http://www.zerohedge.com/news/spain-discussed-%E2%82%AC300-billion-full-bailout-germany-uncomfortable
Submitted by Tyler Durden on 07/27/2012 07:55 -0400
http://www.businessinsider.com/report-spain-asked-for-a-300-billion-bailout-last-week-2012-7
Reuters just reported that Spanish Economy Minister Luis de Guindos and German Finance Minister Wolfgang Schaeuble talked about a €300 billion ($366 billion) sovereign bailout last week.
and.....
http://www.zerohedge.com/news/draghi-box
Is Draghi just another toy ?
Submitted by Tyler Durden on 07/27/2012 07:34 -0400
The jawboning party has come and gone, leading to a nearly 100 bps move tighter in Spanish spreads (from all time records of 7.6% just three days earlier), and now the hangover is here. Or, as Bloomberg puts it, Draghi is now in a box. "European Central Bank President Mario Draghi has boxed himself into a corner. Spanish and Italian bond markets rallied yesterday as investors cheered Draghi’s signal that the ECB is prepared to intervene to reduce soaring yields. Now he has to deliver, or face deep disappointment on financial markets, analysts said. The risk in doing so is alienating key policy makers on the ECB council, such as Bundesbank President Jens Weidmann. The Bundesbank reiterated its opposition to bond purchases today." If this seems like a Catch 22 in which the ECB loses regardless of the outcome, that's because it is. Luckily, no matter which path Draghi chooses, the time for talk is over, and now he has to act. Because with every day the ECB does nothing, the more credibility it loses.
and.....
http://ftalphaville.ft.com/blog/2012/07/27/1098471/what-is-the-ecb-going-to-do-next/
http://www.businessinsider.com/this-is-why-everyone-is-wary-of-the-ecb-report-2012-7
A promise by European Central Bank President Mario Draghi to "do whatever it takes to preserve the euro" remains the hot topic of investor debate this morning.
and the IMF called out as liars by Greece's former IMF envoy ........
Flashback May 14, 2012: Mr. "Lie When It's Serious" Juncker Tells Another Whopper: "I Don’t Envisage, Not Even for One Second, Greece Leaving the Euro Area"
http://www.zerohedge.com/news/europe-desperately-attempts-talk-down-bond-yields-further-bundesbank-finally-says-nein
Submitted by Tyler Durden on 07/27/2012 06:47 -0400
and......
http://headlines.ransquawk.com/headlines/ecb-is-preparing-to-buy-spanish-and-italian-debt-according-to-le-monde-27-07-2012
( tug of war between ECB and Germany coming into view ? ? Guess we will know who has the stronger hand when the next report on ECB bond buys comes out and actual bond buying occurs .)
http://www.guardian.co.uk/business/2012/jul/27/eurozone-crisis-live
http://www.telegraph.co.uk/finance/debt-crisis-live/9430517/Debt-crisis-live.html
A banking licence for the bailout fund would factually mean state financing via the printing press and would be a fatal route, which therefore is prohibited by the EU treaty.
There haven’t been any changes in our positions on bond purchases of the Eurosystem, bond purchases by the EFSF, or giving a banking license to the ESM [...] The Bundesbank has repeatedly expressed in the past that it views bond purchases critically because they blur the line between monetary and fiscal policy.
The Bundesbank continues to view the SMP in a critical fashion.
The limits of the SMP have become apparent [...] At the same time, the programme has not been ended by the ECB Council. Benoit Coeure described that.
The ECB thus emerges as a Trojan horse. It is no longer for stability and adherence to principles, but for a Europe in which the South has the final say. The result will be borne by a gigantic redistribution of the North - without any of the problems would be solved.
2. Non-recourse repos: A less widely discussed possibility is that of a non-recourse repo [where collateral alone will secure the debt]. This could at least cosmetically alleviate some of the financial fragmentation that Draghi referred to in his comments, allowing banks across the euro area to buy peripheral debt and repo it, placing at least part of the credit risk on the ECB’s balance sheet.
1. Re-opening the SMP: SMP was last active in early 2012 and the ECB’s dislike of the measure is only too clear given the three well-known hurdles.
The euphoria is unlikely to last long unless the ECB comes through with concrete action after its pre-holiday meeting next week. Angel Gurria, head of the OECD, honed in on Mr Draghi's caveat, saying the legal constraints are the nub of problem. The ECB must "explore the flexibility of its mandate", he said.
Spain Discussed €300 Billion Full Bailout, Germany "Uncomfortable"
While the EUR was soaring, and Spanish bond yield were (very briefly) plunging in the past 48 hours, the reality behind the scenes was very different than what was blasted publicly in the headlines. Namely, Spain was on the verge of requesting a full blown sovereign bailout, one which would see it become the next country after Greece, Ireland and Portugal to fall under the Troika's control. From Reuters: "Spain has for the first time conceded it might need a full EU/IMF bailout worth 300 billion euros ($366 billion) if its borrowing costs remain unsustainably high, a euro zone official said. Economy Minister Luis de Guindos brought up the issue with German counterpart Wolfgang Schaeuble in a meeting in Berlin last Tuesday as Spain's borrowing costs soared past 7.6 percent, the source said. If needed, the money would come on top of the 100 billion euros already agreed to prop up Spain's banking sector, stretching the euro zone's resources to breaking point, and Schaeuble told de Guindos he was unwilling to consider a rescue before the currency bloc's ESM bailout fund comes on line later this year." So why the sudden attempt to talk up European risk in the last two days? Simple -Germany did not agree to fund Spain's bailout. Which meant it was suddenly up to Europe's apparatchiks to jawbone markets into cooperation. "De Guindos was talking about 300 billion euros for a full program,but Germany was not comfortable with the idea of a bailout now," the official told Reuters."
What this means is that, as we suggested yesterday, Draghi really has nothing up his sleeve, and the promises of the last two days from Nowotny and less than Super Mario are very ad hoc and even more hollow, and that the vigilantes are about to come back with a vengeance as Spain has effectively admitted it is broke. So once the euphoria from the latest risk on episode fades, watch out.
From Reuters:
Yes , Spain has hit the wall . They are running on fumes and have already sought their sovereign bailout . Everything else is just noise , spin and distraction with the hopes of faking it until europe makes it to mid September....."Nothing will happen until the ESM is online. Once it is operational we will see what the borrowing costs for Spain are and maybe we will return to the question," the official said.Spain has repeatedly said it would not need to follow Portugal, Ireland and Greece in seeking a full bailout. Asked about the source's comments, a government spokeswoman said on Friday: "We strongly deny any such plan. This possibility (of a 300-billion-euro rescue for Spain) has not been looked at and has not been discussed."As Schaeuble and de Guindos were meeting on Tuesday, Spanish borrowing costs reached their highest level since the country adopted the euro, hitting 7.64 percent for 10-year bonds - a level at which Spain cannot sustainably borrow from the markets.But on Thursday European Central Bank President Mario Draghi said the central bank was ready to act to bring down Spanish yields and the 10-year yield fell to 6.88 percent.A second euro zone official said Spain could manage without a bailout, but had made bad communication mistakes which had unnerved investors. Asked if Madrid needed a bailout the second official said:"In pure arithmetic terms no, if interest rates were commensurate with what I consider a sustainable situation."Finally for those still confused what Germany's real goals are in the ongoing collapsing Nash Equilibrium, we have said it before, and we will say it again:...to have Europe at the edge of chaos, keeping the EUR low, and its Debtor In Possession targets amenable to any termsThe rest is just central bank bluster even as city by city, region by region, country by country goes broke.
http://www.businessinsider.com/report-spain-asked-for-a-300-billion-bailout-last-week-2012-7
Reuters just reported that Spanish Economy Minister Luis de Guindos and German Finance Minister Wolfgang Schaeuble talked about a €300 billion ($366 billion) sovereign bailout last week.
According to a eurozone source, Schaueble was not amenable to the idea, insisting that the European Stability Mechanism—Europe's future bailout fund—must go online before any bailout was considered.
The ESM is expected to go into effect later this year.
Economy Minister Luis de Guindos brought up the issue with German counterpart Wolfgang Schaeuble in a meeting in Berlin last Tuesday as Spain's borrowing costs soared past 7.6 percent, the source said.
If needed, the money would come on top of the 100 billion euros already agreed to prop up Spain's banking sector, stretching the euro zone's resources to breaking point, and Schaeuble told de Guindos he was unwilling to consider a rescue before the currency bloc's ESM bailout fund comes on line later this year.
"De Guindos was talking about 300 billion euros for a full program, but Germany was not comfortable with the idea of a bailout now," the official told Reuters.
"Nothing will happen until the ESM is online. Once it is operational we will see what the borrowing costs for Spain are and maybe we will return to the question," the official said.
More to come.
and.....
http://www.zerohedge.com/news/draghi-box
Is Draghi just another toy ?
Draghi In A Box
The jawboning party has come and gone, leading to a nearly 100 bps move tighter in Spanish spreads (from all time records of 7.6% just three days earlier), and now the hangover is here. Or, as Bloomberg puts it, Draghi is now in a box. "European Central Bank President Mario Draghi has boxed himself into a corner. Spanish and Italian bond markets rallied yesterday as investors cheered Draghi’s signal that the ECB is prepared to intervene to reduce soaring yields. Now he has to deliver, or face deep disappointment on financial markets, analysts said. The risk in doing so is alienating key policy makers on the ECB council, such as Bundesbank President Jens Weidmann. The Bundesbank reiterated its opposition to bond purchases today." If this seems like a Catch 22 in which the ECB loses regardless of the outcome, that's because it is. Luckily, no matter which path Draghi chooses, the time for talk is over, and now he has to act. Because with every day the ECB does nothing, the more credibility it loses.
From Bloomberg:
“Draghi is damned if he does and damned if he doesn’t,”said Carsten Brzeski, senior economist at ING Group in Brussels. “He maneuvered himself into an extremely difficult situation. Expectations are very high.”“I don’t believe you will see government bond purchases yet,” said Jacques Cailloux, chief European economist at Nomura International Plc in London. “But there are other things they can do that will help, such as lowering the haircut on sovereign bonds they accept as collateral or buying private sector securities.”
And repeating what we said yesterday morning following day #2 two of hollow promises (following Nowotny's bluster about the ESM getting a banking license which will not happen)...
“It will be difficult to hold these gains without any actual action,” said Christoph Kind, head of asset allocation at Frankfurt Trust, which manages about $20 billion. “There’s still pressure on the spreads of the peripheral countries and I fear this is only a temporary narrowing.”
Also, as reported earlier, the Bundesbank has finally stepped into the fray in Angela's absence:
The Bundesbank said restarting ECB bond purchases is not the best way to address the debt crisis.
“The Bundesbank has repeatedly expressed in the past that it views bond purchases critically because they blur the line between monetary and fiscal policy,” a spokesman said.
Finally, the ECB's bazooka will once again be a dud:
“We still don’t think policy makers have done enough to make the market sit up and take note,” said Richard Urwin, head of investments at BlackRock Inc.’s Fiduciary Mandate Investment Team in London. That has left bond yields in weaker countries “too high to be sustainable,” he said.“The ECB appears to be running out of conventional ammunition,” said Marius Daheim, a senior fixed-income strategist at Bayerische Landesbank in Munich. “What is left, however, is the ‘bazooka’,” he said, referring to large-scale interventions in troubled bond markets.
But whether or not the ECB has run out of money, or Europe's politicians have run out of empty promises is, at the end of the day irrelevant: what matters is whether Europe has any actual money good assets. The answer is a resounding no.
And now, Justin Timberlake.
and.....
Thursday, July 26, 2012 9:30 PM
Actions , Actions , Actions - after the talk from Draghi , what does the ECB actually DO ? ?
What’s the ECB going to do next?
Recent comments from Mario Draghi and Ewald Nowotny have got the markets all aflutter and struggling to understand how policymakers are going to keep the eurozone together in the next weeks and months.
JPM’s David Mackie has complied a list of possible actions, in descending order of likelihood as he sees it:
1. EFSF/ESM purchases in primary and secondary bond markets.2. A reactivation of SMP program on the basis of constructive ambiguity.3. A decline in the ECB’s interest rate corridor, pushing the deposit rate into negative territory.4. More LTROs with significantly less aggressive collateral haircuts, with the financing rate linked to the pace of bank lending.5. A precautionary credit line from the EFSF/ESM for Spain.6. A statement removing perceived seniority of EFSF/ESM and ECB interventions.
7. A full EFSF/ESM bailout for Spain.8. An ECB commitment to buy EFSF/ESM debt in the secondary markets.9. Large scale asset purchases along the lines seen in the US and UK.10. A reactivation of SMP program with yield targets for Spain and Italy.11. ECB taking a write down on holdings of Greek debt to reinforce pari passu status of official interventions.12. Giving the ESM a banking license.
Mackie reckons items one to eight are within the ECB’s comfort zone. The other four are either some way away or would only become options if the crisis significantly deteriorates.
But the idea of giving the ESM a banking license may never get into the central bank’s comfort zone, given the legal opinion it issued last year. He adds:
Of course, legal opinions can change, and maybe Nowotny was signalling that this is happening. But, as we have argued in recent weeks, policymakers do not need to give the ESM a banking license. ECB purchases of ESM debt in the secondary markets would be enough to help the ESM do more if needed.
remember , talk is cheap , actions spel louder than mere words .....
This Is Why Everyone Is Skeptical That Draghi Will Save The World
Ralph Orlowski / Getty Images
Analysts immediately interpreted Draghi's statements as a commitment to do something big, in particular either return to purchasing Italian and Spanish bonds (known as the SMP program) or offer new, even more potent long-term refinancing operations that would pump new liquidity into the system. Draghi had qualified that he would have to work within the confines of the ECB's mandate, and such measures have been among the bank's most potent actions so far.
Nonetheless, there is good reason to doubt that even these measures are forthcoming, or that they would be truly significant if implemented:
- Yesterday, officials at the ECB played down the importance of Draghi's comments, arguing that he has said similar things before.
- This morning, a spokesman from the German Bundesbank told reporters that it continued to believe that ECB purchases of sovereign bonds would be "problematic," and that it would prefer that the EFSF—Europe's current bailout fund—purchase such bonds if necessary. The Bundesbank is thought to provide the ideological and practical leadership for the ECB. The EFSF is influenced by European countries, some of whom say they are opposed to bond purchases, making the prospect of bond purchases much less likely.
- Further, the Bundesbank says it opposes giving the ESM—Europe's future bailout fund, set to go into effect later this year—a banking license, according to Bloomberg, refuting comments by ECB Governing Board member Ewald Nowotny earlier this week saying that the ECB would consider such a proposal. In fact, the Bundesbank argued that this was prohibited by European treaties. A banking license would dramatically increase the ESM's firepower, which most analysts consider inadequate.
Draghi has indeed made similar comments before, to much less market fanfare. Further, he and other ECB officials have repeatedly expressed regret about their bond-buying program, which they felt was ineffective when they used it last year.
That said, Draghi has played a delicate game of keeping pressure on EU leaders to make more radical changes and also averting financial crisis. However, so far he has delivered on promises to keep the system alive temporarily when it mattered most. If he believes bond-buying or a stronger LTRO will do the trick then his past behavior suggests that he will take such action—though only when the eurozone reaches the brink.
That said, another round of bond buying or stronger LTROs really aren't the solution here, and would avert crisis only momentarily. Indeed, EFSF bond purchases would avoid some important investor concerns (in particular, the explicit promise to subordinate private sector debt in the case of default) and would demonstrate EU leaders' dedication to fixing Europe's problems.
The real problem remains that this dedication still isn't there. Even if Draghi delivers on his promises yesterday, monetary policy only goes so far. The problems of the eurozone are structural and deep, and with the pressure off Northern Europe, there's little incentive for this perspective to change.
Investors are beginning to remember that we're still a long way from a solution here, no matter what the ECB President says.
and the IMF called out as liars by Greece's former IMF envoy ........
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what reform program can work if deposits are being yanked from the banking system ?
Greek bank deposits by businesses and households dropped 6.8 billion euros, or 4.3 percent, in June as two elections in six weeks raised concern the country may leave the euro area.
Deposits fell to 150.6 billion euros in June from 157.4 billion euros the previous month, according to a statement released by the Athens-based Bank of Greece on its website on Thursday. Deposits have dropped 14 percent in the first six months of the year from 174.2 billion euros in December.
Prime Minister Antonis Samaras formed a coalition government after the country’s second vote June 17, pledging to renegotiate the terms of a European Union and International Monetary Fund bailout while keeping the country in the euro.
“Although the outlook is less fragile compared to that prevailing in May and June upcoming political and macro developments will drive deposit evolution in the coming months,” Manos Giakoumis, a research director for Euroxx Securities SA in Athens, said in an e-mailed note.
Bank of Greece (TELL) Governor George Provopoulos said earlier this month there’s been a “satisfactory” inflow of bank deposits since the country’s rerun election. Bank deposits rose by 10 billion euros after the June election, Capital.gr reported on Thursday, citing unnamed bank officials. As much as 200 million euros is returning to the banking system every day, the Athens- based news website said.
European Central Bank data released on Thursday showed Greek deposits by non-financial companies and households fell 6.89 billion euros to 156.2 billion euros in June.
Greek bank lending to households and businesses declined 4.3 percent in June compared with a year earlier, according to a separate statement from the central bank on Thursday.
Greek bank deposits fell in June on euro exit concern
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Deposits fell to 150.6 billion euros in June from 157.4 billion euros the previous month, according to a statement released by the Athens-based Bank of Greece on its website on Thursday. Deposits have dropped 14 percent in the first six months of the year from 174.2 billion euros in December.
Prime Minister Antonis Samaras formed a coalition government after the country’s second vote June 17, pledging to renegotiate the terms of a European Union and International Monetary Fund bailout while keeping the country in the euro.
“Although the outlook is less fragile compared to that prevailing in May and June upcoming political and macro developments will drive deposit evolution in the coming months,” Manos Giakoumis, a research director for Euroxx Securities SA in Athens, said in an e-mailed note.
Bank of Greece (TELL) Governor George Provopoulos said earlier this month there’s been a “satisfactory” inflow of bank deposits since the country’s rerun election. Bank deposits rose by 10 billion euros after the June election, Capital.gr reported on Thursday, citing unnamed bank officials. As much as 200 million euros is returning to the banking system every day, the Athens- based news website said.
European Central Bank data released on Thursday showed Greek deposits by non-financial companies and households fell 6.89 billion euros to 156.2 billion euros in June.
Greek bank lending to households and businesses declined 4.3 percent in June compared with a year earlier, according to a separate statement from the central bank on Thursday.
and....
Results, Results, Results
The word of the day today quite obviously is "results".
When the second-in-command of top-ranking eurocrats threatens Greece with expulsion unless results are produced, it's long past the time to consider the Troika is not only ready to pull the plug, but hoping to do so.
The top-ranking eurocrat is of course "lie when it's serious" Jean-Claude Juncker. The second-ranking eurocrat is José Manuel Barroso, European Commission president.
Today the Financial Times reports Barroso pushes Greece to show results
When the second-in-command of top-ranking eurocrats threatens Greece with expulsion unless results are produced, it's long past the time to consider the Troika is not only ready to pull the plug, but hoping to do so.
The top-ranking eurocrat is of course "lie when it's serious" Jean-Claude Juncker. The second-ranking eurocrat is José Manuel Barroso, European Commission president.
Today the Financial Times reports Barroso pushes Greece to show results
José Manuel Barroso has urged Greece to accelerate reforms after two years of foot-dragging if it wants to stay in the eurozone, saying Athens needed to show “results, results, results”.
The European Commission president, making his first visit to Greece since it sought assistance from the EU and International Monetary Fund in 2010 to avert a sovereign default, stressed that delays in implementing agreed measures had undermined the country’s credibility with its partners, adding: “Actions are more significant than words.”
Mr Barroso’s strongly-worded message, delivered after a two-hour meeting with premier Antonis Samaras, came after leaders of the three-party coalition government endorsed in principle a €11.5bn package of spending cuts for 2013-14 that were agreed with creditors six months ago but kept on hold during two successive election campaigns.
The troika is not due to return until September to decide whether enough progress has been achieved to disburse a €31.2bn loan tranche from the country’s second bailout, already overdue since June.
By then it may be clear whether Greece has a chance of making the bailout work, without seeking an extension of the 2014 deadline and extra financing from European partners, or faces a second debt restructuring and a looming threat of being forced out of the eurozone.
The European Commission president, making his first visit to Greece since it sought assistance from the EU and International Monetary Fund in 2010 to avert a sovereign default, stressed that delays in implementing agreed measures had undermined the country’s credibility with its partners, adding: “Actions are more significant than words.”
Mr Barroso’s strongly-worded message, delivered after a two-hour meeting with premier Antonis Samaras, came after leaders of the three-party coalition government endorsed in principle a €11.5bn package of spending cuts for 2013-14 that were agreed with creditors six months ago but kept on hold during two successive election campaigns.
The troika is not due to return until September to decide whether enough progress has been achieved to disburse a €31.2bn loan tranche from the country’s second bailout, already overdue since June.
By then it may be clear whether Greece has a chance of making the bailout work, without seeking an extension of the 2014 deadline and extra financing from European partners, or faces a second debt restructuring and a looming threat of being forced out of the eurozone.
The new package targets pensions rather than wages, with staggered reductions in pensions above €1,000 a month and an overall monthly cap of €2,000-€2,200 aimed at securing annual savings of €2bn or one percentage point of national output.Lie When It's Serious
Thousands of higher-paid workers in local government and state-controlled corporations would also face salary caps, losing seniority pay and special allowances allocated by senior politicians in past years without consulting the finance ministry.
“Pensioners are not in a position to lead violent street protests against the cuts … while setting ceilings gives meaning to the coalition’s pledge to enact social justice,” said an Athens-based economist.
Flashback May 14, 2012: Mr. "Lie When It's Serious" Juncker Tells Another Whopper: "I Don’t Envisage, Not Even for One Second, Greece Leaving the Euro Area"
Those looking for a bit of humor in the European debacle can find it in statements from Jean-Claude Juncker, head of the eurozone finance ministers.
Juncker says "I don’t envisage, not even for one second, Greece leaving the euro area. This is nonsense. This is propaganda. We have to respect Greek democracy."Anyone who could not envision Greece leaving the eurzone is a liar or an idiot. Jean-Claude Juncker is both and the same applies to his lap-dog Barroso.
Bear in mind this statement comes from the same man who said "When it becomes serious, you have to lie."
Also bear in mind Juncker's support for a Troika installed puppet government in Greece, after Greek Prime Minister George Papandreou proposed putting bailout measures to a vote.
....
Juncker and others have proven lies are the norm.
and..........
As Europe Desperately Attempts To Talk Down Bond Yields Further, Bundesbank Finally Says "Nein"
Following two days of desperate attempts by the ECB to talk down record peripheral bond yields without any actual action, it is only logical that while Merkel is on holiday, we get a third day of attempts to buy some time purely thanks to rhetoric and jawboning, before the Chancellor comes back and spoils the party. Sure enough here it comes:
- ECB PREPARING TO BUY SPANISH, ITALIAN DEBT, LE MONDE SAYS
- More from Reuters:Euro zone governments and the European Central Bank are preparing to intervene on financial markets to help bring down Spanish and Italian borrowing costs, French afternoon daily Le Monde reported on Friday.The newspaper, which cited unnamed sources, said the ECB was willing to take part in the action on condition that governments agreed to tap the bloc's bailout funds, the European Financial Stability Facility and the European Stability Mechanism.Under the plan, the EFSF could be activated first to purchase Spanish and Italian debt on the primary market, followed by the ESM in September, after it becomes operational.
The ECB would at the same time buy Spanish and Italian government bonds itself on the secondary market.The newspaper said the plan was days or possibly weeks away from being finalised and that officials were holding consultations on Friday about it.
Ah, the good old unnamed sources which always appear in times of need... and of Merkel summer vacations. But while the cat may be away, the Bundesbank has decided to take at least some matters into its own hands:
- BUNDESBANK SAYS IT HASN’T CHANGED STANCE ON ECB BOND BUYING, REMAINS OPPOSED TO FURTHER BOND BUYING BY THE ECB
More from the WSJ:
"Germany's central bankremains opposed to further government bond purchases by the European Central Bank, but isn't against using the euro-zone's temporary rescue fund (European Financial Stability Facility) doing so to drive down soaring sovereign borrowing costs, a Bundesbank spokesman said Friday.
Germany's central bank regards further bond buys by the ECB as "problematic" and "not the most sensible" instrument for overcoming the debt crisis, in particular because they create false incentives for governments, the spokesman said."
And then just to confirm that nobody in Europe has any clue what is going on and its politicians are now just making things up on the fly, we get this:
- HOLLANDE-MERKEL TO SPEAK BY PHONE AT 1 PM ON HELP: LE MONDE
And the logical response:
- STREITER SAYS `DOESN'T KNOW' ABOUT MERKEL-HOLLANDE CALL
Sigh - when one sees such relentless lies and confusion what else can one say but... "Europe."
and......
http://headlines.ransquawk.com/headlines/ecb-is-preparing-to-buy-spanish-and-italian-debt-according-to-le-monde-27-07-2012
( tug of war between ECB and Germany coming into view ? ? Guess we will know who has the stronger hand when the next report on ECB bond buys comes out and actual bond buying occurs .)
ECB is preparing to buy Spanish and Italian debt, according to Le Monde
-ECB is preparing the debt purchases with governments
-German Chancellor Merkel and French President Hollande due to meet tomorrow to discuss the plans, according to the report
-ECB would buy the debt on the secondary market
-Report says EFSF could first be used to buy Spanish, Italian debt on the primary market, then the ESM from September
-ECB will only take part in action if governments use bailout funds
-German Chancellor Merkel and French President Hollande due to meet tomorrow to discuss the plans, according to the report
-ECB would buy the debt on the secondary market
-Report says EFSF could first be used to buy Spanish, Italian debt on the primary market, then the ESM from September
-ECB will only take part in action if governments use bailout funds
-An ECB spokeswoman declined to comment on the report
Reaction details:
Bund futures moved 30 ticks to the downside in the two minutes following the headline, coinciding with a 24 pip move higher in EUR/USD, with DAX paring losses by 30 ticks in tandem.
Italian and Spanish 10yr yields approach session lows, last seen at 5.97% and 6.88% respectively
Source: Le Monde
and.....
Over in Greece another round of crisis talks are taking place.
Helena Smith our correspondent in Athens says a long-awaited meeting between prime minister Antonis Samaras and troika officials is currently underway.
(Earlier we had mistakenly reported that talks between Samaras and EU president Jose Manuel Barroso were continuing today - sorry about that)
German chancellor Angela Merkel and French president Francois Hollande are set to discuss the ECB plan today, according to Le Monde.
The paper also says the ECB and the EFSF bailout fund are preparing co-ordinated action to support Spain and Italy. Le Monde says the EFSF could be used to buy Spanish and Italian debt on the market, with this function taken over by the replacement bailout fund, the ESM, when it comes into force.
The report seems to have brought a bit of optimism back to flagging bond markets.
Germany's finance minister Wolfgang Schaeuble will apparently be issuing a statement on the general euro situation today, a spokeswoman has said.
According to Reuters, the German government's position on euro area instruments - presumably the ECB and the bailout funds - remains unchanged. So what Shaeuble plans to say is unclear.
She also repeated that the EU treaty does not envisage a banking licence for the bailout funds, which appears to back up the Bundesbank comments from earlier.
As for specific countries, she said there had been no request from Spain for further help, while Germany's position on Greece staying in the euro had also not changed. Yesterday, you may recall, Citigroup said it believed there was now a 90% chance of Greece leaving.
Of course, Italy's success with the six month bond is a drop in the ocean and not much of an indicator of what is to come. Nicholas Spiro of Spiro Strategy said:
Sentiment-wise things have improved markedly, particularly at the shorter end of the Spanish and Italian yield curves. The Treasury has Mr Draghi’s market-moving comments yesterday to thank for this. The more positive tone going into today’s auction has clearly helped. Although Monday’s sale of longer-dated paper will be a more accurate gauge of sentiment towards Italy, the Treasury will be fairly pleased with today’s result. While demand was stable, yields actually fell, reversing the recent trend.
Mr Draghi’s verbal intervention yesterday has had its intended effect. Yet the stakes have been raised: if the ECB does not intervene in Spanish and Italian bond markets should market conditions deteriorate once again, its credibility will suffer. More importantly, previous ECB interventions in Spanish and Italian bond markets proved ineffective, which is why Mr Draghi has taken a dim view of the Securities Markets Programme (SMP). Investors may have read too much into his comments. Markets may once again be getting ahead of themselves. The fact that yields in the secondary market are already inching back up is telling.Nothing has changed with regards to Italy’s dire predicament. The Treasury is still only some 50% of the way through its bond issuance programme for this year, the recession continues unabated and there is considerable uncertainty about the post-Monti political landscape. Most worryingly in our view, Italy’s bond market is at the mercy of what happens in Spain.
That last comment is perhaps the most worrying of all...
The Bundesbank has popped the Draghi Rally!
Germany's central bank has given a strong indication in the last few minutes that it is not impressed by Mario Draghi's comments yesterday – particularly the implication that the ECB might start buying Spanish or Italian government bonds, or even launching a full-scale quantitative easing package.
A Bundesbank spokesman described the idea of the ECB buying government bonds as "problematic", as it creates "false incentives" (Dow Jones reports). It would apparently be "unproblematic" for the EFSF bailout fund to buy government bonds.
The Bundesbank has also reiterated that it opposes the notion of giving the European Stability Mechanism a banking licence (which would allow to increase its firepower by leveraging its assets via the ECB).
This has had a predictable impact on the markets, pushing up the yields on Spanish and Italian bonds, and sending the euro lower.
The Bundesbank's intervention is not really a surprise – it would be more newsworthy if they had changed their stance, as Sony Kapoor of the Re-Define thinktank points out:
http://www.telegraph.co.uk/finance/debt-crisis-live/9430517/Debt-crisis-live.html
10.56 Stock markets may have fallen, but Draghi's comments are still having some effect on the bond market. Spanish ten year borrowing costs aren't as low as they were this morning, but they're still below 7pc, at 6.93pc.
I'll keep you updated.
10.51 So, the rally has come to an end. The IBEX 35 in Madrid has fallen 1.8pc, while Germany's DAX is down 0.8pc.
The question now for the markets is: who do they believe? Super Mario saying that the ECB will do "whatever it takes" to preserve the euro?Or the finger wagging Bundesbank which has always hated the prospect of the ECB hoovering up more peripheral debt?
10.32 The Bundesbank also poured cold water over any idea of the eurozone's permanent rescue fund - or European Stability Mechanism (ESM) - getting a banking licence so it could tap central bank funds. It said:
A banking licence for the bailout fund would factually mean state financing via the printing press and would be a fatal route, which therefore is prohibited by the EU treaty.
10.26 More from the Bundesbank. A spokesman said:
There haven’t been any changes in our positions on bond purchases of the Eurosystem, bond purchases by the EFSF, or giving a banking license to the ESM [...] The Bundesbank has repeatedly expressed in the past that it views bond purchases critically because they blur the line between monetary and fiscal policy.
10.08 Italian borrowing costs have eased at a short term debt auction this morning. The country sold €8.5bn of six-month debt at average yields of 2.454pc, compared with 2.957pc at an auction last month.
The number of bidders per bond on offer remained steady, at 1.61.
10.04 The Bundesbank has also stuck its oar in. A spokeswoman toldBloomberg this morning that Germany's central bank hadn’t changed its stance on bond purchases by the ECB. Another spokesman told Reuters:
The Bundesbank continues to view the SMP in a critical fashion.
Jens Weidmann, Bundesbank President, has expressed doubt about the effectiveness of bond purchases in the past. Earlier this year, he said that it was not the ECB's job to tackle Spain's problems. He told Reuters in an interview:
The limits of the SMP have become apparent [...] At the same time, the programme has not been ended by the ECB Council. Benoit Coeure described that.
09.54 The Draghi backlash has started. And guess where it's coming from?
Die Welt's Jörg Eigendorf compares the ECB this morning to a "Trojan Horse" (caution - via Google translate - Herr Evans-Pritchard isn't around this morning)
The ECB thus emerges as a Trojan horse. It is no longer for stability and adherence to principles, but for a Europe in which the South has the final say. The result will be borne by a gigantic redistribution of the North - without any of the problems would be solved.
While our Brussels correspondent Bruno Waterfield highlights this in today's Handelsblatt:
08.51 More from SocGen:
2. Non-recourse repos: A less widely discussed possibility is that of a non-recourse repo [where collateral alone will secure the debt]. This could at least cosmetically alleviate some of the financial fragmentation that Draghi referred to in his comments, allowing banks across the euro area to buy peripheral debt and repo it, placing at least part of the credit risk on the ECB’s balance sheet.
3. SMP with EFSF/ESM guarantees: For those looking for leverage of the EFSF/ESM, this is one way to do it. The idea would be for the ECB to purchase, for example, €100bn of government bonds and for the EFSF/ESM to guarantee €20bn of first losses on this amount. In our opinion, however, this solution would make it even harder to package the placement of sovereign risk on the ECB’s balance sheet under the heading of securing proper transmission of monetary policy. Moreover, such a solution would require a change to the EFSF/ESM ‟ something that would take time. We thus attach a low probability to this solution.
08.41 Economists have also had more time to chew on Mr Draghi'swords. In a note today, Michala Marcussen and Anatoli Annenkov at Societe Generale state that Mr Draghi and the ECB must put their money where their mouth is. They outline three main ways they can do this:
1. Re-opening the SMP: SMP was last active in early 2012 and the ECB’s dislike of the measure is only too clear given the three well-known hurdles.
Article 123: The EU Treaty that prohibits the ECB from funding governments. The ECB has been very careful to reference the proper transmission of monetary policy as justification for the usage of the program language that Draghi repeated yesterday.
Conditionality: Last summer, the ECB was thrown into a very uncomfortable situation with Italy having to remind then Prime Minister Berlusconi of the importance of respecting the budget targets agreed with the European partners.
Politics: The credit risk on the government bonds held by the ECB ultimately fall back to the individual member states through the ECB’s capital key. If the ECB were to aggressively buy peripheral bonds in large volume, it could be seen as circumventing the national parliaments.
08.28 Jobless rates across Spanish regions vary vastly. In Andalucíathe rate is now close to 35pc, while in the north African enclave of Ceutait is close to 40pc.
By contrast, the unemployment rate in País Vasco in the north of Spain, is 14.6pc.
08.16 The unemployment rate in Spain touched a record high of 24.6pc over the second quarter, from 24.44pc in the previous quarter.
08.11 The FTSE 100 has opened up 0.2pc at 5,582.63, while theIBEX 35 in Madrid is up 0.61pc and the FTSE Mib in Milan is up 0.8pc.
Spanish borrowing costs have also fallen further this morning. Ten year yields are hovering around the 6.7pc mark. while two year borrowing costs are currently at 5.5pc.
Italian ten year borrowing costs have dipped back below 6pc.
08.05 It's the morning after the night before, and so far markets have picked up where they left off.
There was a huge rally in global markets yesterday, fuelled by Mario Draghi's comments that the ECB will do "whatever it takes" to save the euro. Ambrose Evans-Pritchard writes that the euphoria is unlikely to last:
The euphoria is unlikely to last long unless the ECB comes through with concrete action after its pre-holiday meeting next week. Angel Gurria, head of the OECD, honed in on Mr Draghi's caveat, saying the legal constraints are the nub of problem. The ECB must "explore the flexibility of its mandate", he said.
Others were blunter. Marc Ostwald from Monument Securities said Mr Draghi's words were "cheerleading bluster", while Gary Jenkins from Swordfish called them "a bluff to get through the summer".
"Spain is very close to the precipice, and its pretty much game over already, " said Mr Jenkins. "Today's action was a short-covering rally. The real trick is get bond investors to come in alongside the ECB, and that is much harder."
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