http://www.athensnews.gr/portal/1/57007
and......
http://www.telegraph.co.uk/finance/debt-crisis-live/9404564/Debt-crisis-live.html
There are now 20 countries that we have found that have sub-1% 2-year government bond yields of which 6 of those are actually negative - (all in Europe, being Swiss, Denmark, Germany, Austria, Netherlands and Finland). Whatever happened to zero percent mattresses? They've been overlooked in these countries above.
There are no [debt[ operations between nations in the monetary union and practically the only demand for Italian debt comes from Italians. A similar thing is happening in France and Spain.
There is a problem from the point of view of the fundamentals of the monetary union. The decision-making process in the euro zone is slow and complicated. That is where international investors who highlight the weak points attack, at the moment Italy or Spain, at another moment, it will be others.
Downside risks to this weaker global outlook continue to loom large. The most immediate risk is still that delayed or insufficient policy action will further escalate the euro area crisis. In case of a major shock to the recovery, fiscal policies may need to be recalibrated in countries with fiscal space, in the context of a reassessment of the overall macroeconomic policy mix...
http://www.guardian.co.uk/business/2012/jul/17/eurozone-crisis-mervyn-king-libor
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1. ISAP WALKOUT Electric railway (ISAP) staff will hold a four-hour walkout on Tuesday, in a protest about their social insurance coverage which has been problematic since the merging of their healthcare fund with EOPYY (National Organisation for Healthcare Provision). Train services on the Kifisia-Piraeus railway line will be suspended from noon to 4pm and ISAP staff are planning to intensify their movement if the problem is not dealt with in an appropriate manner.
2. TALKS RESUME FOR 11.6BN Finance Minister Yannis Stournaras will resume his meetings with cabinet members on Tuesday, after they failed to hit the target of 11.6bn euros in cuts on Monday. Stournaras and his colleagues could not agree on the details of the cuts that need to be made, due to resistance on behalf of ministers to further cuts to their department budgets. The finance minister is expected to finalise the proposal by the end of the day before he presents it to Prime Minister Antonis Samaras on Wednesday. Less than 6bn euros in cuts have been agreed on so far, 3bn of which will be cuts in social benefits.
3. IMF SEES HIGHER DEFICIT The country’s primary fiscal deficit could be higher by 0.5 – 1.0 per cent of the GDP compared with initial budget targets, unless there are further changes in economic policy, the International Monetary Fund said on Monday.. The IMF said the situation remained unstable and noted that a worsening macro-economic environment and an uneven implementation of reforms have burdened public revenue this year, while funding limitations lead to lower spending. The Fund underlined that a fiscal consolidation process is underway in the other three eurozone states which were receiving support programs, but noted that a recent deterioration of political and economic climate in Greece could use as a warning for any “adjustment fatigue” which could threaten the implementation of the program.
4. STEELWORKERS MEETING Labour Minister Yiannis Vroutsis met on Monday with striking workers of the Hellenic Steel Industry (Elliniki Halyvourgia) of Aspropyrgos, who have been on strike for nine months. The minister is acting as mediator between the workers and the industry's management, but Monday’s meeting produced no results. The mediation will resume on Tuesday, as Vroutsis is determined to do everything for a solution to be found. The employees' union is demanding the re-hiring of 120 laid-off workers in order to end the strike, a demand that the steel industry's administration rejects.
5. GERMAN MINISTER VISIT Greek Finance Minister Yannis Stournaras held a meeting on Monday with visiting German Minister of State for Foreign Affairs Michael Link. Ministry sources said that Germany does not view positively a possible extension of the Greek adjustement program if the credibility of this year's Greek budget is not restored. "Germany will help if we prove credible this year," the sources noted.
6. VENIZELOS PROPOSAL Pasok leader Evangelos Venizelos on Monday proposed the adoption of a new medium-term programme for the country’s fiscal adjustement that will cover the period from July 2012 to the end of 2016. Addressing the inaugural meeting of the party's new political secretariat, Venizelos noted that "without this updated medium-term programme, which will take into consideration the new macroeconomic situation and particularly the deep recession, neither the 2012 budget will close nor the 2013 budget will be prepared and be tabled as a bill by the first Monday of October, as it is prescribed by the Constitution."
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and......
http://www.telegraph.co.uk/finance/debt-crisis-live/9404564/Debt-crisis-live.html
09.50 Spain has sold €3.56bn in treasury bills. It has sold 12-month bills at an average yield of 4.242pc compared to 5.107pc at the previous auction and the 12-month bill averaged a yield of 3.918pc, much lower than the 5.074pc at the last auction.
Demand for the 12-month bills was 2.23 times the amount sold, compared with 2.16 times in June; the bid-to-cover ratio for the 18-month security was 3.66 compared with 4.42 last time.
09.40 In the UK, inflation fell to its lowest in more than two and a half years in June, dropping to 2.4pc from 2.8pc in May. The fall was helped by early summer sales of clothes and shoes.
08.59 Sticking with bond yields, Jim Reid, an analyst at Deutsche Bank, points out that 10-year US uields briefly traded through their all-time closing lows yesterday. He adds:
There are now 20 countries that we have found that have sub-1% 2-year government bond yields of which 6 of those are actually negative - (all in Europe, being Swiss, Denmark, Germany, Austria, Netherlands and Finland). Whatever happened to zero percent mattresses? They've been overlooked in these countries above.
08.53 As investors seek refuge in so-called safer assets, French 10-year bond yields have hit a new low. The country’s 10-year rate fell as much as eight basis points to 2.07pc, the lowest since Bloomberg began tracking the data in 1990.
08.29 Spain will test investor appetite for its debt for the first time since announcing a swathe of austerity measures last week. Today, it will auction up to €3.5bn of shorter-maturity debt. That comes ahead of key bond auctions of up to €3bn of medium- and longer-dated bonds on Thursday, when it sells bonds maturing in 2014, 2017 and 2019.
The auctions come as Spain's economy minister was quoted as saying that Europe's debt markets are not functioning properly due to the slow and complicated decision-making process in the eurozone.
Luis de Guindos told Spanish daily La Vanguardia:
There are no [debt[ operations between nations in the monetary union and practically the only demand for Italian debt comes from Italians. A similar thing is happening in France and Spain.
He added:
There is a problem from the point of view of the fundamentals of the monetary union. The decision-making process in the euro zone is slow and complicated. That is where international investors who highlight the weak points attack, at the moment Italy or Spain, at another moment, it will be others.
08.15 And yet more bad news, this time for Italy: Moody's downgraded 13 of its banks late last night, citing the weakened borrower standing of the government after last week's sovereign cut. The agency said:
Along with the increase in the risk of sovereign bond defaults, the downgrade of Italy's long-term ratings to Baa2 also indicates a similarly increased risk that the government might be unable to provide financial support to its banks in financial distress.
08.01 Yesterday the IMF cut its global growth forecast and warned that the outlook could dim further if policymakers in Europe do not act with enough force and speed to quell their region's debt crisis. Its 2013 forecast for global economic growth dropped to 3.9pc from the 4.1pc it projected in April.
On the UK, the IMF cut its growth forecasts for 2012 and 2013 by 0.6 percentage points each, to just 0.2pc and 1.4pc respectively - well below what Britain's official forecaster, the Office for Budget Responsibility, predicted in March.
Downside risks to this weaker global outlook continue to loom large. The most immediate risk is still that delayed or insufficient policy action will further escalate the euro area crisis. In case of a major shock to the recovery, fiscal policies may need to be recalibrated in countries with fiscal space, in the context of a reassessment of the overall macroeconomic policy mix...
There is room for monetary policy in the euro area to ease further. In addition, the ECB should ensure that its monetary support is transmitted effectively across the region and should continue to provide ample liquidity support to banks under sufficiently lenient conditions.
and....
http://www.guardian.co.uk/business/2012/jul/17/eurozone-crisis-mervyn-king-libor
John Mann quizzes Paul Tucker over new emails
This is the text of one of the emails uncovered by John Mann, sent from Paul Tucker to Bob Diamond.
From: Paul.Tucker
Sent: Wednesday, May 28,2008 11:24 AM
To: bob,
Subject: Llbor
Sent: Wednesday, May 28,2008 11:24 AM
To: bob,
Subject: Llbor
Bob
Have spoken to hsbc and rbs, stuart and johnny. Sense similar across all three of you. I encouraged contact amongst mark dearlove peer group
Best
Have spoken to hsbc and rbs, stuart and johnny. Sense similar across all three of you. I encouraged contact amongst mark dearlove peer group
Best
[end]
Mark Dearlove is the head of the money markets desk at Barclays, who received the instruction from Jerry del Messier to lower Barclays' submissions to the Libor panel. "Johnny" is Johnny Cameron of RBS.
Mann says the email shows that Tucker was "discussing Libor with this level of people at a regular basis."
Tucker, though, rebuffs the suggestions that his fingerprints are all over the scandal. He says he simply wanted to discuss his concerns about the accuracy of Libor during a time of market disfunctionality to Bob Diamond or John Varley (then Barclays CEO).
John Mann, of course, is furious that he has not been given a place on the new parliamentary inquiry into Libor.
Mann also accused the Bank of England of being in denial over the Libor scandal. Mervyn King denies(!) the charge, saying that the Bank simply had "no evidence of wrongdoing" in 2008.
And, of course, it was not responsible for this section of the financial sector. That's what the FSA is for.
Updated at 11:38 BST
John Mann takes up the questioning.
Before the inquiry started, he released new emails sent between the Bank of England and Barclays (as mentioned at 10.05am)
You can see them here, and the details of his Freedom of Information request.
Mann demands to know why the Bank didn't release more information about the Libor inquiry earlier. After an amusing bit of confusion (King thinks he means the new emails, but Mann is actually referring to the details released by the Fed last Friday).
Mervyn King says that there are masses of emails to be looked through, and that while Mann got special priority with his first request, he can "wait in the queue" in future.
Mervyn King concedes that the British Bankers' Association didn't cover itself in glory either during the Libor scandal, saying the BBA had to be nudged into action over Libor.
But the governor isn't up for retributiion, saying that it was very hard to regulate a bank such as Barclays where the culture was to sail close to the wind.
I don't want to blame anybody.
That rather startles the excellent Andrea Leadsom (why is she not serving on the new inquiry into Libor?), who points out that Libor figures were being manipulated for seven years.
King, though, sticks to his position that there were deep problems at the heart of Barclays, saying pointedly that:
Libor was not so much the straw that broke the camel's back at Barclays as a bail
Why have the Barclays chairman, Marcus Agius, and senior non-executive director, Mike Rake, avoided more blame from the failures at Barclays, asks Andrea Leadsom.
King says Agius did the "honorable thing" by resigning (before unresigning), but that it wasn't fully appropriate, because the issue is about the culture at the bank, and that comes from the chief executive.
Updated at 11:13 BST
Another important question from Andrea Leadsom, this time for Lord Adair Turner.
Why was Jerry del Messier promoted to the high-profile role of COO of Barclays just a few weeks ago, when the final details of Barclays' fine over the Libor scandal was being agreed?
Turner says Andrew Bailey, the FSA executive responsible, raised the issue with Barclays before the promotion, but the FSA did not block it because del Messier wasn't really changing his role.
A promotion to be a chief executive would be a different matter, says Lord Turner, but won't speculate on whether the FSA would have blocked such a move.The governor confirms that there was deep confusion at the heart of the UK financial sector on the weekend of 30 June and 1 July. Apparently, he (along with Lord Turner and others), had learned of Marcus Agius's resignation "from the BBC's website".
Andrea Leadsom MP, one of the sharpest blades in the committee's cutlery drawer, asks Sir Mervyn King a key question – why did no-one spot that a crucial measure like Libor was being fiddled?
The governor reaches for a sporting reference – the recent scandal of spot-fixing in cricket (in which players colluded to bowl no-balls at certain times):
No-one saw it because the game wasn't fixed
So, Leadsom asks, how can we be sure that other important rates aren't being fixed? We can't, says King, and nor should he be expected to. "We're not responsible for the regulation of markets".
Updated at 11:14 BST
Why did the New York Fed take such an active interest in the potential rigging of Libor, but the Bank of England did not, asks Pat McFaddon
King explains that the two central banks are different: "They're a regulator, we're not ...", adding that the Bank had to pass the concerns on to the BBA.
So you're just a postbox, asks McFaddon?
Certainly not, replies an irked governor. The Bank played an important role in the BBA's inquiry, he adds.
Pat McFaddon wants more details about the little chat which took place in Basel in 2008 between Sir Mervyn King and Tim Geithner (when he was running the New York Fed), where Geithner warned him about Libor.
King explains that Geithner (now the US treasury secretary) was worried about the dollar Libor (the interest rate at which banks lend to each others in dollars).
Thus the decision to ask the British Bankers Association to hold an inquiry, to check that Libor was an accurate measure of the health of the system. King, though, insists that he was still thinking in terms of whether Libor was giving the right picture, rather than if someone was deliberately fixing it.
It's the difference between bringing a patients' temperature down, and fiddling with the thermometer.
Updated at 11:00 BST
Mervyn King is insisting that the Bank of England can't be blamed for the Libor scandal. He says he only learned there had been deliberate misreporting of Libor two weeks ago.
Yes, there were concerns about the accuracy of Libor during the financial crisis. But that is not the same as proof that the figures had been manipulated for private gain, King says, adding:
That's my definition of fraud.
King's argument is that the Bank, the FSA, and the media did not know that the rate had been deliberately fixed until recently, even
though there had long been suspicions over its trustworthiness.
Now Michael Fallon asks Sir Mervyn King about the message sent to the Bank of England from the US Federal Reserve back in 2008, expressing concerns over Libor.
King replies that he had solicited the email, for starters – asking Tim Geithner to send over his concerns in writing, after learning of them at a conversation in Basel.
Once King received it, he "sent a message back to staff, asking them to take a view on it. The next day, we sent it to the BBA".
The conclusion was that the BBA would hold a proper consultation into Libor, to check whether financial pros across the world had confidence in the Libor rate.
So what happened next? Not a lot, it seems.
Paul Tucker admits that the Fed's concerns of "deliberate misreporting" did not set off any alarm bells.
Fallon goes for the jugular, asking:
Is deliberate misreporting dishonest?
Tucker admits that:
With hindsight, it is.
That's an embarrassing admission from the man responsible for financial stability.
Updated at 10:53 BST
Andrew Tyrie is probing Mervyn King on whether he had the legal authority for interfering in the management of Barclays.
King replies that he had consulted the Bank's legal advisor "to confirm exactly what I can and cannot say."
The world has changed, the governor insists. If the Bank and the regulators has concerns about the concerns "on the bridge", and have lost confidence in a bank's management, they have a duty to act on theose concerns.
Over to Sir Mervyn King -- what was his role in this sorry tale?
The governor confirms that there was deep confusion at the heart of the UK financial sector on the weekend of 30 June and 1 July. Apparently, he (along with Lord Turner and others), had learned of Marcus Agius's resignation "from the BBC's website".
That's particularly odd, as it was a Guardian scoop. But all's fair in love, war, and banking crises.
King then insists that he did not pull the trigger on Bob Diamond. He simply wanted to make sure that Barclays' senior independent director (Sir Michael Rake) very clearly understood the depth of the regulators' concerns over the bank's executive management.
Rake did not appreciate this, he adds (despite the letters sent by the FSA, expressing concerns over Barclays).
Updated at 10:31 BST
Where is the governance process that the FSA went through before deciding to pull the rug out from under Bob Diamond, asks Andrew Tyrie?
It doesn't sound like there was one.
Lord Turner concedes that the Barclays debacle "raises questions about future governance of these kind of situations", but adds that the FSA took "sensible decisions" at the time.
Or, as an unimpressed Andrew Tyrie puts it, "we're making policy on the hoof".
Updated at 10:31 BST
Why, Tyrie asks, did the Financial Services Authority (which Lord Turner runs) then turn to the Bank of England to force Bob Diamond out?
Adair Turner argues that the Bank's role in financial supervision and the stability of the UK financial sector means its governor has every right to put his views to the heads of commercial banks such as Barclays.
Andrew Tyris is not impressed. The Bank of England has no regulatory role over this kind of issue, he points out.
Lord Turner replies that neither the BoE nor the FSA were making a "regulatory instruction" (just a waggle of Merv's eyebrows?).
Turner's argument is that it is totally appropriate for the Bank of England to play this kind of role in regulating the City (despite the FSA having the official responsibility). Something of a change of heart, argues the Telegraph's Jeremy Warner:
Exciting developments just before the hearing begins. A new set of emails have emerged this morning, which appear to leave the Bank of England, and Paul Tucker in particular, facing more questions about the Libor scandal.
John Mann MP is calling them "explosive".
They include an email from Bob Diamond to Paul Tucker, congratulating him on his appointment as deputy governor. Tucker's reply says:
Thanks so much Bob. You've been an absolute brick through this, Paul.
Sir Mervyn King's session at the Treasury Select Committee (see 8.04 for details) was arranged before the Libor scandal broke, engulfing
Barclays - but it's the first time that MPs have had a change to question the governor since.
Barclays - but it's the first time that MPs have had a change to question the governor since.
Our banking expert, Jill Treanor, explains what we should expect on Libor:
King is supposed to be talking about financial stability but it seems likely he will asked about Libor and his role in the departure of Bob Diamond's resignation as Barclays boss.FSA chairman Lord Turner appeared before MPs yesterday and explained how his attempts to encourage Diamond to quit had not worked. The division bell was ringing - ending his session - as he recounted he told Marcus Agius, the Barclays chairman on 6 July that the board had to think "very seriously about the scale of the change" which Barclays had to make but that he was surprised that Agius decided to step down as he had expected Diamond to resign instead.Turner - who described Agius' decision as "honourable" - then had a meeting with King who then spoke to Agius and was more direct, telling the Barclays chairman that regulators had lost confidence in Diamond, which eventually led to his departure.MPs should ask for King's version of events and also take an opportunity to ask his deputy Paul Tucker yet again if he instructed Barclays to cut its Libor submission.
"How Germany weakened the Euro"
Spiegel has an detailed article this morning about how, and why, Germany deliberately undermined the Stability and Growth Pact in the early years of the eurozone.
Under the Pact, European countries were meant to keep budget deficits below 3%, and total national debt below 60% of GDP. That was proving too tough for Gerhard Schröder's administration (which was struggling to implement economic reforms in the teeth of a stagnant economy and rising joblessness). So, despite opposition from German finance minister Hans Eichel and some EU officials, Schröder managed to get the targets watered down in 2005.
Here's a flavour:
The undertaking began in secret in the summer of 2003. The German economy had been stuck in a chronic slump since the beginning of the new century with growth stagnating near zero. Unemployment was on the rise and the budget deficit was consistently growing.The previous year, Eichel had only narrowly managed to avoid a deficit warning from the European Commission. But it soon became apparent that the situation was not going to improve in the near future. Because Schröder and Eichel shied away from cleaning up the budget by way of austerity, further warnings from Brussels, or even monetary penalties, seemed merely a matter of time.
Schröder, though, found a solution. If it wasn't possible to adjust the government's finances to the Stability Pact, then the Stability Pact would simply have to be adjusted to the state of German finances.Gerhard Schroeder, (L) meeting French President Jacques Chirac in October 2005. Photo: Stephane De Sakutin/AFP/Getty Images.
Interestingly, Schröder's argument was that Germany should be allowed to run a larger deficit in order to stimulate its economy, rather than sticking rigidly to the rules [sound familiar?].Would the Greek crisis have been avoided if Europe had stuck to fiscal discipline? Hard to say: Greece's economic figures had already been 'massaged' to make the country appears in stronger health before it joined the single currency. But Germany and France's failure to hit the Stability and Growth targets in the good year was a poor example to the rest of the eurozone, and must have meant less pressure on Italy and Spain.
Wolseley, the FTSE 100 building supplies group, warned shareholders this morning that it is suffering from ongoing “difficult market conditions” in continental Europe.
In an attempt to dodge the worst of the eurozone crisis, Wolseley now plans to sell or restructuring its French business. Things don't look to rosy in Denmark either.
My colleague Dan Milmo has crunched the numbers, and reports:
The world’s largest supplier of plumbing materials - from kitchen sinks to shower doors - announced that it is exploring strategic options for its French arm, raising the prospect of selling the unit, slimming it down or hiving it off in a joint venture. Wolseley also flagged up problems with its Danish business, citing “challenging” trading conditions and warning of an impairment charge against its Denmark assets.
Referring to Europe as a whole, the group said the outlook had not improved since a third quarter trading statement, when it reported negative sales numbers for all its European territories in the UK, Scandinavia, France and central Europe. “We reported difficult market conditions in Continental Europe [in Q3] and these conditions have continued,” said Wolseley.
Following Peugeot's job cuts last week, it's another sign that the eurozone crisis is now hitting the 'real economy' hard.
Another day in the bond markets begins with traders driving up the prices of 'safe-haven' eurozone government bonds.
Already, the yield (effectively the interest rate) on Belgium's 10-year debt has hit a euro-era record low of 2.53%. And the yield on Germany's 2 year bonds has hit a new record low of -0.061%. A negative yield means you would not get all your money back if you held the bond until it matured.
The yield on Austria's 2-year bonds is also below 0%, while the French equivalent has hit a record low of 0.058%*.
So what's happening? In normal times, riskier government bonds command a higher yield, while safer ones offer a smaller return. In the current climate, traders are putting the money into bonds from countries which are likely to ride out the crisis, unbothered that current prices mean they are guaranteed a loss.
Belgium's bond yields have been dropping steadily in recent months, which the FT's Stanley Pignal says is partly due to the creation (finally) of its new government:
Here are the details of the five senior Bank of England policymakers who will appear before parliament at 10am:
- Sir Mervyn King, Governor of the Bank of England
- Paul Tucker, Deputy Governor of the Bank of England
- Lord Turner, Member of the interim Finanancial Policy Committee
- Donald Kohn, Member of the interim Financial Policy Committee
- Paul Fisher, Executive Director, Markets, Bank of England
I'll eat my live-bogger's hat if the Treasury Select Committee don't ask Tucker about the claim made yesterday by Jerry del Missier that he believed he was acting on instructions from the Bank of England itself when he told staff to manipulate the Libor rate.
Jerry del Missier, giving evidence to the Treasury Select Committee yesterday. Photo credit: PA Wire
Here's how some of today's papers cover the story
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