http://www.zerohedge.com/news/so-much-g7
Submitted by Tyler Durden on 06/05/2012 08:47 -0400
http://www.zerohedge.com/news/goldman-europes-growth-package-nothing-really-new
Submitted by Tyler Durden on 06/05/2012 08:44 -0400
http://www.telegraph.co.uk/finance/debt-crisis-live/9311334/Debt-crisis-Live.html
( Dutch reiterates no desire for deposit insurance scheme or common eurobonds - just like Germany )
What we also don't feel the need for is introducing a European deposit guarantee scheme now.
They don't want to. They are too proud. It's fatal hubris.
Submitted by Tyler Durden on 06/05/2012 07:00 -0400
Aggressive reality cancer hits Europe
So Much For The G7
Just as expected an hour ago...
- JAPANESE FINANCE MINISTER AZUMI SAYS G7 WILL NOT ISSUE A JOINT STATEMENT
- AZUMI: G7 DID NOT DISCUSS GREECE LEAVING THE EURO
But...
- AZUMI: G7 AGREED WILL WORK TOGETHER TO DEAL WITH PROBLEMS IN SPAIN, GREECE - RTRS
At least they agreed to agree to hold another press conferences... when XO is over 1000 bps. And so much for that. Next up on the disappointment ladder: the ECB.
http://www.zerohedge.com/news/goldman-europes-growth-package-nothing-really-new
Goldman On Europe's Growth Package: "Nothing Really New"
- Crude
- Crude Oil
- European Central Bank
- Germany
- Greece
- Gross Domestic Product
- headlines
- International Monetary Fund
- Italy
- Portugal
Germany remains vehemently opposed to any euro-wide deposit guarantee scheme as the head of the association of savings banks believes it: "would lead to a spreading of risks to the detriment of German financial institutions" and that this would "increase the burden for national protection schemes, which is not in the interest of German banking clients". Not exactly encouraging and along with the fact that Goldman notes that Germany's 'growth plan' (which includes increasing EIB capital and redirecting existing funds to the periphery) with which it will attempt to bolster its opposition to soaking up more peripheral risk, contains 'nothing really new in it'. For this reason Goldman is far less sanguine heading into the ECB meetings as they hope for the best and prepare for the worst. They expect Draghi's forward-looking statements on being ready to act, conditional on events in the periphery, will be the most important headlines but expect him to remain stoic in his position on governments contributing to the solution. Goldman's view remains that, at least for the time being, the ECB has to play a leading role in stabilising the system (though SMP remains marginalized given its potential to sit outside of the ECB mandate) given that it can operate more quickly and more effectively, given the many political constraints governments face. A genuine long-term solution, however, falls once again in the domain of governments.
German government prepares "growth package"; nothing really new in it. According to news reports, the German government has been working on a list of measures to support growth in the Euro area. The list includes measures such as increasing the European Investment Bank's capital by around €10 billion and redirecting existing money in EU funds towards the periphery. There seems to be nothing really new on the list and there is no indication that the German government would now be in favour of any large public spending programme. The German government will use this list for its forthcoming discussion with the opposition on the fiscal compact, scheduled for June 13. The government needs the support of the opposition in order to get the fiscal compact through parliament. The opposition has demanded that, in exchange for its support, the government should come up with specific measures to support growth in the periphery.
German banks critical on proposed support measures for peripheral banks.The head of the association of savings banks, Fahrenschon, wrote in an op-ed in FTD that a Euro area wide deposit guarantee “would lead to a spreading of risks to the detriment of German financial institutions” and that this would “increase the burden for national protection schemes, which is not in the interest of German banking clients”. The association of private banks, BdB, at the same time has rejected in a written statement direct financial help for peripheral banks from the EFSF. Such help would be conditional on a restructuring of the banking sector and only national governments would ultimately be in a position to ensure that such conditions were met.
Portuguese government to inject €6.63 billion into banks. Portuguese Finance Minister Gaspar said yesterday that Portugal will use money from its current EU/IMF programme, earmarked for supporting banks, to bolster the capital position of its three biggest banks.
Focus: ECB preview: Hoping for the best, preparing for the worst
Bottom line: We expect the ECB to keep rates on hold this Wednesday and also expect no announcement of further non-standard measures. Further ECB actions are to a great extent conditional on events in the periphery, and on the implication these events will have for the wider Euro area and the financial system. ECB President Draghi is likely to use the press conference as an opportunity to signal that the ECB will in principle stand ready to support the system if needed. However, Draghi is also likely to remind governments forcefully that they must contribute to the solution and that the ECB can only accommodate what in the end is a political process.
Growth outlook (a lot) more uncertain
Growth at the beginning of the year was somewhat stronger than we had expected and the Euro area economy 'only' managed to stagnate, after a small decline in economic activity at the end of last year. Stronger than expected numbers out of Germany and Spain - although the Spanish economy still contracted by 0.3%qoq - were the main reason for this, more than offsetting a negative surprise in Italy.
However, the latest monthly indictors coming out of the Euro area suggest that the economy is losing momentum again and our Current Activity Indicator, which uses information up to April, is consistent with a small decline in GDP. The May business surveys imply this downward trajectory continued last month (for more on the outlook see our latest European Views).
In the May introductory statement, the ECB’s Governing Council's view was that the “latest survey indicators for the euro area highlight prevailing uncertainty. Looking ahead, economic activity is expected to recover gradually over the course of the year”. This outlook, according to the Governing Council, “continues to be subject to downside risks”. We think the June statement will now acknowledge that an easing in economic activity during the summer is likely, but will at the same time still expect an improvement by the end of the year. Thus, we expect “gradual recovery” to remain part of the Governing Council’s main scenario.
We also expect the deterioration seen in the data since March to be reflected in a downward revision of the June staff projections. While a revision to our more pessimistic outlook for Euro area growth of -0.5% for this year seems unlikely, we could see the staff now forecasting – after -0.1% for 2012 in March – a more pronounced weakness in the coming two quarters, leading to an annual growth forecast of around -0.3%.
A downward revision of the 2012 annual figure to around -0.3% would imply that the ECB’s staff expect the current weakness to be temporary, followed by a stabilisation by the end of the year and a return to positive growth in 2013. Next year’s growth forecast of +1.1%, in this scenario, is unlikely to be changed much (GS: +0.4%).
A more significant change in the staff projections would signal a more fundamental reassessment of the current situation, and would also, everything else equal, make further policy easing - including a reduction in rates - more likely.
As far as the inflation outlook is concerned, the May statement saw inflation staying above 2% in 2012, but “over the policy-relevant horizon, we expect price stability to remain in line with price stability" and “risks to the outlook for HICP inflation rates in the coming years are still seen to be broadly balanced”. This risk assessment is unlikely to change, although we could see the Governing Council signaling a small reduction in the underlying inflationary pressures by deleting “still” from the sentence in the statement describing the risk assessment.
The somewhat more benign outlook for inflation should also be reflected in a moderate downward revision of this year's forecast of 2.4% on the back of weaker growth and lower energy prices (for example, back in March the staff assumed a price for Brent crude oil of US$115 for this year) and a broadly unchanged figure for next year (+1.6%; GS: 2.4% in 2012 and 1.9% in 2013). Again, a more substantial downward revision of inflation would signal a fundamental reassessment of the outlook for the Euro area.
ECB to remain on hold in our base case scenario...
ECB actions remain to a great extent conditional on developments in the periphery at this point, and on the implications these events will have for the wider Euro area and the financial system. Ultimately, it is the implications for the Euro area as a whole that the ECB cares about. Our base scenario foresees a 'muddling-through' in Greece, with the newly elected government unlikely to choose an exit from the Euro or implement the EU/IMF programme unconditionally. Meanwhile, it is likely that Spain will eventually have to ask for external financial help to support its banking system. All this is likely to be accompanied by slow progress – mostly consisting of announcements – on deeper policy integration and the building of higher financial firewalls.
We expect the ECB to keep rates on hold in this 'muddling-through' scenario. That said, the ECB will stand ready to provide liquidity to banks, as it has in the past, and we expect the ECB to extend the deadline up to which it will operate its current full-allotment regime in its refinancing operations significantly, potentially until the end of the year. Emergency Liquidity Assistance (ELA) should be the main tool through which additional liquidity needs will be met (see our European Daily Comment from May 31 for more details).
President Draghi is likely to be asked during the press conference about the preparations the ECB has made in the event Greece leaves the Euro. While Draghi will probably simply say that the ECB expects Greece to remain part of the Euro area, he may want to use this opportunity to stress the ECB’s willingness to support banks in the event of a liquidity shortfall.
...but would come out in force if needed
We could see the ECB engaging in a wide range of non-standard measures in order to safeguard the system should events turn out to be more disruptive. Liquidity measures such as additional LTROs, possibly beyond 3 years, and a further widening of the collateral framework would be part of the ECB’s response to a sharp rise in tensions on the back of, for example, a disorderly Greek exit from the Euro.
Outright purchases of financial assets are also conceivable in such a scenario. The hurdle for reactivating the SMP seems high at this point and several Governing Council members have been sceptical about whether the SMP would fall within the ECB’s mandate and about the overall effectiveness of the programme. Moreover, with the EFSF now in a position to buy government debt in the secondary market, the ECB is unlikely to be eager to use its balance sheet to stabilise peripheral yields.
The ECB could therefore consider outright purchases in other market segments, including bank debt. But depending on the sharpness of such moves, the SMP may very well be reactivated on short notice.
Political coverage necessary
Implicit or explicit approval by Euro area governments would be required for the ECB to engage in a new round of additional support measures in a disruptive scenario. Whether this support for the ECB would take the form of a common declaration by governments or individual statements is difficult to say. But whatever shape or form such political backing took, it would clearly increase the ECB’s effectiveness in dealing with the situation. Our view remains that, at least for the time being, the ECB has to play a leading role in stabilising the system given that it can operate more quickly and more effectively, given the many political constraints governments face. A genuine long-term solution, however, falls once again in the domain of governments.
http://www.telegraph.co.uk/finance/debt-crisis-live/9311334/Debt-crisis-Live.html
( Dutch reiterates no desire for deposit insurance scheme or common eurobonds - just like Germany )
13.23 The Dutch, like Germany, are not keen to share load when it comes to eurozone bank debt. Dutch Prime Minister Mark Rutte said on Tuesday he was not in favour of introducing a European deposit guarantee scheme. He told partliament:
What we also don't feel the need for is introducing a European deposit guarantee scheme now.
He also reiterated his opposition to common eurozone bonds or the use of EU bailout funds to directly capitalise banks.
13.10 Spain's woes have left more banks dependent of ECB support, with weekly funding more than doubling.
The ECB's weekly offering of limit-free 7-day funding on Tuesday saw a total of 96 banks take €119.4bn. This is the highest since the second of its two 3-year injections at the end of February and more than double the €51.2bn taken a week ago
Money market traders, who had expected only around €50bn to be borrowed, put the surprise leap down to a combination of Spain's woes, recently blacklisted Greek banks coming back into ECB operations and lower recent uptake of three-month ECB funding.
12.20 The G7 finance ministers should be well into their emergency conference by now. Sources are telling Reuters that it is likely to be a "German bashing session".
The source says ministers would discuss the situation in Spain and confirmed that Germany was pushing Spain to accept an EU rescue to help it recapitalise its stricken banks, adding:
They don't want to. They are too proud. It's fatal hubris.
Although, Spain has done an about-turn today on taking outside help. Spanish Treasury Minister Cristobal Montoro admitted (see entry at 9am) for the first time that European “institutions” should help shore up the nation’s lenders. He said Spanish banks don’t need “astronomical figures” to recapitalize so European institutions should "open up and help us".
This is not what the Prime Minister Mariano Rajoy was saying just days ago. So, either there is something in this or the government is divided.
German Finance Minister Wolfgang Schaeuble said in an interview with the Handelsblad today that Germany is open to closer European coordination to resolve the euro area’s banking troubles. But usually in Germany this mean tighter supervision not centralised bailing out of troubled lenders. So maybe don't hold your breath for a resolution to this crisis just yet.
http://www.zerohedge.com/news/overnight-sentiment-more-economic-deteuroration
Overnight Sentiment: More Economic DetEUROration
Another day, another set of disappointing European economic data. While the final Euroarea Composite PMI index increased by one tick from the 45.9 Flash reading to 46.0 in the final, the prior revision was also upward from 46.5 to 46.7 thereby indicating that while things had not necessarily deteriorated much in the past 2 weeks, they did relative to benchmark.
As Goldman explains: "The final reading of the Euro area May Composite PMI was revised upwards marginally to 46.0 after a flash reading of 45.9. The level reached in May is consistent with a small decline in Euro area activity (-0.1%-0.2%qoq). Together with the final reading of the Composite PMI, the May Services PMI was also released today. Compared with the flash reading, the final figure was also revised upwards (46.7 after 46.5). The broadly stable reading of the final Services PMI when compared with the flash suggests that business activity in the Euro area has not deteriorated further over the last two weeks (given that the final reading incorporates more up-to-date information). Looking at the country figures, the Services PMI declined further in Germany, France and Spain. In Italy, the Services PMI saw a small increase in May after a large decline in April. It remains to be seen, however, whether the May reading is indicative of a stabilisation, or simply a pause before the downward trend is resumed in June."
- Germany: 51.8 in May after 52.2 in April
- France: 45.1 in May after 45.2 in April
- Italy: 42.8 in Amy after 42.3 in April
- Spain: 41.8 in May after 42.1 in April
Also minutes ago German April factory orders printed at -1.9 on expectations of a -1.2 decline, and coupled with the prior revision from 2.2% to 3.2%, this confirms that the peripheral shakedown in Europe is impacting the core countries, as well as non-Eurozone targets increasingly more. This was confirmed when looking at the spread of domestic vs foreign orders. Again, per Goldman: "Domestic orders rose 0.4%mom after +1.8%mom, while foreign orders declined -3.6%mom after +4.4%mom. Within foreign orders, orders from the Euro area declined 1.8%mom after +0.9%mom, continuing the downward trend. Foreign orders from outside the Euro area declined +4.7%mom after +6.6%mom, still showing an upward trend (see chart below). There is no indication in these data that activity in the German manufacturing sector saw a sharp deterioration in Q2. Business sentiment, however, suggests that the sector is likely to lose some momentum going forward." Which means that once again, everyone's attention is now focuses on what external help can come: either from the G7 phone call in minutes, which will be a disappointment, or the ECB on Thursday, which we are confident, will also be a whimper, not a bang. As a reminder: there must be blood in the streets for coordinated intervention by both banks and fiscal authorities in Europe, for it to be effective.
German manufacturing orders continues sliding...
... As the world becomes less hospitable to German production:
Regarding Euro PMI: European GDP must be sweating it:
The Core distinction is increasingly becoming burred:
Finally, interest rates need to drop... But can they?
BREAKING….Eurozone monthly sales trend TEN times worse than expected
Aggressive reality cancer hits EuropeEuropean slump seen to be accelerating exponentially
The Eurozone’s April retail sales were down a full 1% compared to the March figure. The ‘expected’ fall was -0.1%. Year-on-year, the number predicted was -1%. The actual figure has come in at -2.5%.
These figures are open to just the one interpretation. Think about this:
1. Expectations of a one per cent fall between 2012 and 2011 show the half-asleep eurocrats again hoping that (a) annualised declines would be 2.5 times slower than they really were; and (b) that the latest deceleration would be ten times slower than it was.
2. Far from decelerating, the rate of decline is in reality increasing dramatically: that rate of acceleration is now seen to be fourfold in twelve months.
Just averaging that out versus 2011/2010, it means all the projections for 2013-15 are complete nonsense. The train is heading for the cliff, the brakes are shot, and the driver jumped out some miles back.
Every Troika analyst, central banker an Exchequer boss in the Western World needs to think again. These figures are disastrous, and will start to spook (and spike) every Sovereign bond market in Europe.
Yes, it’s another triumph for Pristine Lowgrade & the Troikanauts.
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