Dates to watch in June ! Will the ECB meeting follow today's G-7 conference as another failure to launch , in a series of failures to launch ?

June 6 - ECB Governing Council meeting
June17 - Greece Elections
June 18 -19 G-20
June 18-19 Iran and P 5 + 1 talks in Moscow
June 19-20 Fed Meeting

http://www.guardian.co.uk/business/2012/jun/06/eurozone-crisis-ecb-interest-rates

( Draghi says SMP program still on hold , Ireland gets pat on head - nothing else , no right timing for another LTRO , check to national governments to take action. )

2.17pm: It's official - the European Central Bank's governing council was split over whether to cut interest rates today.

Mario Draghi tells the Frankfurt press conference that "a few members" would have preferred a rate cut today "but not many".

He has also confirmed that the ECB has not decided to restart its policy of buying government bonds. That programme has now been suspended for the last 12 weeks.

2.12pm: Arthur Beasley of the Irish Times asks Mario Draghi for his views on the Irish referendum vote last week. Will Ireland now get some relief on the terms of its aid package from Europe?

Draghi says that he welcomes Ireland's decision to vote in favour of the EU Fiscal pact, but insists there is "no horse trading" between the ECB and national governments. He adds:

There has never been a quid pro quo between monetary policy and government policy....

1.50pm: Interesting! Mario Draghi is asked whether today's decision to leave interest rates unchanged at 1% was unanimous.

He replies that the decision was taken "by consensus". That sounds like code for "not unanimous", or at the least that there was a robust exchange of views over the issue.

He is also quizzed about whether the ECN would launch a new Long-Term Refinancing Operation (where banks are offered cheap loans on a three-year timescale). Draghi argues that another LTRO is not the right solution now - and hints that national governments should do more.

He says:

The issue now is whether these LTROs would be effective..... there is plenty of liquidity in some ares, and a lack in others. We need to ask why?

Some of these shortages have nothing to do with monetary policy..... It is not right for monetary policy to fill in for other's lack of action.

http://www.zerohedge.com/news/key-highlights-draghis-press-conference

( ECB keeps key rate at 1.00 percent . )

Key Highlights From Draghi's Press Conference

Submitted by Tyler Durden on 06/06/2012 08:32 -0400

• European Central Bank
 
• Germany
 
• Gross Domestic Product
 
• headlines
 
• Unemployment

The headlines are rolling in. From Bloomberg:

• ECB SEES 2012 INFLATION AT 2.3% TO 2.5% VS PREV 2.1% TO 2.7%. - so... counterdisinflation

That's the kicker: ECB sees inflation. Deus Ex Off - forget more easing at this point. Everything else is just filler.

• ECB SEES 2013 GDP AT 0.0% TO 2.0% VS PREVIOUS 0.0% TO 2.2% - not good
• DRAGHI SAYS INFLATION RATES LIKELY TO STAY ABOVE 2% IN 2012
• • DRAGHI SAYS MARKET TENSIONS, UNEMPLOYMENT TO WEIGH ON ECONOMY - ya think?
  • DRAGHI SAYS UNDERLYING PACE OF MONETARY EXPANSION SUBDUED
  • DRAGHI SAYS ECONOMIC GROWTH REMAINS WEAK
  • DRAGHI SAYS ECONOMIC OUTLOOK IS SUBJECT TO DOWNSIDE RISKS
  • ECB EXTENDS FULL ALLOTMENT REFINANCING TO AT LEAST JAN 15 2013
  • DRAGHI SAYS NON-STANDARD MEASURES ARE TEMPORARY IN NATURE
  • DRAGHI SAYS EURO-AREA ECONOMY WILL RECOVER GRADUALLY
  Finally:
  • DRAGHI SAYS BANKS MUST STRENGTHEN BALANCE SHEETS FURTHER.
  As we said first thing today: check to Fed. And Germany.

and....

On Greece , I'm still wondering if the situation stays together until 6/17 and the after action scenarios of trying to form a government / coalition.....

http://www.guardian.co.uk/business/2012/jun/05/eurozone-crisis-live-g7-emergency-talks

7.00pm: Speaking of developing economies (see last post), it emerged earlier today that India has drawn up contingency plans for Greece to exit the euro.

Reuters has the story:

"Yes, India does have a contingency plan. There are different crisis management groups within the government to deal with such a possible scenario," Kaushik Basu, the chief economic adviser to finance minister Pranab Mukherjee, told Reuters.

He declined to give details of the plan, but another senior official familiar with the planning said the finance ministry and central bank were prepared to take monetary and fiscal measures if necessary to try to insulate India from the shockwaves of a euro zone collapse

4.22pm: The Greek stock market has closed at a new 22-year low, after another day of heavy falls among banking stocks.

The main Athens index closed -5.09%. Traders said the latest selloff was partly due a prediction from Standard & Poor's yesterday that there was a 1 in 3 chance of Greece leaving the euro.

and....

Nearly half of Germans polled want Greek euro exit

5 Jun 2012

Afraid of what the Greek crisis is doing to the eurozone, many Germans would welcome Greece's exit from the euro. (file photo) Nearly half of Germans want Greece to leave the euro zone and a third is very afraid that the country's debt crisis could threaten the euro, a poll in Stern magazine showed on Tuesday. According to a survey of 1,001 Germans conducted by Forsa research institute, 49 percent of those polled want Greece to quit the single currency while 39 percent want it to stay. Nearly two thirds want German Chancellor Angela Merkel to keep insisting that Greece stick to agreed austerity measures despite growing criticism of this course in other euro zone countries such as France, the poll said. The Greek election on June 17, the second in two months, is widely seen as a referendum on whether the debt-laden country should stay in the euro zone and press on with painful reforms or leave and go back to its old drachma currency. Polls suggest the vote could go either way, with support for pro- and anti-austerity parties finely balanced. In Tuesday's survey, nearly two thirds of Germans expressed a lack of understanding for those Greeks who want to vote for opponents of austerity measures. A third said they would have second thoughts about spending their holidays in Greece at the moment.

Greece's income from tourism dropped 15 percent in the first quarter, with fewer holidaymakers from Germany and Britain, Greece's biggest tourist markets. (Reuters)

and...

China planning for Greek euro exit

4 Jun 2012

China has joined the sizeable list of nations preparing contingency plans in case of a possible Grexit event. (file photo) The Chinese government has called on key agencies including the central bank to come up with plans to deal with the potential economic risks of a Greek withdrawal from the euro zone, three sources with knowledge of the matter told Reuters on Monday. The sources said the plans may include measures to keep the yuan currency stable, increase checks on cross-border capital flows and stepping up policies to stabilise the domestic economy. As investor concerns over Greece's possible exit from the euro zone grow, the central government has called on related state agencies, including the National Development and Reform Commission, the central bank and the banking regulator, to discuss contingency plans, the sources said. "It's very urgent," a source with direct knowledge said. "The government has asked every department to analyse measures to cope with a Greek exit from the euro zone and make their own suggestions as soon as possible." Late last month, Premier Wen Jiabao warned at a state council meeting that "downward economic pressure is increasing". The government has already announced a raft of measures to support economic growth, which is expected to slide this year to its weakest pace since 1999. These include fast tracking infrastructure and industrial investment projects while doling out subsidies for energy-saving home appliances and cars. A research chief with a Chinese bank in Hong Kong said that banks are being required by the mainland authorities to hand over a brief on global financial markets every day. Yu Yongding, an influential economist and a former central bank adviser, said in comments published last week that China should prepare for a Greek withdrawal from the single currency and proposed steps including capital controls to cash injections to domestic markets to reduce volatility. China's central bank chief said in comments published on Monday that the country will continue to invest in euro zone government debt and other assets and urged the single-currency bloc to step up reforms to stem its debt crisis. (Reuters) and....

http://www.ekathimerini.com/4dcgi/_w_articles_wsite2_1_05/06/2012_445512

Pressure from foreign tour operators weighs on tourism By Stathis Kousounis Foreign tour operators are in talks with Greek hotel owners to make sure their money is protected in case the debt-wracked country exits the eurozone next year. Kathimerini understands that officials representing international tour operators negotiating contracts for 2013 are pressuring Greek hoteliers to agree that if Greece breaks from the euro area and returns to the drachma, they will get their money on the basis of the new exchange rate. Sources told the newspaper that several German-owned businesses are refusing to sign big contracts for next year until after Greece’s parliamentary election on June 17. Speculation that Greece will leave Europe’s common currency area has been fueled by the lingering political instability since the leading parties failed to form a government after the previous polls on May 6. A small number of travel companies made similar demands last year, but Greek businesses did not bow to the pressure. This year some tour operators requested that in case there are outstanding payments to be made or bookings are transferred to the next season, transactions would be made in euros, even if Greece swaps its currency. According to sources, a big German-based tour operator has frozen deposits for this year’s contracts until after the election. At the same time, tour operators based in countries that make up a smaller share of Greece’s tourism market -- such as Romania, Poland, the Czech Republic and Italy -- are putting pressure on Greek hoteliers to slash prices by up to 30 percent for this season. Furthermore, potential visitors appear concerned about the chances of Greece abandoning the euro. They want to know what will happen if Greece goes bankrupt or returns to the drachma while they are visiting the country. The percentage of the drop in foreign bookings is now in the double digits, according to recent data from the Association of Greek Tourism Enterprises (SETE). In fact, after the election on May 6, the rate of bookings at Greek hotels has slumped by between 30 and 50 percent, according to figures released by the Panhellenic Hoteliers Association. Hotel owners blame the negative trend on the volatile political environment and are calling for urgent measures to remedy the situation. and....... http://www.ekathimerini.com/4dcgi/_w_articles_wsite1_1_05/06/2012_445506 New Democracy and SYRIZA clash over leaders' TV debate The two parties vying for first place in the June 17 election, New Democracy and PASOK, were at loggerheads on Tuesday after negotiations to hold a televised debate between their respective leaders, Antonis Samaras and Alexis Tsipras, collapsed amid acrimony. ND claimed it had agreed with SYRIZA almost all the details for a Samaras vs Tsipras debate but that the leftists scuppered the deal by issuing two statements outlining their positions on the discussions. SYRIZA said it wanted two debates: one between Samaras and Tsipras based on the format of the French presidential debate and another between the leaders of all the parties, apart from the neo-Nazi Chrysi Avgi (Golden Dawn). “As soon as representatives of ND and SYRIZA shook hands on the TV debate between the two leaders, SYRIZA began messing everything up: journalists’ names, the process, even the inclusion of other parties, with the aim of blowing everything sky-high,” said conservative spokesman Yiannis Michelakis. He accused Tsipras of being anxious about holding the debate as he would have to defend his party’s position in relation to “the drachma lobby, harboring terrorism, giving Greek identities to millions of migrants, leaving NATO.” SYRIZA denied it had undermined a compromise and accused Samaras of dodging the debate. “After falling silent for days, New Democracy has decided to announce its premeditated decision not to hold a debate, afraid of exposure and the debate of positions in front of the Greek people,” the leftist party said in a statement. SYRIZA said the details had not been agreed and that it still backs holding two debates. ND stepped up its campaign to discredit SYRIZA’s positions with a TV spot showing schoolchildren asking their teacher about whether Greece is in the eurozone. ND’s Dora Bakoyannis accused Tsipras of intending to turn Greece into Bolivia. Conservative sources said ND would soon switch to a more positive campaign as the euro vs drachma dilemma has not helped boost support among voters aged 18 to 40, an age group SYRIZA dominated on May 6. Tsipras is due to meet today with the ambassadors in Athens representing the G20 countries. He turned down a meeting with the ambassadors of the EU countries last week. SYRIZA sources said that as Samaras had already met with them, Tsipras did not want to be seen to be copying him. The SYRIZA leader met individually with some of the EU ambassadors last week. and..... http://www.ekathimerini.com/4dcgi/_w_articles_wsite2_30_05/06/2012_445509 Disastrous April eliminates surplus  Primary figures post deficit that saw gains of year to March evaporate By Sotiris Nikas The primary result of the general government accounts swung from a surplus to a deficit within just one month in April, while the state’s outstanding debts remained at 6.2 billion euros, according to official data released on Tuesday by the Finance Ministry. The budget surplus of 2.3 billion euros secured in the first three months of the year evaporated in April, at the end of which there was also a deficit of 18 million euros. This is attributed to two main factors: The deterioration of the state budget, with public spending growing faster than tax revenues, while the surplus of social security funds and hospitals has decreased. The primary deficit of the state budget soared from 333 million at the end of March to 1.7 billion euros at end-April. Public expenditure (not including interest) grew by 4.7 billion euros, while tax revenues expanded by 3.3 billion euros. At the same time the primary surplus of social security funds declined by 633 million euros, dropping from 930 million in the first quarter to 297 million on May 1. State corporations had a primary surplus of 274 million euros at the end of March that dropped to 67 million euros at end-April. Local authorities also saw their primary surplus contract in April from 377 million euros to 289 million. Nevertheless, officials at the Finance Ministry are expressing optimism as far as the course of the state budget is concerned, saying that although revenues have lagged expectations, the ministry has gone ahead with an extra reduction in expenditure in a bid to rein in the deficit. The government’s cash deficit (including interest) amounted to 7.6 billion euros in the year’s first four months. The state’s outstanding debts to third parties -- suppliers, construction companies etc -- rose marginally from 6.23 billion euros to 6.27 billion. The biggest portion of state debt was to social security funds, at over 2.8 billion euros in the January-April period, followed by hospital debts (1.58 billion euros). Worse, the debt problem is expected to deteriorate, given that the bailout installment that was originally due this month has now been postponed. and..... Funds facing 1.4-bln shortage By Christina Kopsini The social security system will need hundreds of millions of euros by the end of the year, as the risk of nonpayment of pensions is greater than ever, fund employees and trade professionals warned on Tuesday. The Panhellenic Federation of Social Security Fund (IKA) Employee Unions told the caretaker government and the political parties in a letter that “the normal payment of pensions in the coming months is becoming problematic” unless an extra 1.403 billion euros is secured by the end of 2012. IKA revenues have dropped by more than 30 percent in the year’s first four months compared to the same period in 2011, the federation suggested. The National Confederation of Greek Commerce (ESEE) warned that “the social security fund of traders and of the self-employed, OAEE, is crumbling, as its revenues have been dramatically reduced.” The fund’s budget has not been approved by its governing board and all difficult decisions have been postponed until after the June 17 general election. and " Fed Wire " says QE on the table......... http://www.zerohedge.com/news/here-come-hilsenrath-leak-fed-considers-more-action Here Come The Hilsenrath Leak: "Fed Considers More Action" Submitted by Tyler Durden on 06/05/2012 19:29 -0400 Bank of Japan   Ben Bernanke   Bond   Exchange Traded Fund   Federal Reserve   Japan   recovery REITs   SPY   Unemployment Three months ago, just when things looked like they were about to turn south, the Fed's trusty mouthpiece, Jon Hilsenrath, made it clear that the market can stop falling as the Fed was "considering" sterilized QE, or more Twist, something we explained later would be impossible in the current format as the Fed would run out of sub 3 Year paper by the end of August. It did however halt the drop in stocks for a month or two until Europe became permanently unfixed. Hilsenrath then cralwed back into his WSJ cubicle. Until today: two weeks before the all critical June 20 FOMC meeting, the faithful Fed scribe has been charged with his latest leak commission: "Fed Considers More Action Amid New Recovery Doubts." And as it has been leaked (now that people have actually done the appropriate math), so it shall be. From the WSJ: Disappointing U.S. economic data, new strains in financial markets and deepening worries about Europe's fiscal crisis have prompted a shift at the Federal Reserve, putting back on the table the possibility of action to spur the recovery. Such action seemed highly unlikely at the central bank's April meeting, when forecasts for growth and employment were brightening. At their policy meeting this month, Fed officials will weigh whether the U.S. economic outlook is deteriorating enough to justify new measures to boost growth, according to interviews and Fed speeches. The Fed's next meeting, June 19 and 20, could be too soon for conclusive decisions. Fed policy makers have many unanswered questions and have had trouble forming a consensus in the past. Top Fed officials have said that they would support new measures if they became convinced the U.S. wasn't making progress on bringing down unemployment. Recent disappointing employment reports have raised this possibility, but the data might be a temporary blip. Moreover, the Fed's options for more easing are sure to stir internal resistance at the central bank if they are considered. Their options include doing nothing and continuing to assess the economic outlook—or more strongly signaling a willingness to act later if the outlook more clearly worsens. Fed policy makers could take a small precautionary measure, like extending for a short period its "Operation Twist" program—in which the Fed is selling short-term securities and using the proceeds to buy long-term securities. Or, policy makers could take bolder action such as launching another large round of bond purchases if they become convinced of a significant slowdown. Another question: does Twist end in 25 days, or will the market have a violent revulsion to a world without constant central-planner artificial "flow" creation (because as first noted here months ago, only Nobel prize-winning economists still think "stock" is even remotely relevant). Mr. Bernanke must decide whether to let the program end.The Fed has enough short-term securities left to extend it for a few months [ZH: good to see that Hilsenrath is finally doing the math that refuted his own articles 3 months ago] as a precaution while it watches how the economy develops. If officials become more convinced about a growth slowdown they could expand the Twist program or launch another round of securities purchases—an approach known as quantitative easing—to try to boost growth. But the most important question: with the 10 Year already at the idiotic 1.50% level, does anyone seriously believe that more risk taking will be provoked by pushing yields to 1.40%, or 1.30%? Or how about 0.00%? In fact, why doesn't Bernanke just pull a Bank of Japan, and stop beating around the bush, instead buying up all the SPY, and REITs he can find. One ETF he doesn't have to buy will be GLD: that one will go up on its own. Very, very fast. Finally, as Zero Hedge explained patiently last night, while the economists, pundits, and sellsiders have their theories, the bond market, at least as of now, has spoken, and see not more LSAP but a simply expansion of Twist from 0-3 to 0-4 year maturity sales: an outcome which to the market will be the worst of all worlds.   http://www.businessinsider.com/game-on-the-best-fed-source-in-the-world-says-qeiii-is-now-on-the-table-2012-6 The WSJ's Jon Hilsenrath -- whom Cardiff Garcia has dubbed "Fedwire" -- reports that more Fed action is now officially on the table due to the slew of weak incoming data. There's no gaurantee that it will happen, or that if it did happen it would be at the June 20 meeting, but the presses are being warmed up. Top Fed officials have said that they would support new measures if they became convinced the U.S. wasn't making progress on bringing down unemployment. Recent disappointing employment reports have raised this possibility, but the data might be a temporary blip. Moreover, the Fed's options for more easing are sure to stir internal resistance at the central bank if they are considered. Their options include doing nothing and continuing to assess the economic outlook—or more strongly signaling a willingness to act later if the outlook more clearly worsens. Fed policy makers could take a small precautionary measure, like extending for a short period its "Operation Twist" program—in which the Fed is selling short-term securities and using the proceeds to buy long-term securities. Or, policy makers could take bolder action such as launching another large round of bond purchases if they become convinced of a significant slowdown. Bloomberg TV Meanwhile, Jefferies David Zervos gives his take on the key levels to watch for more Fed action: As always, it will be hard to pinpoint exact tipping points for a move - but I suspect that if we see a combination of the DXY (dollar index) at 86/88, and the spoo (S&P) at 1200/1225, the Fed will jump into action. I do not think we need to talk about the PCE or the U-rate when it comes to the Fed - the real triggers are in liquid market prices. And, in particular, if these levels in the DXY and spoo are breached, any sensible forecasts for forward looking employment and inflation that enter into a Taylor rule will plummet - hence accommodation follows!! In fact, take a look at a DXY chart since early 2008 - the 88 level was a good indicator for QE1 and QE2. and rather than QE maybe they should just go whole hog in the form below........... http://ftalphaville.ft.com/blog/2012/06/05/1029231/well-its-one-idea/ Well, it’s one idea… Posted by Cardiff Garcia on Jun 05 18:20. Via Barry — click through for more: Markets crave QE - from the BOE , ECB and of course the Fed , what if anything will that truly fix......

http://ftalphaville.ft.com/blog/2012/06/04/1027301/will-rates-stay-low-qe-or-no/

Will rates stay low, QE or no?

Posted by Simon Hinrichsen on Jun 04 20:17.

It was inevitable that the abysmal payrolls report last Friday would make louder the calls for another round of quantitative easing from the FOMC, which meets later this month.

QE can take various shapes, but we wanted to mention something about the specific idea of the Fed buying up more US Treasuries: as a few analysts have pointed out recently, there’s a pretty good chance that rates will stay low no matter what the Fed does.

Since the first round of QE, the composition and size of the Fed’s balance sheet has changed dramatically. It now owns a big part of outstanding US Treasuries (chart via Deutsche Bank):

Torsten Slok of Deutsche Bank writes:

In addition, central banks (Fed, ECB, BoE, BoJ) buying government bonds has lowered supply of risk-free bonds real money managers can buy (for example, the Fed currently holds 30% of all 5-10 year US Treasuries outstanding).

Bottom line: More demand for risk-free assets and less supply of risk-free assets combined with significant long-term risks to global growth imply that interest rates are likely to stay low for many more years.

All part of the ongoing global safe asset grab. Ten-year US Treasuries now yield about 1.5 per cent, as they remain one of the true stores of value alongside Bunds, JGBs, Gilts, Scandi and Swiss paper.

And from JP Morgan’s Flows and Liquidity team on Friday, we have five reasons, other than quantitative easing, why rates will stay down for the foreseeable future:

- Regulations such as Solvency II, pension fund regulations, Basel III

- It is not only regulations inducing financial institutions to buy bonds, demographics may also be playing a part

- Due to ultra low policy rates, retail investors replaced money market funds with bonds as savings vehicle

- G4 central bank QE

- An acceleration of the global savings glut since the Lehman crisis.

- The end of the equity culture

As you can see in this chart from Bianco Research (via Barry Ritholtz), demand is high without intervention:

Of course, QE isn’t only about the asset purchases themselves. It’s meant to signal the Fed’s commitment to doing what is necessary to combat disinflationary pressures and boosting employment.

But if quantitative easing is done without any kind of sterilisation (and despite early reports, it now seems that sterilisation is not under serious consideration), it might create problems for Money Market Funds and other parts of the shadow banking system that are competing for the small pool of available collateral. We say “might” because much depends on other factors.

Just something to keep in mind if the likelihood is that rates will be low anyways, especially given that the Fed’s new communications efforts this year have been somewhat muddled. In that sense, we would emphasize that another round of quantitative easing is, in fact, not risk-free.

and looking toward the G-20 , don't expect China to save the EMU ...........

http://www.telegraph.co.uk/finance/debt-crisis-live/9311334/Debt-crisis-Live.html

13.30 There has been a suggestion that the G20 would like China, with its trillions of dollars of foreign reserves, to step in to help out the eurozone. But Tim Condon, chief economist and head of Asian economic research at ING in Singapore, is sceptical. He said:

China is totally consumed by juggling what is turning out to be a complicated year domestically. If something coincides with what's good for Europe, happy days, but for them to do something above and beyond... I'm not a big buyer of the view that we're going to have some big kumbaya moment at the G20.

In 2008, G20 nations pledged stimulus packages worth some $5 trillion to underpin global growth. China's 4 trillion yuan ($635bn) contribution was vital and it essentially underwrote business activity into 2010, but at huge political cost at home. The stimulus fuelled inflation in its own economy and widespread corruption and speculation.