http://www.zerohedge.com/news/and-todays-market-ramp-comes-courtesy
Submitted by Tyler Durden on 06/21/2012 14:52 -0400
Submitted by Tyler Durden on 06/21/2012 13:56 -0400
And Today's Market Ramp Comes Courtesy Of...
... The Eurogroup, which according to various newswires has informally decided to use the EFSF for Spanish financial sector bailout, likely to be transferred to the ESM later according to sources.
It seems that now they are not even trying. Like yesterday when the market idiotically ramped when Merkel said that the ESM and EFSF can do... what they are designed to do, namely buy bonds, so today, we "discover" that because the ESM is actually non-existent, and will be delayed as reported earlier due to German bickering, Europe will be stuck with the far smaller EFSF, which by the way has about €200 billion in dry powder left.
And this ramps the EURUSD by a whopping 40 pips. Thank you flashing red headline for giving another short-term shorting entry point.
and wonder why the accounting firms report ( allegedly done but not to be released until September - does Spain need time to ratchet down expectations )
What Oliver Wyman Really Said About Spain's Banks
The 'real' results from Oliver Wyman's stress tests are out, via Bloomberg, and there are some skeptical conclusions at best. Theexpected loss for Spanish banks under the adverse stress test scenario is €253-274 billion (and EUR 173-194 billion under the base-case). The announced capital deficit under the stress scenario of €51-62 billion assumes some rather interesting items:
- The expected loss is offset by €98 billion of exiting provisions (which will have to be offset by something and if deposit outflows continue, instead of reverse, then this merely accelerates the under-capitalization); and
- New profit generation of €64-68 billion seems remarkable for a banking system which is inextricably tied to its sovereign and entirely bust itself
- We won't even speculate how a broke banking system can have a €33-39 billion "excess capital buffer"
It seems clear that adjusting these for any sense of reality means the real loss (or capital deficit) will be well north of the EUR 100 billion assigned to the country. We only wonder if Oliver Wyman was paid, as they should be, in stock of Spanish bank STD, vesting over the next 3 years.
And just so the message is not lost, we repeaet it: the insolvent Spanish banking system is expected to generate up to €65 billion in profits! Yet according to MSCI, the market cap of the entire Spanish banking system is.... €91.82 billion.You can't make this shit up... (thanks to the Supreme Court we can now swear)the full report:and......http://www.zerohedge.com/news/beggars-are-choosers-greece-calls-troikas-bluff
Beggars Are Choosers As Greece Calls TROIKA's Bluff
Submitted by Tyler Durden on 06/21/2012 10:24 -0400
Greece's newly confident coalition party has issued a list of zee-demands, via Bloomberg:- *GREEK COALITION PARTIES AGREE ON POINTS FOR BAILOUT TALKS
- *GREEK COALITION PARTIES AGREE ON STATE ASSET SALES
- *GREECE TO PRESS TROIKA ON NO JOB CUTS IN PUBLIC SECTOR
- *GREEK COALITION PARTIES WANT TO RETRACT CUT TO MINIMUM WAGE
- *GREECE TO PRESS TROIKA ON NO FURTHER WAGE CUTS FOR 2013-2014
and of course TROIKA will be happy to comply, in exchange for some of that shiny yellow stuff (as we noted here). Though we have a response already:
- *DE JAGER SAYS GREECE HAS NO ALTERNATIVE TO PAINFUL CUTS
- *DE JAGER: THERE WILL BE NO SOFTENING OF CONDITIONS FOR GREECE
- *DE JAGER SAYS ROOM FOR GREECE IS EXTREMELY LIMITED
- *DE JAGER SAYS WE SHOULDN'T SPECULATE ON MORE TIME FOR GREECE
Finally, as a reminder from February, here is how this entire circus unwinds:Negative Salaries, Negative Bailout And Now Negative Gold - Greece Just Became The Bankster's ParadiseWhile Iceland is now known as the country that is the closest earthly approximation tobanker hell, it is safe to say that Greece is the terrestrial equivalent of banker heaven. Because as explained earlier today, the country's population is about to get a worse deal than your average run of the mill slave - they may get whipped, but at least never have to pay for the privilege, unlike the Greeks. Hence negative salaries. As also explained, the European bailout of Greece, is now formally a Greek bailout of Europe, funded by the country's already negative primary surplus, or better said - deficit (don't try to make mathematical sense of that - a scene out of Scanners is guaranteed). Hence, negative bailout. But the piece de resistance, and the reason why Greece is the in situ version of bankster heaven is the news from the NYT thatGreece is also about to have negative gold.
and three article Monti follows below.......... card one
Ms. Katseli, an economist who was labor minister in the government of George Papandreou until she left in a cabinet reshuffle last June, was also upset that Greece’s lenders will have the right to seize the gold reserves in the Bank of Greece under the terms of the new deal.Well, they may be broke, and they may be bailing out Europe, but at least they'll have no gold: sounds like a sweet deal - it makes perfect sense that Greeks are taking every incremental humiliation from a syndicate of few fat, bald types who have access to a digital money printer, with the supine determination of an Oliver Twist.http://globaleconomicanalysis.blogspot.com/2012/06/monti-begs-germany-to-stabilize.htmlMonti Begs Germany to Stabilize Interest Rates; Merkel Pours Cold Water On "Theoretical Discussions"; Italy Official Denial #1; Why Monti's Days Are Numbered
Why shouldn't she pour cold water on the idea? The only way to stabilize rates in Italy and Spain is to destabilize them in Germany.The G-20 summit is over. As expected, the two-day summit produced nothing but bickering.
On day one, European Commission president Jose Barroso kicked things off by sniping at a Canadian reporter and blaming the US for Europe's problems.
UK Independent Party (UKIP) leader Nigel Farage responded by calling Barroso a "delusional idiot".
For a highly entertaining video of Farage's tongue lashing, check out Nigel Farage: "EC president Jose Barroso is a Delusional Idiot, The Whole Thing's a Giant Ponzi Scheme!"
Merkel Ambushed
On day two, French president François Hollande and Italian technocrat prime minister Mario Monti combined to Ambush German Chancellor Angela MerkelAngela Merkel, German chancellor, is well accustomed to turning up at international events to receive lectures on how to solve the eurozone’s crisis, but at the Group of 20 in Los Cabos the meeting turned into an ambush.
This time, the rebellion against Ms Merkel came from within the eurozone. Mario Monti, who last year received Ms Merkel’s imprimatur after succeeding Silvio Berlusconi as Italy’s prime minister, suggested the eurozone’s €440bn rescue fund should be used to drive down rocketing borrowing costs for both Spain and Italy.
Mr Monti denied Italy was about to seek help, but confirmed there were ongoing discussions about ways to reward “virtuous countries”, such as Italy and Spain, that are nevertheless being punished by financial markets.
“The idea is to stabilize borrowing costs, especially for countries who are complying with their reform goals, and this should be clearly separated from the idea of a bailout,” Mr Monti told a press conference.
The proposal was quickly seized upon by François Hollande, the new French president who has shown no compunction about publicly disagreeing with Ms Merkel about her crisis management plans since he assumed office last month.Ms Merkel quickly left the summit on Tuesday evening with only brief comments to the media. But back in Berlin on Wednesday, she insisted such discussions were only theoretical and German officials attempted to pour cold water on the idea.
Official Denial
Please note the "official denial" from Italy: "Mr Monti denied Italy was about to seek help." A few more of those denials and it will be 100% clear Italy will "seek help".
How many official denials were there in Spain before it happened? I recall at least a half-dozen in the span of a week, and dozens in the preceding month.
Monti Begs Germany to Stabilize Interest Rates
Also note the self-serving interests of Monti, practically begging (with help from Hollande) to stabilize borrowing costs of “virtuous countries”, such as Italy and Spain.
Monti claimed there were "ongoing discussions" on doing just that. Indeed there were. Alas, those discussions were led by "delusional idiots" including European Commission president Jose Barroso and Herman Van Rompuy, president of the European Council.
Merkel once again poured cold water on the ideas, calling them "theoretical".
Questions of the Day
Might I ask why there needs to be a European Commission and a European Council, each with their own president and staff?
Are two delusional idiots better than one?
Why not a European Committee as well? That way we could have three "EC" presidents.
Why Monti's Day's Are Numbered
To understand why Monti's days are numbered, one only need look at a pair of polls, the first in November 2011, the second one a few days ago.
Please consider this now-humorous headline from November 20, 2011:Everybody Loves Mario MontiAccording to a new survey conducted by polling company Demos for daily newspaper La Repubblica, 80% of Italians support his new technocratic government. An even higher proportion, 84%, approve of Monti personally.
Now consider this this June 15, 2012 article: Monti's approval rating falls to new lowMonti's approval rating dropped 1 percentage point to 33 percent by mid-June compared to the start of the month, after falling steadily from a high of 71 percent when he became prime minister last year, the SWG-Agora poll showed.
Beppe Grillo's Five-Star Movement Now Second Largest PartyWhile everyone was glued to the elections in Greece, far more significant events were happening in Italy and France.
When asked how effective Monti's government is, three quarters of those polled said "not much" or "not at all". Monti's technocrat government took over from Silvio Berlusconi last year to try to transform the economy and avert a Greek-style debt crisis.The poll also showed a rise in the number of people who planned to vote for comedian Beppe Grillo's Five-Star movement, which has become Italy's second most popular party after dealing a stunning blow to traditional parties in local elections in May.
Twenty-four percent said they would vote for the center-left Democratic Party (PD), up from 23.2 percent. Voter support for Silvio Berlusconi's People of Freedom (PDL) party fell to 15 percent from 15.4 percent.
About 21 percent of survey respondents said they would vote for Grillo's movement, up from 20.2 percent earlier in June.
Support for Grillo is at 21 percent, support for PD is 23.2 percent. All it will take is a mere two percentage point shift to put Five Star in the lead.
Why Italy May Exit the Euro Before Spain
To understand the significance of the Five Star Movement, please read Six Reasons Why Italy May Exit the Euro Before Spain; Ultimate Occupy Movement.
The article discusses the Five Star movement from the perspective of reader "Andrea" who is from Italy but now lives in France.Grillo's personal opinion (not a mandate for the Five Star Movement) is for Italy to get out of the Euro and default on debt.
Socialists Take Over French Parliament
For more about France, please see Greek Election Sideshow; Socialists Win Absolute Majority in France
Early Elections
The nannycrats in Brussels (assuming they are paying attention which is of course debatable) are no doubt in huge fear of early elections in Italy. On June 4, 2012 Reuters reported Pressure grows in ruling Italian party for early electionPrime Minister Mario Monti no longer has the backing in parliament to adopt more reforms and Italy should consider holding an early election before the year-end, the economic spokesman for a major ruling party told Reuters on Sunday.
Four Front Battle
"In this political context and with this parliament, Monti does not have the strength to carry out more reforms," said Stefano Fassina, economic spokesman of the centre-left Democratic Party (PD), one of the two main parties Monti depends on for his majority.
"We should verify quickly if there is any chance of reforming the electoral law and if that doesn't work we should consider the possibility of bringing forward the budget law for 2013 and voting in the autumn," he said in an interview.
On Friday, Berlusconi said Italy should leave the euro unless the European Central Bank agreed to pump more cash into the economy, only to play down his remarks the next day as a "joke".
Note the brewing four-front battle: Italy, Spain, France, Greece. Of those, Italy is the most crucial.Time is not on the nannyrats' side.The longer the delay before an election in Italy, the more strength the Five Star movement will gather.
“See you in the next Parliament” said Beppe Grillo said after the local elections in May.
Let's hope so.and card number two of three article Monti .....http://www.guardian.co.uk/business/2012/jun/22/mario-monti-week-save-eurozoneMario Monti: we have a week to save the eurozone
Italian prime minister warns that there is no room for failure in talks between single currency's big four countries
Italian prime minister Mario Monti has spoken of the potentially disastrous consequences of the collapse of the eurozone. Photograph: Edgard Garrido/ReutersItaly's prime minister, Mario Monti, has warned of the apocalyptic consequences of failure at next week's summit of EU leaders, outlining a potential death spiral whose consequences would become more political than economic.The Italian leader is to hold talks with Chancellor Angela Merkel of Germany, the French president, François Hollande, and Spain's prime minister, Mariano Rajoy, in the hope that the single currency's big four countries can pave the way for a breakthrough at next week's meeting.Speaking to the Guardian and a group of leading European newspapers, Monti said that, without a successful outcome at the summit, "there would be progressively greater speculative attacks on individual countries, with harassment of the weaker countries". The attacks would be focused not only on those who had failed to respect EU guidelines, but also on those like Italy, which he said had abided by the rules "but which carry with them from the past a high debt".Monti warned: "A large part of Europe would find itself having to continue to put up with very high interest rates that would then impact on the states and also indirectly on firms. This is the direct opposite of what is needed for economic growth."Outlining the result of a failure at the talks, Monti said that, faced with creeping economic paralysis, "the frustration of the public towards Europe would grow", creating a vicious circle. "To emerge in good shape from this crisis of the eurozone and the European economy, ever more integration is needed," said Monti. Yet, if the summit failed to resolve the problems quickly, "public opinion, but also that of the governments and parliament… will turn against that greater integration".Monti said he could see the beginnings of the process "even in the Italian parliament, which has traditionally been pro-European and no longer is".He made his remarks hours after his predecessor, Silvio Berlusconi, acknowledged that his party had bled support because of its backing for the Monti government's unpopular budgetary measures and spoke openly for the first time of the electoral advantage it could derive from torpedoing Monti's non-party cabinet of technocrats.Monti signalled that the key eurozone leaders were working on a plan designed to halt the spread of debt contagion while satisfying Germany's refusal to sanction financial irresponsibility. The plan, he said, was one of the "absolutely necessary" outcomes of next week's summit.The first outcome, he said, would be a clear sign of the eurozone's willingness to integrate further "in such a way that Europeans know where they're going… [and] the markets are convinced that, having given birth to the euro, the will [of the member states] to make it indissoluble and irrevocable is there and will be strengthened by other steps towards integration".He warned: "There may not be – indeed, there will not be – a fully-fledged, detailed blueprint, but there will some strong elements and a short road – I hope short, a few months – to get from there to the overall project."Other minimum requirements were "a fuller banking union, with advances in terms of integrated, and if possible unified, supervision"; "a European deposit guarantee" system; and the plan that will be on the table on Friday for "new market-friendly policy mechanisms" to help out countries under attack – provided they had complied with EU demands for fiscal discipline.On Thursday figures indicating that the eurozone is slipping into recession heightened fears that Italy will follow Spain in asking Brussels for rescue funds. Only a strong performance from Germany stopped the currency union from contracting in the first quarter. But separate data showed the German private sector suffered a severe downturn in May, made worse by a slump in manufacturing.The German services sector continued to expand, but this solitary piece of good news is unlikely to keep the eurozone from recession in the second quarter, especially after both manufacturing and services contracted in France.Elsewhere, the US suffered a slowdown in growth across the manufacturing sector and China registered its eighth consecutive contraction in production.Without recourse to strongly growing export markets, Italy can expect to see its growth hit for another year, analysts said.Monti said the proposed new mechanism would kick in "when there is a recognition by the European authorities of respect for the rules on public finance and structural reforms". Making intervention conditional on good behaviour could offer a way of providing relief for countries like Italy and Spain, while meeting German demands for fiscal discipline.Monti avoided giving details but said he was "very favourable" to the purchase of the bonds of countries under attack. The present system, of assistance to the banking sector by way of the state, led to an increase in public debt that raised the yields – and cut the value – of government bonds, which in turn weakened the finances of the banks, creating "a disagreeable spiral… That is why measures to de-couple this are being studied", he said.and article three......http://www.telegraph.co.uk/finance/financialcrisis/9347924/Debt-crisis-desperate-Monti-needs-Merkel-summit-deal-to-stop-revolt-at-home.htmlDebt crisis: desperate Monti needs Merkel summit deal to stop revolt at home
Italy's technocrat government risks a parliamentary mutiny unless premier Mario Monti can secure major concessions from Germany at a crucial summit of the eurozone's Big Four powers in Rome on Friday.
8:23PM BST 21 Jun 2012"Monti is desperate. Reform fatigue has breached breaking point," said a top Italian official. "There is a feeling here that the euro is basically dead already. Unless Germany offers a road map out of this crisis, Monti is not going to be able to hold it together much longer."The main Left and Right parties have until now backed Mr Monti's fiscal squeeze – a net tightening of 3.2pc of GDP this year – and radical reform of pension and labour markets.The implicit trade-off was that Brussels and the European Central Bank would in return intervene to keep the bond vigilantes at bay, if necessary. Germany has so far blocked such action. Yield spreads of 10-year Italian bonds over German Bunds neared a record 500 basis points last week.Party leaders fear an electoral massacre akin to the PASOK defeat in Greece if they back further austerity with no reward. Dissidents are near open revolt."We will back Monti in spite of difficulties until the summit: after that it will depend on Angela Merkel," said Angelino Alfano, secretary-general of the dominant Peoples of Liberty Party (PdL).He said refusal to activate the ECB as a lender of last of resort is the cancer eating away at the system. "Mr Monti, tell Merkel that if Germany continues to act as it is, the Italian parliament could react badly," he saidThe soft-spoken Professor Monti – flanked by French president Francois Hollande and Spanish premier Mariano Rajoy – is unlikely to be so blunt. Yet he has lured German Chancellor Angela Merkel into a Latin ambush, symbolically staged in the seat of Roman power.The unspoken message is that Germany does not command a majority vote at Europe's high table and can no longer rely on the Franco-German axis to impose its will. The deal agreed by the quartet in Rome – if there is one – will largely dictate the final EU response to the crisis next week in Brussels.The so-called Monti Plan includes a call for the mobilisation of the eurozone's bail-out funds (EFSF and ESM) to cap the borrowing costs of "virtuous" countries shut out of the bond markets due to contagion, without having to request a formal rescue or submit to EU commissars.Mrs Merkel gave the idea a chilly reception at the G20 summit in Mexico though said it might be "possible".The fund already has powers to buy sovereign debt "premptively" on the open market. The dispute is over whether Germany will stand behind a commitment it has already made, and on what terms.Berlin fears that the term "virtuous" could prove elastic, even if Italy qualifies right now. Spain is a borderline case after dragging its feet on bank closures.Piecemeal intervention at this stage would be worse than useless. It would subordinate other creditors and quicken the exodus from Italian and Spanish bonds. Any action would have to be overwhelming. That would be a hard sell in the German Bundestag, where feelings have hardened."We reject any form of debt mutualisation," said Volker Kauder, the Christian Democrat leader in parliament. "That is against German and European law. I don't think there would be any majority in the Bundestag for a change to the constitution, and certainly not among our citizens."Yet the mood is hardening just as fast in Italy. Former finance minister Antonio Martino is calling openly for Italy to withdraw from EMU and regain sovereign control over monetary policy.Former premier Silvio Berlusconi said his PdL party would hold a forum in mid-July with "nobel prize winners" on whether Italy should return to the lira. "It is not blasphemy to talk of leaving the euro," he said in carefully scripted remarks.Mr Berlusconi said the eurozone's weaker states may have to revert to national currencies if Germany refuses to let the ECB back-stop the financial system."It would have its advantages, because devaluation would allow us to export more," he said. "We will finish up in a worsening recessionary spiral if we keep going with Mrs Merkel's policies."There is mounting bitterness in Italy that it has been pushed deeper into crisis by the perverse mechanisms of the euro itself. The country is clearly not a basket case on any measure.It will have a primary budget suplus of 3.6pc of GDP this year, and 4.9pc next year, the best in the G7 bloc.Combined public and private debt is 260pc of GDP, similar to Germany and much lower than France, Spain, or the UK. With private wealth of €8.6 trillion, Italians are richer per capita than Germans.Italy scores top on the IMF's long-term debt sustainability indicator at 4.1, ahead of Germany 4.6, France 7.9, the UK 13.3, Japan 14.3, and the US 17.The country has been through a decade of stagnation, with growth averaging just 0.6pc, but that would not normally cause a bond market crisis.Critics say the eurozone's policy of combined fiscal and monetary contraction is what is doing most damage to Italy's debt trajectory.Citigroup says the double-dip recession will push public debt from 123pc last year to 137pc by 2014, beyond the point of no return in a fixed exchange system. It is this that is frightening investors.Italy is well able to survive and flourish on its own with a sovereign currency. While Mr Monti will not be uttering such heretical words in Mrs Merkel's ear at the Palazzo Madama, others are saying it ever more loudly in the Italian parliament.and.....http://www.telegraph.co.uk/finance/financialcrisis/9348292/IMF-unveils-its-blueprint-to-salvage-the-stricken-euro.htmlIMF unveils its blueprint to salvage the stricken euro
The International Monetary Fund has directly confronted Germany by urging the eurozone to take a "determined and forceful move" to "complete economic and monetary union" by sharing government debt and underwriting failing banks.
11:55PM BST 21 Jun 2012The IMF's intervention is timed to tip the balance against Angela Merkel at a critical summit between Germany, France, Italy and Spain in Rome today where the embattled German Chancellor will be fighting off identical demands.Christine Lagarde, the IMF's managing director, last night unveiled the blueprint to save the euro while warning that the EU's single currency was under "acute stress" that threatened "the viability of the monetary union itself"."We are clearly seeing additional tension and acute stress applying to both banks and sovereigns in the euro area," she said."With that in mind, 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."Germany is opposed to almost every single element of the IMF measures, including "common debt", a European deposit guarantee scheme, a single banking resolution fund, sovereign bond purchases by the European Central Bank and direct aid by euro bail-out funds to struggling financial institutions.
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