp details

[Winehole23]

attempts to allay fear and anxiety often have the opposite effect:


Christine Lagarde, managing director of the International Monetary Fund which has ranked Deutsche Bank as the world’s riskiest bank, said state help was not needed. Speaking to CNBC, Lagarde said: “I don’t see that particular institution as ... at a stage where state intervention is absolutely called for at the moment. I would hope that the right measures are taken internally so that the whole financial sector in Germany (https://www.theguardian.com/world/germany) is solid and that systemic players [are] strengthened.”https://www.theguardian.com/business/2016/sep/28/deutsche-bank-john-cryan-denies-asking-german-government-help

[boutons_deux]

Deutsche Bank in BIG trouble

Commerz Bank laying off 10K

[Winehole23]

no vote rocks Italy, imperils bank bailout:


The largest 14 Italian banks – not counting the myriad of smaller banks – are sitting on €286 billion of “non-performing exposure,” as the ECB calls it. These loans, debt securities, and off-balance sheet items won’t be repaid. Banks still carry this toxic waste as assets on their books, and writing off this toxic waste and cleaning up their books would crush the banks’ capital officially – though in reality, it got crushed long ago – and take down the banks.

So banks have to find new capital to clean up the horrendous mess, but new capital has become scarce, given the horrendous mess.


The most urgent case is Italy’s third largest bank, Monte dei Paschi. It has already raised new capital twice in recent years, only to re-collapse. The third time is not going to be the charm, investors have decided. They’ve lost their appetite for losing even more money on this morass.

http://wolfstreet.com/2016/12/04/italians-vote-no-renzi-to-resign-banking-crisis-now-looking-for-taxpayers

[boutons_deux]

of course, the mgmt of Monte de Paschi have made out like wolves.

BigFinance is a fucking corrupt den of thieves, everywhere.

"The Best Way To Rob A Bank Is To Own One" -- Bill Black

and Trash/Repugs will roll back, kill CFPB, unleash pay day lenders, reduce capital reserves, ignore used-car sub-prime dealer/lenders, to allow BigFinance to fleece the citizen sheep even more

something like 6M car owners, a lot of the sub-prime borrowers/dealer-financed, are behind 90 days or more.

[Winehole23]

Varoufakis:


What we’re forgetting is that in Europe we have created a very interesting beast. A very large economy, featuring a supposedly independent central bank, but in reality we have created an economy where there is a central bank without a government to have its back, and governments without a central bank.”

“We ended up with a massive crisis without a central bank where we could park our bad assets, and the very quaint illusion that a banking crisis, yielding gigantic losses, could be overcome through austerity.

https://yanisvaroufakis.eu/2016/12/07/reflections-on-the-natural-causes-of-global-financial-uncertainty-amsterdam-4th-dec-2016/

[Winehole23]

“Allow me to put forward a working hypothesis,” he said, explaining that it has to do with the way in which surpluses and deficits are recycled.


“Between 1950 and 1971 it was a very boring time for bankers but an interesting time for humanity, the golden era for capitalism.


“The US took parts of its own surplus and recycled it in Europe and Japan.


“At the end of the US surplus, when it shifted to a deficit position, they blew up the system they had created because they realised it wasn’t working, unlike the Europeans, who will do anything to hang on to an unsustainable system.


“The US did something quite remarkable – they turned their deficit into a source of strength. They entered a deficit position but didn’t tighten belts; they hit the accelerator and increased their deficit. But that deficit was remarkably important for the rest of the global economy. It operated like a vacuum cleaner, sucking into US territory the net exports of Germany, Netherlands, Japan and later China.


“American policy ensured that the rest of the world not only sent their net exports to America but sent 70% of their excess money to Wall Street. They recycled other people’s capital. From 1950 to 2008 Europe did not have to perform macroeconomic stabilization, Washington was doing it for us.


“But Europeans never understood that we were lacking both the intellectual and economic expertise and the political mechanism by which to do that for ourselves. The tragedy of 2008 is that the breakdown led to the end of America’s capacity to recycle global surpluses.

[Winehole23]

“Great incongruity between very high savings and very low investment, creates deflationary forces, and deflationary forces breed political monsters today, just like it did in the period between 1930-1933.


“Our perfect storm is due to a political failure. It is the establishment politicians’ fault. It’s our fault, for not forcing politics to shape up.”

[boutons_deux]

"It’s our fault, for not forcing politics to shape up."

How naive. Check the Princeton study on oligarchy.

The US oligarchy doesn't GAF about the us of "our fault".

The entire political class has been corrupted by money, with much tranks the VRWC SCOTUS' "money is speech/corporations are people" bullshit, that "us" simply can't outbid.

[Winehole23]

AEP: the IMF bollixed it up



The International Monetary Fund’s top staff misled their own board, made a series of calamitous misjudgments in Greece, became euphoric cheerleaders for the euro project, ignored warning signs of impending crisis, and collectively failed to grasp an elemental concept of currency theory.


This is the lacerating verdict of the IMF’s top watchdog on the fund’s tangled political role in the eurozone debt crisis, the most damaging episode in the history of the Bretton Woods institutions.

It describes a “culture of complacency”, prone to “superficial and mechanistic” analysis, and traces a shocking breakdown in the governance of the IMF, leaving it unclear who is ultimately in charge of this extremely powerful organisation.



https://www.telegraph.co.uk/business/2016/07/28/imf-admits-disastrous-love-affair-with-euro-apologises-for-the-i/

[Winehole23]

The report said the whole approach to the eurozone was characterised by “groupthink” and intellectual capture. They had no fall-back plans on how to tackle a systemic crisis in the eurozone – or how to deal with the politics of a multinational currency union – because they had ruled out any possibility that it could happen.

[RandomGuy]

Yikes.

[Winehole23]

Italy and EU standing off over Italy's budget deficit:


The government has set a public deficit target for next year of 2.4% of GDP, three times higher than the previous government’s pledge. It’s a big ask for a country that already boasts a debt-to-GDP ratio of 131%, the second highest in Europe behind Greece. To justify its ambitious “anti-poverty” spending plans, proposed tax cuts, and pension reforms, the government claims that Italy’s economic growth will outperform EU forecasts.


Brussels is having none of it. EU Commission President Jean Claude Juncker urged Italy’s Economy Minister Giovanni Tria to desist. “After having really been able to cope with the Greek crisis, we’ll end up in the same crisis in Italy,” he said (https://www.reuters.com/article/italy-budget-juncker/corrected-eus-juncker-warns-italy-not-to-go-ahead-with-proposed-2019-budget-idUSB5N1O400K). “One such crisis has been enough… If Italy wants further special treatment, that would mean the end of the euro. So you have to be very strict.”
https://wolfstreet.com/2018/10/07/italy-debt-crisis-doom-loop-government-bonds-banks-showdown-with-eu/

[Winehole23]

It is this outsized exposure of Italian banks to Italian debt that makes any sudden deterioration in the value of Italian bonds so dangerous. The banking sector hold around 18% of all of the nation’s public debt. It’s the reason why, as investors abandon Italian bonds en masse, the shares of Italy’s banks are also nose-diving, with the stock of recently rescued Monte dei Paschi di Siena leading the way down having lost more than half its value year-to-date.


The chart below shows how the FTSE Italy Banks Index has plunged 29% since early May (black line), while the Italian government 10-year yield (red line) has nearly doubled from 1.8% to 3.4%, practically in tandem:


https://www.nakedcapitalism.com/wp-content/uploads/2018/10/Italy-bank-shares-v-10-yr-yield-2018-10-05.png


In other words, the dreaded “Doom Loop”– the vicious cycle between over-indebted governments in the Eurozone and the weak banks that funded them, which the ECB’s QE program was supposed to put an end to — is back in full flow.

[RandomGuy]

[inverted yield curve for Italian banks]

Yikes.

[Winehole23]

4th largest Eurozone economy

[boutons_deux]

4th largest Eurozone economy

and Pootin's Russia is smaller

[Winehole23]

and Pootin's Russia is smalleryeah, the Russian menace is overhyped

[Winehole23]

what could go wrong?


The European Union executive would have to reject Italy's draft budget for 2019 in its current form, Budget Commissioner Günther Oettinger told DER SPIEGEL on Wednesday.


"The assumption has been confirmed that Italy's draft budget for 2019 is not consistent with existing EU obligations," Oettinger said. European Commissioner for Economic and Financial Affairs Pierre Moscovici is expected to lead talks on the issue in Rome this week. The commission is expected to send a formal letter with its assessment to the Italian government within the next two weeks.
http://www.spiegel.de/international/germany/european-commission-to-reject-italy-draft-budget-a-1233781.html

[boutons_deux]

that was a bail in: Greek citizens got squeezed, the EU paid nothing, reckless lenders were made whole.

:lol the greeks didnt have enough bank deposits to bail in

[Winehole23]

:lol the greeks didnt have enough bank deposits to bail inshockingly ignorant. the EU has claimed the future income of Greece as far as the eye can see.

pensions to decimate, public properties like airports, national parks and seaports to privatize, and money to be squeezed off in perpetually austerian budgets to service the debt to Germany and northern Europe.

[Winehole23]

the European Commission, an unelected body, has just told Italy's government it must change its budget.


the country now has three weeks to submit a new, draft budget to Brussels.https://www.bbc.com/news/world-europe-45954022

[Winehole23]

Salvini predictably gives Brussels the finger:


Matteo Salvini said on Thursday that the Italian government will not change “a comma” of its budget plan for next year, even though it was rejected by the European Commission.
https://www.politico.eu/article/matteo-salvini-to-brussels-we-are-not-changing-a-comma-of-the-budget/

[boutons_deux]

shockingly ignorant. the EU has claimed the future income of Greece as far as the eye can see.

pensions to decimate, public properties like airports, national parks and seaports to privatize, and money to be squeezed off in perpetually austerian budgets to service the debt to Germany and northern Europe.

To pay off the predatory, vulture Capitalists who knew they were "buying", "asset stripping" Greece by loaning Greece $Bs sure to default, just like predatory Capitalists did with "liar loans", piggy-backed home equity loans during the Capitalist Tool Greenspan's 2000s housing bubble.

[Winehole23]

so much for your contention that Greece was too poor to bail in.

[boutons_deux]

so much for your contention that Greece was too poor to bail in.

so poor and sub-standard, Greece should never have been admitted to EU, as many said when it happened

[Winehole23]

yeah, well now they're a debt colony

[boutons_deux]

yeah, well now they're a debt colony

enslaved to BigFinance like 10Ms in USA

[Winehole23]

EU threatens fines:


Italy, which already has the second highest debt in Europe at 133 percent of GDP, wants to borrow and spend more to deliver on election promises, breaking EU rules that say debt has to fall every year until it is below 60 percent.

The Commission, which is the guardian of EU rules, said last month Italy was in breach of EU rules and should change the draft budget or face a disciplinary procedure that could end up in fines.
https://www.reuters.com/article/us-eurozone-italy-idUSKBN1O30AO

[Winehole23]

Salvini backed down:

https://www.breakingviews.com/considered-view/italy-saves-eu-budget-battle-for-another-day/

[Winehole23]

https://pbs.twimg.com/media/GaKTbeoW0AAUsEM?format=jpg&name=900x900

[Winehole23]

Austerity has really paid off


https://pbs.twimg.com/media/GaKWiE5WoAAxPD5?format=jpg&name=900x900