http://www.zerohedge.com/news/issue-moments
Submitted by Tyler Durden on 07/24/2012 08:27 -0400
-Otto Waalkes, famous German comedian
and.....
http://hat4uk.wordpress.com/2012/07/24/moodys-downgrades-eu-creditors-its-the-beginning-of-the-end/
http://globaleconomicanalysis.blogspot.com/2012/07/spanish-finance-minister-in-germany.html
and...
Representatives of Greece’s troika of lenders were due in Athens on Tuesday to begin the last phase of their inspection before producing a report on Greece’s fiscal program that could decide whether the country will receive any more loans.
The government was searching for 2.5 billion euros more in savings to meet the target of 11.5 billion set by the troika fro 2013 and 2014.
The effort to finalize the 11.5-billion-euro package is broadly based on a report by the Center of Planning and Economic Research (KEPE) which recommends a range of measures, including setting a ceiling on pensions, worth an estimated total of 5.1 billion euros
The combined efforts of the various ministries added another 3 billion euros to the running total with an additional 1 billion euros reportedly scraped together in a meeting chaired by Finance Minister Yannis Stournaras on Monday.
Prime Minister Antonis Samaras is due to meet the leaders of the two other parties in his coalition government, PASOK’s Evangelos Venizelos and Democratic Left’s Fotis Kouvelis, on Thursday afternoon to discuss the cuts.
Samaras is due to meet the troika officials on Friday, a day after they hold talks with Stournaras.
The meetings come amid growing concern about a possible Greek euro exit. Ratings agency Moody's cited late on Monday an increased chance that Greece could leave the eurozone, which «would set off a chain of financial sector shocks ... that policymakers could only contain at a very high cost."
It also warned that Germany and other countries rated 'AAA' might have to increase support for troubled states such as Spain and Italy that are struggling to finance their deficits.
The burden of that support would fall most heavily on the euro zone's top-rated states, it said.
Moody's said the outlook for Germany's AAA credit rating is negative, the first step towards a possible downgrade.
and....
http://www.zerohedge.com/news/spain-not-uganda-increasingly-looking-vigilante-hell-2-year-666-10-year-76
Submitted by Tyler Durden on 07/24/2012 06:41 -0400
We believe that the regional liquidity fund that has been implemented is sufficient to tackle any difficulties the regions may have.
The Issue Of 'Moments'
Via Mark Grant, author of Out of the Box,
“What’s on your mind; big boy?”
-Otto Waalkes, famous German comedian
It was inevitable and despite all of the usual huffing and puffing on the Continent; the moves are correct. First Egan-Jones and then Moodys and Germany is downgraded or threatened with a downgrade and for sound reasons. The German economy is $3.2 trillion and they are trying to support the Eurozone with an economy of $15.3 trillion that is in recession and rapidly falling off the cliff. There is just not enough German capital to support the entire enterprise and the ratings agencies are finally taking note of the situation. Moodys also tapped the Netherlands and Luxembourg leaving only Finland with a stable outlook to maintain its “AAA” rating. By comparison the United States has an economy that is $14.3 trillion, that is 125% the size of all of our domestic banks while Germany is overshadowed by her banks, by the recession in Greece, Portugal, Spain and Italy and there is just not enough firepower to withstand the onslaught without consequences. It may be unpleasant but some parts of the equation were bound to give as a matter of economic necessity and it will be the ratings, Germany finding herself in a recession by the fourth quarter and an actual debt to GDP ratio that is getting stretched to well beyond 100% of the country’s resources. If the downgrades continue and are actualized then it will not just be the separate countries that are affected but the whole European construct that will lose its “AAA” status.
“In the end, you are exactly--what you are.
Put on a wig with a million curls,
Put the highest heeled boots on your feet,
Yet you remain in the end just what you are.”
-Mephistopheles
Germany is supporting at Target2 financing operation of over $800 billion, funding 27% of the operations at the EU including the EIB, the EFSF, the possible ESM and 22% of the $4 trillion balance sheet at the European Central Bank.Contingent liabilities which are not counted in the EU’s financial calculations are turning into real liabilities as money pledged to the EFSF has become actualized and as the demands of Spain with a first tranche of $125 billion for her banks, which must flow through the sovereign, enlarging soon as the Spanish banks and the Spanish regions are in quite serious trouble. Italy is also on the waiting list and with a real debt to GDP ratio of 202%, which includes their $211 billion in derivatives and their other contingent liabilities; the funding gap in Europe has gone from probable to actual as the demands of the periphery has shifted pledges of money to the necessity of handing over the money and real Euros, not just promises of them, are now being demanded.
“Even Hell hath its peculiar laws.”
-Faust
The Issue of Moments
We have had several Greek moments, an Irish Moment, a Portuguese Moment and now a Spanish Moment. I am constantly asked if there will be a Lehman Moment and this depends upon your definition of a Moment and the fear factor that accompanies it. Historically, if we note the demise of the Soviet Union, all of the countries that were included in this Bloc were part of the Soviet Union until the Moment when they were not but this occurrence had very little economic effect upon the United States and so was discounted as historical but not financially relevant. This will not be the case with the European Union and we are facing two specific Moments that may change the course of events. The first is Greece #3where the Troika report will be made public and funding will either be continued or not. Greece is demanding another $50 billion in capital or threatening to default on its obligations which total some $1.3 trillion. Greece could not pay back its debt if it stood on its head and spit olive oil and so it must either be debt forgiveness or the end of funding and the consequences that accompany it. Germany is being forced to choose and it looks like the IMF and the EU are just about to say, “Nein.” Debt forgiveness, in my view, is a non-starter in German politics and it appears as if the long and winding road is about to end.
The second Moment in our gun sights is Spain and with the largest region, Catalonia, who has an economy roughly equivalent to Portugal, supporting an eight year maturity that is now yielding 14.4% the situation for the Regions in Spain is no longer tenable and the prospect of a full blown Spanish bailout is all but assured in my opinion. On two fronts Europe is hitting the wall and the prospects are dismal so that two real and quite serious crunch times are close at hand. The firewall concept has failed, the ring fences have collapsed and the contagion is spreading like wildfire all across the Continent. There is a scant $65 billion left in the EFSF fund and the ESM is hung up in the German courts until September 12 so that the European flanks are fully exposed and I do not even think some sort of ECB intervention will stem the flow of blood that is spreading like a dark stain from capitol to capitol in Europe.
Each new European enterprise gives the markets a shorter and shorter bounce as we all watch the yields in Europe rise, the stock market’s fall and the Euro in serious decline against both the Dollar and the Yen. There has been no Lehman Moment to date but moment-by-moment the decline in the fortunes of Europe diminishes. There is almost no historical precedent where debt paid by the addition of more and more debt has been a successful operation. There is always the inevitable wall or walls and the concrete slabs of Greece and Spain fast approach.
“Misunderstandings and neglect occasion more mischief in the world than even malice and wickedness.”
-Goethe
and.....
http://hat4uk.wordpress.com/2012/07/24/moodys-downgrades-eu-creditors-its-the-beginning-of-the-end/
MOODY’S DOWNGRADES EU CREDITORS: It’s the beginning of the End.
Slog’s Bankfurt Maulwurf claims victory and vindication
Germany, the Netherlands and Luxembourg had the outlooks for their Aaa credit ratings lowered to negative by Moody’s Investors Service this morning, citing “rising uncertainty” about Europe’s debt crisis, the risk of Greece leaving the eurozone, and the growing likelihood of massive bailout bills in Spain and Italy. On the whole, they seem like pretty sound reasons to me.
The IMF has, as I predicted, written off Greece. The Greek elite is, in turn, not even trying to hide how little effort they’re exerting to put their own public sector feathered-nest in order. The managements of Greek state-run enterprises seem to be so forgetful, they forgot to implement government decisions concerning wages cuts for thousands of employees at state-run enterprises (DEKO) and other state bodies and organizations. And the Coalition itself omitted to pass the legislation forcing them to do it.
The Troika arrives in Athens today, and will be vociferous in pointing out the non-compliance. (I doubt if they’ll bother to mention that all the forgotten public sector cuts have been dumped onto the already flatlining private sector). It is just possible that the Troikanauts will say “That’s it, no more money”, but unlikely: with Spain and Italy in bond-yield intensive care, this would be bad timing.
Spain’s two-year bond yield saw its biggest one-day move since the eurozone debt crisis broke out in early 2010, closing at 6.53 per cent. “Spain is close to losing access to markets entirely,” said John Stopford, a senior fund manager at Investec Asset Management. “It’s not sustainable to borrow at these levels for very long.” He’s not wrong: Spain is entering the Greek Twilight Zone.
“You have seen the events of the last fortnight,” said The Slog’s long-standing mole in Frankfurt, “and I have last Spring predicted that the eurozone would shatter by the Autumn. Also that the banks and lawyers would stop Känzlerin Merkel. All this has happened, and [my interest group] is now reassured that the risk to German solvency is receding”.
In Berlin-am-Brussels, this time there is no emergency summit, no grandiose fantasy plan, no Zen Bazooka. It is disturbingly quiet on that front. Draghi over the weekend referred to the euro somewhat unrealistically as ‘irreversible’, but the decision doesn’t lie in Frankfurt’s ECB: it lies with Bankfurt Germans and Berliner politicians. Mario’s assertion is publicly contradicted by the growing weight of German policymakers who state that Greece has reached the end of the road – and should remove itself from the eurozone as soon as possible.
Until last week, it was the end of the beginning of Euroblown. Now it is the beginning of the end.
http://globaleconomicanalysis.blogspot.com/2012/07/spanish-finance-minister-in-germany.html
Monday, July 23, 2012 10:22 PM
Spanish Finance Minister in Germany Pleads for Temporary Credit Line to Halt an "Imminent Financial Collapse"
Spain faces a bond rollover of €28 Billion in October and is rightfully scared about 2-year bond rates of 6.5%.
El Economista notes the Spanish economy minister is at a meeting in Berlin to discuss Government Request for a Credit Line to Save the Year and forestall an imminent financial collapse.
This is a heavily Mish-modified translation from the article ....
El Economista notes the Spanish economy minister is at a meeting in Berlin to discuss Government Request for a Credit Line to Save the Year and forestall an imminent financial collapse.
This is a heavily Mish-modified translation from the article ....
Luis de Guindos will meet with Wolfgang Schäuble to negotiate measures noting the ECB is already 19 weeks without buying debt.
Eeconomy minister, Luis de Guindos, now travels to Germany for talks with German Finance Minister, Wolfgang Schäuble. The appointment is key because Spain is running out of time. With the 10-year bond about 7.5% and the risk premium on the 632 basis points, Guindos nevertheless insisted that Spain will not have to ransom all for a full sovereign bailout.
Instead, he asks for the European Central Bank (ECB) to resume purchases of Spanish bonds in the market.For starters, when it comes to these bailouts, there is no such thing as "temporary". Regardless, I believe Germany will reject the request, thereby forcing Spain into a full sovereign bailout.
Guindos believes Mario Draghi is not the problem. Rather, bond purchases have stopped primarily because Germany is opposed. To mutate this position and to convince Schauble to give permission to his emissaries at the ECB, Jörg Asmussen, and Jens Weidmann, Luis de Guindos traveled to Germany
Analysts are unanimous: An imminent financial collapse is at stake. If pressure on Spanish bonds continues and Treasury loses its access to the bond market, Spain cannot cope with the massive debt maturity that awaits him in October, close to the 28 billion euros. Amounts may be even greater if Spain has to funnel money to the regions requesting the help of special liquidity fund.
Therefore, sources close to the government have admitted they are considering other alternatives. For example, the negotiation of a temporary line of credit with which to address the maturity of its debt, and perhaps even financial assistance for Spain's regional governments.
This option is based on a premise well known in the eurozone, of buying time. A credit line would serve to dampen fears today, waiting for the agreements reached at the June summit, including the implementation of a single banking supervisor and an operational Stability Mechanism.
and...
Greece searches for 2.5-bln more in cuts as Moody's adds to concern
  |
The government was searching for 2.5 billion euros more in savings to meet the target of 11.5 billion set by the troika fro 2013 and 2014.
The effort to finalize the 11.5-billion-euro package is broadly based on a report by the Center of Planning and Economic Research (KEPE) which recommends a range of measures, including setting a ceiling on pensions, worth an estimated total of 5.1 billion euros
The combined efforts of the various ministries added another 3 billion euros to the running total with an additional 1 billion euros reportedly scraped together in a meeting chaired by Finance Minister Yannis Stournaras on Monday.
Prime Minister Antonis Samaras is due to meet the leaders of the two other parties in his coalition government, PASOK’s Evangelos Venizelos and Democratic Left’s Fotis Kouvelis, on Thursday afternoon to discuss the cuts.
Samaras is due to meet the troika officials on Friday, a day after they hold talks with Stournaras.
The meetings come amid growing concern about a possible Greek euro exit. Ratings agency Moody's cited late on Monday an increased chance that Greece could leave the eurozone, which «would set off a chain of financial sector shocks ... that policymakers could only contain at a very high cost."
It also warned that Germany and other countries rated 'AAA' might have to increase support for troubled states such as Spain and Italy that are struggling to finance their deficits.
The burden of that support would fall most heavily on the euro zone's top-rated states, it said.
Moody's said the outlook for Germany's AAA credit rating is negative, the first step towards a possible downgrade.
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and....
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http://www.zerohedge.com/news/spain-not-uganda-increasingly-looking-vigilante-hell-2-year-666-10-year-76
Spain Not Uganda - Increasingly Looking Like Vigilante Hell With 2 Year At 6.66%, 10 Year At 7.6%
- Bond
- Capital Markets
- Citigroup
- European Central Bank
- Germany
- Greece
- Ireland
- Italy
- Meltdown
- Portugal
- Reuters
- Risk Premium
Spain is not Uganda: this morning Spain is increasingly looking like the 10th circle of bondholder vigilante hell with its 10 Year trading at 7.59% after hitting a record 7.607% moment prior. The short end has blown out even wider and the 2 Year very appropriately at 6.66% and rising. Italy has also joined the party blowing out to just why of 6.5% and Italy's banks about to be halted across the board despite the short-selling ban. Next up: selling anything forbidden. Finally, the scramble for safety into Swiss 2 year notes accelerates as these touch a mindboggling -0.44%. There was no specific catalyst to lead to today's ongoing meltdown, but the fact that Spain just paid a record price for 3 and 6 month Bills is not helping: the average yield was 2.434 percent for the three-month bills compared with 2.362 percent in June and 3.691 percent for six-month paper compared with 3.237 percent. With each passing day, the selling crew is demanding the ECB get involved and stop the carnage. For now Draghi is nowhere to be seen as Germany continues to have the upper hand. After all recall just who it is that benefits from keeping the periphery on the razor's edge and the EURUSD sliding.
Some views on the 3 and 6 month bills via Reuters.
JOSE LUIS MARTINEZ, ECONOMIST, CITIGROUP, MADRID
"Good ratios, and at rates (that were) less than expected and at decent levels. It is clear that the Treasury can continue to finance itself at these levels, but the problem is private financing. That is to say, the Treasury can do it, but companies cannot."
ESTEFANIA PONTE, CORTAL CONSORS, MADRID
"It is a good result, with bid-to-cover ratios above those registered at the last auction, when the risk premium was 100 basis points below where it is now."
NICHOLAS SPIRO, SPIRO SOVEREIGN STRATEGIES, LONDON
"All things considered, the result is not so bad, especially since they are auctions of shorter-dated paper that Spain is counting on to retain market access.
"The most important takeaway from this auction is that Spain was able get all its debt out the door. Still, in March, Spain was able to issue six-month debt at a yield of under 1 percent, now it is paying 3.7 percent."
RICHARD MCGUIRE, STRATEGIST, RABOBANK, LONDON
"Yields have crept higher. They got the full amount issued, a shade more in fact. Yields at these levels are still considerably lower than the peaks we saw when crisis tensions last reached fever-pitch last November. But with the curve flat at around 7.5 percent from five years on and two-year yields already distinctly elevated..., this short-dated issuance is merely a sideshow."
MARC OSTWALD, RATE STRATEGIST, MONUMENT SECURITIES, LONDON
"It was largely as expected. People will be relieved it has come and gone. It is not going to change anything for Spain and it is not going to reverse the generally weak trend that we have seen. The fears about the euro zone aren't going to go away.
"The bills are less volatile...and the banks need (them) for balance sheet purposes. That is why they are not a brilliant indication of what is going on. Bonos are a better reflection of investor demand."
NICK STAMENKOVIC, BOND STRATEGIST, RIA CAPITAL MARKETS, EDINBURGH
"Spain raised the targeted 3 billion (euros), which provides a bit of a relief. But it shows that even at the very front end of the curve, the risk premium for Spanish bonds is rising ever higher.
"The spread between 5- and 10-years moved to negative today, which is a classic sign that the market thinks the current trends are unsustainable for Spain's fiscal dynamics.
"Yields are likely to continue to rise. We haven't seen the 2/10-year curve invert but that is just a matter of time. We have seen this in Portugal, Ireland and Greece. I think it is inevitable now that Spain will need a bailout. It is just a question of when rather than if."
and.........
http://www.telegraph.co.uk/finance/debt-crisis-live/9422024/Debt-crisis-live.html
09.29 The ongoing downturn in the eurozone has driven the rate of job losses to its highest level for two-and-a-half years, according to Markit's latest eurozone PMI survey.
Markit's flash eurozone manufacturing PMI fell to a 37 month low of 44.1 in July, compared with 45.1 in June. This is well below the 50 level that separates growth from contraction.
Services rose to a four month "high" of 47.6, which illustrates just how bad things are.
09.43 The results of the Spanish bond auction are in. In short, it managed to get the auction away, but at a high price.
The country sold €1.628bn of three month bills at average rates of 2.434pc, and €1.42bn of six month debt at average yields of 3.691pc.
This compares with 2.362pc and 3.237pc at the last auction in June.
09.47 Demand remained strong, with 3.02 bidders for every bond on offer at the six month auction, compared with 2.82 previously.
09.52 To put this into perspective, Spain is now paying more to service its debt over six months than Slovakia and the Czech Republic pay to borrow over ten years.
10.40 Spain has considered asking Brussels for a bridging loan to see it through to the end of the year, according to reports.
Sources close to the government told elEconomista that Spain would need a loan to avoid the "imminent financial collapse" that awaits the country in October when it has to roll-over €28bn of debt.
The credit line would "buy time" for the country, the sources said, and would provide breathing space while the eurozone's permanent bail-out pot, the European Stability Mechanism (ESM) was set up.
12.25 The €18bn fund being used to help struggling Spanish regions will be “sufficient,” an EU spokesman has said. Antoine Colombani added:
We believe that the regional liquidity fund that has been implemented is sufficient to tackle any difficulties the regions may have.
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