We shall never know the precise moment that it happened but somewhere around World War I would be about right. Everything had been crawling in this direction for a while and then the silent sparks flew and the connection was made and will never be severed again. The financial world had become integrated so that what happens one place in the world affects the rest of the world and the improvements in technology that have happened since this time has only moved the financial institutions in the world ever closer. News is almost immediate and the communication of it is instantaneous and to hold any other view borders on the edge of holding conversations with the Easter Bunny. Consequently when I hear some of the puffy eyed on TV claiming that America has decoupled from the goings on in Europe I become amused and wonder where this poor fellow has been hiding out on the planet. I always think of East Borneo but one is never sure. There is NO decoupling and there has not been any in ninety years and that is the truth of it. There are variations and it is all a matter of focus really and the American equity market is notoriously myopic and if the immediate news of some event in Europe is ignored it will only be for a moment as the effects of each and every event careen around the planet in a variety of ways reminiscent of some out of control eight ball on the pool table.

China is slowing down, part of it is just cyclical but it is slowing down and I expect anemic growth in the third and fourth quarters of this year. Europe is a mess, both politically and economically, and the entire Continent is in recession with the exception of Germany which is about to join its brethren in the outhouse. To think that this will not affect America is a mad dash to see Cinderella and her Godmother so please allow me to drag you back from this excursion. Now look, I do not run around calling for Armageddon and “end of the world” scenarios. Yes, it is true, some brandish this sword but I do not. I honestly think we are in for some tough times over the next two years and that the world will be in a very unpleasant recession mostly generated out of Europe as they have played the Great Game quite badly but, as I told one Italian newspaper yesterday, we are not going to enter Dante’s Inferno either though we may hang around the gates for a while.

The Days of Wine and Roses

With the dismissal of Mr. Sarkozy and his regime by the French people the politics in Europe took a decided turn into a more combative sport. The poor and wounded nations beg, Ms. Lagarde, ever a femme de France, pleads for Eurobonds, more ECB bond buying and further bailouts for the troubled banks all across the Continent which the countries of the European Union could not afford even if they wanted to and which Germany, in any event, will block so that their coming recession will not be even worse than what is likely to be forthcoming. When America ran into the wall in 2008/2009 the country, with assets of 125% of all of our major banks, strained and labored behind the plow to bail them out but it got done and, regardless of the downgrades by Moodys yesterday, they are now in much better shape than they were during the financial crisis and light years ahead of the large European banks where we find Credit Agricole levered sixty-six to one and Deutsche Bank levered sixty-four to one. I fear we are about to see a repeat of what happened in Iceland and in Ireland where the banks overcame their sovereign nations. The problem is that the European banks are three hundred percent (300%) larger than the assets of the nations in the EU-17 and if one, just one, of the big international European banks roll under the skids of the bankruptcy bus then “woe is me” won’t cover it. The days of wine and roses have ended now in Europe and I fear the porridge will be cold and deficient in nutrients. Now some of you may not agree with my synopsis but I quote the famed economist Miss Holly Golightly:

“Tough beans buddy, 'cause that's the way it's gonna be.”

-Breakfast at Tiffany’s

The Continuing Antics

From one perspective, and one that I choose to take with some frequency, Europe is rather amusing. Many of the impoverished or those who enjoy wearing their tailcoats in Brussels rush about like those filling the stateroom in some Marx Brothers movie. Not enough room of course and pleas and commands to move over but all to no avail. The only person that matters is the rather austere lady in the corner that instinctively frowns at all who comes near and so controls the space that is left for everyone else. Those without present their cases, unfold schematics of grand plans, promise more unbelievable cures than any Medicine Man could ever dream up and describe magical castles floating in the air all in an attempt to get the one lady that is still clutching her purse to open it and allow everyone to dine at the Four Seasons. She has done it before, she might do it again but she is mindful of what is in her purse and knows that the bankroll has slimmed by its former use. Besides she has children to feed at home and they will come first; make no mistake about this because any other such notion that you may have will lead you down Alice’s rabbit hole.

“You're willing to pay him a thousand dollars a night just for singing? Why, you can get a phonograph record of Minnie the Moocher for 75 cents. And for a buck and a quarter, you can get Minnie.”

-The Marx Brothers, A Night at the Opera

Waiting For Godot

One truism about life is that everything is fine right up to the moment when it is not. We do not need a “Lehman Moment” to get to the “when it is not” moment. My good friend, the noted economist Paul McCulley, is the grand touter of the “Minsky Moment” and I must ask him soon to give us all a working definition of a “Lehman Moment” which none of us will understand but it is worth a shot. Now think back about the “moments” that we have had; Greece blowing up at the Parthenon, Ireland finding her bags of gold had turned to lead, Portugal running out of empanadas and now Spain fighting windmills of her own design as the Prime Minister decrees the country’s “walk of shame” a “great victory for Europe.” With this kind of reasoning it is no wonder, no wonder at all, why Europe is in such trouble. The inmates have taken over the asylum and Nurse Ratchet has fled. So you do not have to wait for Godot so he can give you a working definition of “folly;” Europe is providing the answer day by day.

In the next days Greece will present her magic tricks at court and while the Dukes and Barons cheer in the wings it will be up to the Red Queen, this would be the bearer of the Holstein emblem, to decide if the tricks performed are worth the cost. There is a very good chance of the hand wave of dismissal here and then the theatrical event of the season, “Off with their Heads,” will begin. Then the savant of Madrid will be allowed in to show his wares claiming they are all of silk but coarse wool is closer to the truth. The money, if it comes, will be provided by the EFSF by the way because the ESM is not yet in existence. Then the plan is to transfer the loan to the ESM which will be senior to the holders of the Spanish sovereign debt. So this morning you must rush out and by the debt of Spain. You love to be subjugated; you delight in the masochism of the whip. Losing money is what you live for and why you breathe. Oh no; this is not you? Well then; maybe better not.

You can't teach an old dog new tricks, but you can't teach a stupid dog old tricks either.

and.....

http://globaleconomicanalysis.blogspot.com/2012/06/german-supreme-court-delays-esm-another.html

German Supreme Court Delays ESM; Another Setback for Merkel; Creeping Bailouts; Reflections on German Expectations

Reader "Bert" from Germany writes ...

Hello Mish

The German Supreme Court asked the president to delay signing the ESM. This is unprecedented. The court needs more time to study the proposal, they say.

So no ESM yet! I was waiting and hoping for this kind of action.

Kind regards and please keep going on with your very interesting mail service, I never skip a day.

Bert

Another Setback for Merkel

Bert sent this link from Faz: Gauck unterzeichnet Fiskalpakt vorerst nicht.

The Google translation was so bad I won't even post it.

Instead, please consider the Spiegel Online English version reportGermany Faces Delay in Ratifying Euro Rescue Fund

Germany's highest court asked the country's president on Thursday to delay ratification of the permanent euro bailout fund, the European Stability Mechanism, and the fiscal pact into law next week. If he complies, the move could delay the implementation of the ESM by several weeks in the latest setback for Chancellor Angela Merkel.

The Constitutional Court, anticipating challenges to the legislation, wanted more time to review documents. German President Joachim Gauck, hardly three months in office, was already faced with an important decision. If he complied with the request from Karlsruhe, at least one piece of legislation proposed by Chancellor Merkel and her coalition government -- the permanent bailout fund known as the European Stability Mechanism (ESM) -- would undoubtedly be delayed. The ESM was originally scheduled to come into force on July 1, 2012. Gauck doesn't want to sign the two laws, at least for now, when they are presented to the two houses of the German legislature -- the federal parliament, the Bundestag, and the upper legislative chamber, the Bundesrat -- for ratification next week. However, laws in Germany are only considered ratified, and therefore binding under international law, when signed by the president. Now it could take another two or three weeks before the court rules on possible emergency appeals.

Declining a request by the Constitutional Court judges, especially on such a delicate matter, would have created a massive conflict and set off a debate on the question of whether a German president in cases of doubt has the power to ignore Karlsruhe. It was a conflict Gauck was anxious to avoid. According to a statement by the president's office, Gauck intended to "comply with the request, in keeping with standard government practice among the constitutional bodies, and out of respect for the Federal Constitutional Court, as soon as the Bundestag and the Bundesrat have adopted the corresponding treaty laws."

Emergency Appeals by the Left Party and a Former Minister

For now, Germany's highest court has the final say. The Left Party and former Justice Minister Herta Däubler-Gmelin, a member of the center-left Social Democratic Party (SPD), have announced their intention to file suits against the ESM and the fiscal pact. They are expected to file emergency appeals against the measures.

Almost no one in Merkel's coalition government of the center-right Christian Democratic Union (CDU) and the pro-business Free Democratic Party (FDP) believes that Karlsruhe will actually stop the fiscal pact and the ESM. And neither does the opposition, which doesn't want to imagine the prospect of both projects failing on Germany's account. "The house is on fire," says a leading member of the Green Party opposition, in a reference to Spain. He is expressing the dilemma that the Constitutional Court also faces as it considers the possibility of legal challenges, namely that the judges are also keeping an eye on the nervous markets.

Reflections on German Expectations

The article notes that "almost no one" believes the supreme court will stop the ESM. However, note that Merkel and others were shocked by this delay in the first place.

Having followed such stories for over a year, the compromise position would be for the court to allow the ESM with various warnings.

And why shouldn't the court warn? More specifically, why shouldn't the court reject the ESM outright?

"Mistake to Pursue United States of Europe"

Flashback December 28, 2011: "It's a Mistake To Pursue a United States of Europe" says German Supreme Court Justice in Spiegel Interview ; Interpretation of Interview from Saxo Bank Chief Economist Flashback September 26, 2011: Germany's Top Judge Throws Major Monkey Wrench Into Leveraged EFSF Machinery, Demands New Constitution and Popular Referendum for Further Powers

Please read those two articles carefully.

Does Merkel Care About Constitutional Issues?

It is not at all uncommon for politicians (in this case Merkel) to simply not give a damn about constitutional issues.

Moreover, and although I cannot speak for Germany, perhaps it is shocking for the courts to intervene this way. Certainly in the US we do not see laws delayed before they are signed by the president.

Creeping Bailouts

Although Merkel has stayed true to form against Eurobonds and other blatantly obvious transfer mechanisms, I believe the real reason is her fear the German supreme court might demand a referendum.

Even if the court allows the ESM, this is a further warning to Merkel to not stray too far.

Every step of the way, Merkel has caved in to demand for higher bailouts, as well as bailouts upon bailouts, all of which increase German taxpayer risk, as does ever-escalating target2 balances.For further discussion, please see Discussion of Target2 and the ELA (Emergency Liquidity Assistance) program; Reader From Europe Asks "Can You Please Explain Target2?"

Has the Supreme Court Finally Had Enough?

With creeping bailouts caused by cave-in after cave-in by Merkel, and with Target2 balances skyrocketing out of sight, perhaps the German supreme court has finally had enough.

and...

http://globaleconomicanalysis.blogspot.com/2012/06/lagarde-shows-true-colors.html

Lagarde Shows True Colors

The Financial Times says IMF challenges Berlin’s crisis response

The International Monetary Fund on Thursday challenged Berlin’s game plan for pulling the eurozone out of its crisis by advocating a series of short-term fixes that the German government has resisted.

Christine Lagarde, the IMF chief, said eurozone leaders needed to prevent the single currency from deteriorating further by considering the resumption of bond buying by the European Central Bank and pumping bailout money directly into teetering banks.

While Germany has resisted such measures, Ms Lagarde said the IMF was concerned about “additional tension and acute stress” in both the European banking sector and peripheral governments. She warned that the long-term measures being considered by EU leaders ahead of a summit next week were not enough.

“The IMF believes that a determined and forceful move towards complete European monetary union should be reaffirmed in order to restore faith in the system because we see at the moment, the viability of the European monetary system is questioned,” Ms Lagarde said.

In addition to the short-term measures, Ms Lagarde also called on the eurozone to complete a fiscal and banking union in the longer-term, structures that she said should include a eurozone-wide bank deposit guarantee scheme and “gradual but limited” mutualisation of eurozone sovereign debt – both measures also resisted by Berlin.

Ms Lagarde said that while the IMF consulted several EU institutions in its three-week evaluation, it did not run its recommendations by Berlin.

“We did not go into each and every member state’s political position,” she said.

True Colours

In case you were looking for Lararde's true colours (colors if you prefer), here they are.

There certainly was no need for Lagarde to consult Berlin. After all, France's position is all that matters.

Mike "Mish" Shedlock

and......

http://ransquawk.com/headlines/230820

German chancellor Merkel lawmaker Flosbach reject IMF call for direct ESM bank aid

and......

http://online.wsj.com/article/SB10001424052702304441404577480711540533038.html?mod=djemEurAnalysis_t

European officials are becoming more and more concerned about the way their bailouts kick private investors down in the creditor pecking order. As official creditors move in, holders of government bonds get pushed to the back of the line in any future debt restructuring.

That seems to have been one factor scaring the dwindling band of investors in Spanish government bonds since Spain announced its intention this month to seek euro-zone aid of as much as €100 billion ($127 billion) for its struggling banks. As a result, it was on the agenda of euro-zone finance ministers meeting in Luxembourg on Thursday night.

Defining the relationship between public and private creditors has dogged the euro zone's crisis-management efforts since October 2010. That was when German Chancellor Angela Merkel and then French President Nicolas Sarkozy met in the French resort of Deauville and agreed to the creation of a euro-zone permanent bailout fund. They concluded that future bailouts of euro-zone governments would require government bondholders to take losses.

This agreement is viewed by some senior European officials as the turning point of the crisis. After it, the borrowing costs of the more-vulnerable countries in the euro zone began to rise.

Panicked by the market reaction, Berlin tried to reassure investors by saying that only government bonds issued after 2013 would have to be written down. The announcement made matters worse. One senior international official describes the suggestion as turning the clock back on the history of capitalism: In bankruptcies, new lenders get preferred treatment to the old, not the other way round.

This "clarification" was later reversed. The new bailout fund wouldn't make private-sector involvement an inevitable condition of receiving a bailout, and neither would new debt be treated worse than old debt.

However, the new fund, the European Stability Mechanism, would still be a preferred creditor—ranking just below the International Monetary Fund, traditionally the top dog, and above private bondholders. That distinguished it from the European Financial Stability Facility, the temporary bailout fund created hurriedly in May 2010, which claims no preferred status.

Now the ESM's status is up for debate. Changing it may not be easy. Its senior ranking is mentioned in the treaty document that created it. Officials said a possible loophole is that that claim is in the preamble to the treaty, not the treaty proper. Some European Union lawyers say that means it is more of a leaders' wish than a binding commitment and suggest it can be subsequently amended.

Losing explicit senior status might create political complications. The Finnish Parliament ratified the ESM Thursday, and the preferred-creditor status "was one of the main reasons it was approved," a Finnish official said.

If the ESM didn't have this status, the Finnish government would have to ask for collateral for its share of any loans made by the ESM—as it did in Greece's second bailout.

In any case, not everybody is convinced the explicit seniority of the ESM matters much.

"The differentiation of EFSF and ESM status is irrelevant. In all cases, euro-zone loans will be protected from write-downs in any restructuring," said Adam Lerrick, a U.S. expert in sovereign debt restructurings.

Analysts point to what happened in the Greek restructuring in March. There was no explicit prior claim that official lenders would be treated better than private bondholders—but they were. Governments agreed to lighten the terms on their loans, but they weren't forced into the deep write-downs the private bondholders suffered.

This is the usual pattern in sovereign restructurings, Mr. Lerrick said. Initially, the official sector offers debt relief to struggling governments in the form of longer and longer payback periods at lower and lower interest rates. Only when a country's debt problems get really severe or creditor governments want to make a strong political gesture does the official sector take explicit write-downs, as they did for Poland in 1991 and for Iraq after Saddam Hussein was ousted.

In Greece, the European Central Bank was also treated as a preferred creditor. It was a holder of Greek bonds, bought at a discount to full value in the secondary market as part of its Securities Markets Program, but didn't tender them in the restructuring. It insisted it wouldn't take losses—though it agreed to distribute profits back to Greece via member governments.

That stance, many analysts say, has severely weakened the effectiveness of any future ECB intervention to shore up the bond markets of Spain and Italy. It may be one reason why the ECB hasn't bought any government bonds since the Greek restructuring. The more the ECB intervenes, the greater the proportion of debt-servicing revenues that would have to be directed to the ECB in any future restructuring, and the less that would be available to pay private bondholders.

This outcome, of course, applies only if investors believe there will be a restructuring. If there isn't, the pecking orders of creditors won't matter. So far, however, investors are signaling that limited and grudging interventions by the bailout funds and the ECB may not be much more helpful than no interventions at all.

and.....

http://online.wsj.com/article/SB10001424052702304441404577480560337232808.html

FRANKFURT—The European Central Bank is poised to relax its collateral rules for central-bank loans in a bid to ease strains on commercial banks in Spain and the rest of Southern Europe, according to people familiar with the matter.

ECB officials have broadly agreed to make more types of securities, including certain mortgage-backed and asset-backed securities, eligible as collateral at its lending facilities. Details of the plan still need to be finalized, but a decision is expected on Friday.

The move would likely spark renewed concerns about the safety of the central bank's balance sheet, which totals more than €3 trillion ($3.82 trillion), a record high. Germany's central bank, the Bundesbank, has repeatedly warned of the risks associated with the central bank's lending facilities.

An ECB spokesman declined to comment.

A loosening of collateral rules would provide a lifeline to struggling banks in Spain, still dealing with the aftermath of that country's burst property bubble. Spain's central bank estimated this week that bad debts held by Spanish banks were more than €150 billion in April, an 18-year high.

Spanish banks need up to €62 billion in new capital to absorb losses in coming years, according to two independent analyses released Thursday that will serve as the basis for a government request for European Union aid to help finance a cleanup of the local sector.

The Spanish government is expected in coming days to make a formal request to the EU for a bailout of its banks, which will add to Spain's already growing debt load.

A decision by the ECB to relax its collateral rules would shield banks from the fallout that a bailout would have on the ratings of the Spanish government and private-sector bonds. Madrid has been hit by repeated downgrades in recent months, as have covered bonds and other types of securities.

Banks in Spain, Italy and the rest of Southern Europe have found it increasingly difficult to tap the interbank lending market for funds, making them more dependent on the ECB.

Outstanding Spanish bank borrowing from the ECB totaled around €325 billion in May, and banks there were heavy users of the ECB's three-year lending operations in December and February.

The ECB requires collateral for its loans and applies discounts, or haircuts, based on the rating and maturity of the different types of securities posted by banks. With banks in Spain and the rest of Southern Europe turning increasingly to the ECB, the pool of available collateral is shrinking.

and.....

http://www.guardian.co.uk/business/2012/jun/22/eurozone-crisis-live-germany-outnumbered

11.39am: A member of the European Central Bank has come out in support of the European bailout funds lending directly to troubled banks, after IMF chief Lagarde threw her weight behind the idea. (see 9.44am)

ECB governing council member Luc Coene said there is a need to break the 'vicious circle' of the problems of the banking sector and of sovereign debt feeding on each other.

I think if we want to break through we must head towards a solution, which is being considered among others of Spain, with the EFSF able to lend capital directly to financial institutions.

11.19am: Spain only collects 35% of GDP in taxes and has the lowest revenue to GDP figures of the whole European Union, says LSE economist Luis Garicano in an excellent interview that looks at the roots of Spain's problems and possible solutions.

Source: Eurostat via Nada es Gratis

Garciano says:

The Spanish government has been saying that they've done everything that they can. I don't think that's correct. While they have done a lot, they have not provided a clear multi-year vision or plan to stabilize the long term debt ratio and generate some growth.

It hasn't convinced Spaniards or the market that it understands the depth of the problems. Here are a couple of examples. The first thing they did on taking office in January was to increase pensions by 1%, and to re-introduce the mortgage deduction, which the socialist government had (correctly) eliminated at a big political cost. They haven't decreased the salary costs of civil servants; they haven't increased the revenues of the state.

11.03am: There are more lines coming through from the German government spokesman Georg Streiter on the ESM permanent bailout fund.

He says the idea that Angela Merkel might try to influence the court over the ESM decision was "absurd" and she is not trying to "whip through" the ESM law. She does not want the ESM to be delayed.

10.49am: Slovakia's parliament approved the bailout scheme this morning, joining Portugal, France, Greece, Slovenia and Finland. The fund needs the backing of countries representing 90% of the capital base of the eurozone in order to come into effect.

Delays in the ratifications process in several countries, including Germany, mean the ESM is likely to be operational by July 9, eight days later than previously hoped.

10.42am: Germany faces a delay to ratifying the ESM permanent bailout fund, Der Spiegel reports. (Thanks to readers AloisiusH and Continent for the heads up). Severin Weiland and Annett Meiritz write:

Germany's highest court asked the country's president on Thursday to delay ratification of the permanent euro bailout fund, the European Stability Mechanism, and the fiscal pact into law next week. If he complies, the move could delay the implementation of the ESM by several weeks in the latest setback for Chancellor Angela Merkel.

The ESM was originally scheduled to come into force on July 1, 2012.

10.39am: We're not expecting any agreements out of the meeting between Monti, Merkel, Rajoy and Hollande later today, apparently. The Bloomberg economics editor writes:

Linda Yueh@lindayueh

German gov spokesman Streiter says no agreements to be made at Rome meeting today among German, France, Italy, Spain leaders

9.57am: Over to Madrid, where our correspondent Giles Tremlett reports:

Spanish finance minister Luis de Guindos has said this morning that he will be sending the letter in which Spain formally asks for up to €100bn from Europe's bailout fund as soon as he arrives back in Madrid today.

The pledge comes amid complaints of Spanish foot-dragging and clear impatience from other eurozone countries as Spain tries to win time to improve its negotiating position.

The two independent valuations of Spain's bank assets made public yesterday suggest that they need no more than €62bn, but Spain may add a safety cushion to that.

De Guindos has been meeting fellow eurozone finance ministers – the so-called Eurogroup – in Luxembourg. The group's president, Jean-Claude Juncker of Luxembourg, said they expected a Spanish request by Monday.
The temporary EFSF bailout fund will provide the money, with the permanent ESM fund taking over in July. Full details of the terms and conditions will have to wait until the next Eurogroup meeting on July 9.

9.28am: Italian consumer confidence to its lowest level on record in June.The national statistics office said the consumer confidence index dropped from 86.5 in May to 85.3, the lowest since the series began in January 1996.

Italy is mired in recession, taxes are rising and wages are stagnant. The unemployment rate was also worryingly high at 10.2% in April, its highest level ever.

9.23am: Sticking with Germany, Christian Schulz of Berenberg has the following on the IFO business confidence survey (see 9.05am):

The picture in June was mixed across sectors. Manufacturing was hit by a deterioration of the export outlook, a clear indication that companies feel the impact of the euro crisis elsewhere. The most domestically-oriented sectors, retail trade and construction, reported a slightly improving business climate, while the indicator declined for wholesale trade and services.

Investment and exports are likely to be the main channels of transmission of financial market turbulences to the Germany's real economy, as the crisis hits again and is likely to trigger a significant slowdown over the summer. Domestic private and public consumption, on the other hand are likely to have a stabilising effect. With unemployment remaining at very low levels and wages rising, households benefit from lower energy costs.

The key for the economic outlook is the management of the euro crisis, as it was last year. Based on very sound economic fundamentals, the German economy can start expanding at trend growth rates again once this wave of the euro crisis is brought under control, as it did in Q1 2012 after ECB and EU action in December.

9.05am: The German IFO business climate index dropped in June to 105.3, compared with forecasts of a reading of 105.9. But the reading for current conditions was slightly ahead of forecasts at 113.9, comapred with expectations of 112.3.

8.51am: Sticking with the debt markets, the yield on Spain's 10-year bond – effectively the interest rate – is looking devilish at 6.66%, and Italy's 10-year bond is yielding 5.82%. Gary Jenkins said about Spanish bonds:

and...

http://ransquawk.com/headlines/230811

The new coalition government in Greece will roll back a number of austerity measures in order to ease the pain of the country's ongoing recession according to Kathimerini

- according to the report the government will extend unemployment benefits, ban any further reduction of salaries in the private sector, introduce a gradual increase to the lowest pensions, and cut value added tax to 19% in the catering sector

and.....

http://www.ekathimerini.com/4dcgi/_w_articles_wsite1_21674_22/06/2012_448420

Eurogroup defers decision on changes to Greek bailout

Eurozone finance ministers did not discuss in detail possible changes to Greece’s bailout terms when they met in Luxembourg on Thursday but agreed to release 1 billion euros of funding for Athens that had been held back from a loan installment last month.

Speaking after the meeting, Eurogroup head Jean-Claude Juncker said that it was too early to decide on Greece’s request for changes to the loan adjustment period, such as an extension to the fiscal adjustment period.

“As far as Greece is concerned, we didn't discuss today in detail the articulation of the reviewed memorandum of understanding,” said the Luxembourg prime minister.

"We will send ... our people on the ground, they will be invited by the Greek authorities from first meetings on Monday morning, we will have a look into the findings of the (EU/IMF) troika and then we will discuss in detail the different means and instruments which can be used.

"It doesn't make sense for the time being to give more precise indications on the content of the programme ... this depends on the findings of the troika."

French Finance Minister Pierre Moskovici suggested that some changes to Greece’s program would be made.

"We still think the engagements undertaken by Greece should be respected...(but) we are in favour of a certain flexibility and taking into account the expectations of the Greek people, particularly in terms of economic growth,» he told reporters.

The Austrian finance minister, Maria Fekter, took a tougher line on the Greek bailout. “We will have to see how much time Greece missed due to its election campaign... if it missed too much, Greece will have to work even harder,» she said.

Dutch finance minister, Jan Kees de Jager, was also sceptical about making concessions to Greece. «There is no alternative with regards to the reform,that is clear,” he said. “With smarter measures then you can realise more, that is better, but an alternative to hard, painful reform, that alternative is not there."

Juncker added that the 1 billion euros would be released soon. However, Athens will only keep about 100 million of this as the rest is set to go towards its contribution to the European Stability Mechanism (ESM)

“We took note that the EFSF will disperse the remaining 1 billion euros of the first instalment before the end of this month,” said Juncker.

and...

http://www.ekathimerini.com/4dcgi/_w_articles_wsite1_1_22/06/2012_448417

Troika inspectors due in Athens on Monday, says Juncker

Inspectors from the International Monetary Fund, the European Central Bank and the European Commission are expected to return to Athens on Monday to review reform progress and prepare ground for an update of the terms of the Greek bailout.
Greece secured a 130 billion euro bailout from the euro zone and the IMF in February, but two rounds of general elections since then have stalled the implementation of reforms that underpin the emergency lending programme.
"We expect the new government to invite the (EU/IMF) troika to Athens next Monday because we do think they are in an urgent situation and all the procedures need to be speeded up,» the president of the Eurogroup of euro zone finance ministers, Jean-Claude Juncker, told a news conference.
"They will take stock of the situation. On the basis of the guidance we seek, a full troika mission will go to Athens with a view to reaching an agreement on the conditionality that should be reflected in an updated memorandum of understanding,» he said.
"This includes an agreement on the measures of prior actions to be implemented before the next disbursement can take place,» he said.
Juncker added that the European Financial Stability Facility (EFSF), the euro zone's temporary bailout fund, would disburse to Greece by the end of June some 1 billion euros from a tranche agreed on by finance ministers in May.
[Reuters]

Catharsis Ours

Friday, June 22, 2012

Around the horn in Greece and Europe - Europe defers decision on Greece changes to the second bailout. Meanwhile , the Troikans descend on Athens starting Monday. Greece Coalition government starts to allegedly rollback aspects of austerity schemes ahead of Troikan meetings.

Waiting For Godot

German Supreme Court Delays ESM; Another Setback for Merkel; Creeping Bailouts; Reflections on German Expectations

Lagarde Shows True Colors

German chancellor Merkel lawmaker Flosbach reject IMF call for direct ESM bank aid

The new coalition government in Greece will roll back a number of austerity measures in order to ease the pain of the country's ongoing recession according to Kathimerini

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