Saturday, July 21, 2012

So , Greece and Spain are going to run out of money around the same time - end of August , early September ?

http://www.guardian.co.uk/world/2012/jul/22/markets-fear-for-spanish-economy


Spain's regional woes are expected to weigh on financial markets this week after a second local government in three days asked for state aid, increasing fears that the eurozone's fourth largest economy will be forced to seek a full-blown rescue.
On Sunday Murcia became the latest region to admit it needed central government help, after European finance ministers waved through a €100bn (£77.8bn) recapitalisation of Spanish banks on Friday. Several other regions are expected to follow, with Catalonia reportedly unable to pay the interest on €48bn of borrowings.
Murcia's president, Ramón Luis Valcárcel, said he expected the south-eastern region to ask for up to €300m from Madrid as it struggled to refinance debt and cover its deficit.
"Don't imagine they are going to simply make a present of the money," hesaid, warning that Spain's prime minister, Mariano Rajoy, would impose strict conditions.
Murcia joins the far larger region of Valencia – which flagged up a cash shortage on Friday – on the list of regional governments that have said they will tap an €18bn liquidity fund set up by the central government just 10 days ago.
Several others among Spain's 17 semi-autonomous regions are expected to follow. They include the two biggest regions, Catalonia and Andalucia, as well as central Castilla La Mancha.
Valencia's announcement that it would seek money from the fund, which an increasingly desperate Spanish government has had to partially finance with a loan from the state-owned lottery company, helped send the country's sovereign bond yields soaring on Friday.
New government GDP projections also pushed up yields by forecasting that the Spanish economy would not grow before 2014. Ten-year bond yields rose to a new euro-era record of 7.25% on Friday, a rate widely seen as unsustainable and pushing the country closer to a bailout from the European Union and the International Monetary Fund.
Markets also reacted sharply to the news. On Friday, the Madrid stock market suffered its biggest one-day fall for two years, while markets in London, Paris and Frankfurt also slipped, with the FTSE 100 falling 1% to 5651.
The coming wave of regional bailouts may add further pressure to Spain's bond yields as they threaten to spiral out of control and drive Spain towards a full rescue.
Rajoy's ministers have urged the European Central Bank (ECB) to buy the country's bonds in order to relieve pressure, but ECB president Mario Draghi told Le Monde on Sunday that it had no plans to buy Spanish sovereign debt. He also insisted that the eurozone was "absolutely not" in danger of breaking up.
"We see analysts imagining the scenario of a eurozone blow-up. They don't recognise the political capital that our leaders have invested in this union and Europeans' support. The euro is irreversible," he told the French newspaper.
"All movement towards financial, budgetary and political union is, for me, inevitable and will lead to the creation of new supranational bodies."
Spain's regional bailouts come as senior figures in Catalonia and Murcia admit they will have trouble meeting the 1.5% deficit target they have been set this year by central government.
"There are reasons to doubt how we will be able to reduce the deficit from 4.4% to 1.5% this year," Valcárcel admitted.
Senior figures in Catalonia have also privately admitted that, although they are making every effort to meet the 1.5% target, the region will also struggle to make it. Strict regional deficit targets are a major part of Spain's strategy as it tries to meet the national deficit target it has been set by Brussels, which wants Spain's overall deficit down from last year's 8.9% of GDP to 6.3%.
Last year's high deficit was mainly due to regional governments which, despite demands from central government that they cut back, increased their joint overspend. They run health, education and social services – accounting for 37% of public spending.
Rajoy has introduced tough new laws and designed the liquidity fund in a way that allows it, if necessary, to take direct financial control of regions that fail to curb their deficits – imitating the control Brussels now exerts over southern European economies.
Artur Mas, the nationalist president of the independent-minded Catalonia region, has warned that full intervention would be unacceptable and has threatened to call regional elections if that happens.
"All regional governments run the risk of being intervened by central government, given that, if you do not meet the deficit target, the state will force you to take measures – that is intervention," Valcárcel explained.
Refinancing regional debt does not add to Spain's overall debt, but covering regional deficits does.
There were fresh protests at the weekend as several hundred demonstrators travelled to Madrid from many parts of Spain to protest over the country's near 25% unemployment rate, as well as the stinging austerity measures introduced by the government in a bid to avoid an international financial bailout. Protesters, many of whom were unemployed, carried banners saying "No cuts" and "United, that's enough".

As well as on Spain, markets' eyes will be on the Greek government and banks this week, analysts at Capital Economics note, following the news that the ECB will stop accepting Greek bonds as collateral for its refinancing operations pending a review by the troika.
"Greek banks can still use these bonds to access funds from the Greek National Bank's emergency liquidity assistance," said Jennifer McKeown at Capital Economics. "But such loans are more costly and this development will clearly add to the already intense pressure on the Greek banking system."
The Greek prime minister, Antonis Samaras, said on Sunday that Greecewas now in a "Great Depression" similar to the American one in the 1930s. His comments, made to former US president Bill Clinton, who visited Greece as part of a delegation of Greek-American businessmen, came two days before a team of Greece's international lenders arrive in Athens to push for further austerity cuts.
Germany's economy minister, Philipp Rösler, questioned whether Greece could fulfill the conditions for receiving further international aid and said that the idea of the country leaving the euro had "lost its horror."

and.....

http://www.ekathimerini.com/4dcgi/_w_articles_wsite2_1_22/07/2012_453262



The ills that have seen TAIPED fail so far

 Why the privatization plan is threatening to open a new hole in Greece’s second bailout package
 Privatization projects, such as the listed water company of Thessaloniki (EYATH), were delayed or even cancelled due to political factors.
By Dimitris Kontogiannis
Greece is facing a gap of billions of euros in the second EU/IMF financing program due to the country’s perceived highly risky profile, unrealistic assumptions about sellable assets and various delays in the privatization program it can ill afford. The new leadership to be appointed shortly by the government at the Hellenic Republic Asset Development Fund (TAIPED) has little time at its disposal to turn things around and provide a glimpse of hope in what could be a make-or-break five-month period ahead for the country.
Privatizations and the sale of state-owned assets, such as real estate, has been a sensitive topic for most local politicians and a non-negotiable theme for trade unions and others deriving power and benefits from preserving the status quo. The case for privatizations in the public debate is usually cast in terms of the proceeds they will bring to state coffers rather than the efficiency gains they will accrue to the economy.
So, it cam as no surprise that political parties and others of all stripes came out swinging against the PASOK government’s commitment in March 2011 to raise 50 billion euros from asset sales and real estate development by 2015 in return for a tighter spread and extending the maturity of EU bilateral loans in the first 110-billion-euro bailout package.
A few skeptics pointed out at the time that the plan to raise 50 billion euros by 2015 was unrealistic, even if there were an appetite for Greek assets, because there were no assets worth that much available for sale. Of course, the target looked quite realistic if one believed fairy stories putting the value of the state-owned property at 280-300 billion euros, as suggested by some analysts and others in Greece.
The 50-billion-euro figure also looked out of touch with reality when compared to the 10 billion euros the country raised from privatizations, part-flotations and other schemes during the first decade of 2000 when international market conditions were much better for Greece than they have been in the last couple of years.
The second financing package introduced some adjustments by making the 50-billion-euro figure from asset sales a medium-term target. It also set a goal of 4.5 billion euros being raised from June 2011 to the end of this year, 7.5 billion by the end of 2013, 12.2 billion by the end of 2014 and 15 billion by end-2015.
The new lower targets were deemed more realistic by many, with government officials and the outgoing head of the privatization fund repeatedly expressing optimism that they could be attained. However, experts with a good knowledge of the real estate assets, the functioning and the general approach of TAIPED -- supposedly molded after Treuhand, that is, the German agency which privatized East German companies in the 1990s -- did not share this view.
The experts continued to be pessimistic, arguing that even if the 2012 goal was met -- a very difficult proposition -- the targets for 2013 and 2014 were unrealistic because “there were no sellable assets available”. They added that the top echelon at TAIPED should have known this.
This was not the only obstacle set to the attainment of the targets for raising money from assets sales and development. The board of the TAIPED was largely made up of political appointees, most of whom had no previous managerial experience or involvement in corporate deal-making. Even the two representatives of the troika at the board were not considered experts.
But the problems accounting for some of the delays in the privatization and real estate development program went even deeper. The adoption of a generalistic consultancy-type approach for dissimilar projects, such as licensing and the sale of strategic equity stakes, did not help. Likewise, the insistence on sale methods in real estate property deals, such as the establishment of an SPV (Special Purpose Vehicle) in which the state held a minority stake with the goal of maximizing the value of the state in the future, has proven ineffective so far.
It is also hard to say whether cases of described as “bad chemistry” between prospective investors and professionals working for TAIPED are isolated or part of a bigger pattern.
All of the above are not intended to downplay the role played by the high country risk in prospective investors’ decision-making and the big workload and extensive time required to clear most real estate assets of various legal, ownership and other issues before sale. Neither is it intended to obscure the perceived political will to delay and even stop some privatizations such as the listed port and water companies at Thessaloniki.
Still, some of the above issues pointed out by experts may help explain why the privatization plan has been behind schedule and is threatening to open a new hole in Greece’s second bailout package. The new leadership at TAIPED has a good opportunity to tackle some of these issues and to reinvigorate the privatization and real estate program, filling the funding gap to a large extent, attracting new investments and providing a boost to the Greek economy at a time when it needs it the most.







http://www.zerohedge.com/news/greeces-tsipras-calls-drachmatization-instead-troika-longer-rope-hang-ourselves


Greece's Tsipras Calls For 'Drachmatization' Instead Of TROIKA "Longer Rope To Hang Ourselves"

Tyler Durden's picture
Submitted by Tyler Durden on 07/22/2012 17:08 -0400




EURUSD is down over 50 pips from Friday's close, about to test a 1.20 handle for the first time in over 25 months, as headlines pour from the beleaguered disunion. The AP reports of the German vice-chancellor's"more than skeptical" view that Greece can fulfill its obligations; after which "there can be no further payments"seemingly confirms our earlier note on the IMF's reluctance (and dismisses any hope that the IMF's call for more ECB 'assistance' will go unheeded. More worrisome is theAthens News story on Alexis Tsipras (leader of the Greek Syriza party) forecasting thatthe government will "soon present a return to a national currency (drachma) as a national success." He went on to state rather honestly for a politician that any payment extension (of the already re-negotiated TROIKA deal) is "essentially a longer rope with which to hang ourselves." The elite-perpetuating status-quo-sustaining unreality is summed up perfectly as he notes the Greek finance minister is the definition of a finance minister that the TROIKA would have chosen. Germany's Roesler adds a little fuel to the conflagration by adding that "for many experts,... a Greek exit from the eurozone has long since lost its horror."




http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/9418988/Blaming-the-Spanish-victim-as-Europe-spirals-into-summer-crisis.html

( Ambrose has the wrong solution - countries such as Greece , Spain , Portugal are too far gone to be saved - let them go by the boards. If Italy can reform , it is possible they might be rescued  - however , they already may be a victim of the EU's incompetence and get caught up as collateral damage at this point. Having the ECB write checks it really can't back - meaning the financially strong countries would have to bail the ECB out as well as the PIIGS , won't work as those countries at some point just say no. )


7:30PM BST 22 Jul 2012
Comments30 Comments
The financial credibility of Spain is close to zero. Fiscal credibility is zero. Political credibility is zero. The new government of Mariano Rajoy has squandered the advantages of its absolute majority in a matter of months, and completely lost the confidence of Europe's institutions.
That is the verdict of unnamed EU officials and sources in Brussels cited by El Pais, following the twin crash of the Madrid bourse and the Spanish bond market on `Black Friday'.
The claims are self-serving spin by Europe’s incompetent policy elite. Once again, they are blaming the victim for the consequences of their own scorched-earth monetary, fiscal, and regulatory policies.
The reason why Spain is spiralling into deeper depression is because EMU policy settings are contractionary.
The European Central Bank caused the Spanish money supply to collapse last year by tightening policy. Real M1 money was falling at double digit rates by mid-2011. The economic damage we are seeing now was baked into the pie.
Fiscal policy has since become maniacal. The latest EU-imposed cuts, passed by the Cortes on Thursday as a condition for Spain's €100bn bank rescue, entail further tightening of 6.7 pc of GDP over three years. It is a ruinous for an economy already contracting, with unemployment of 24.3pc, in the grip of ferocious deleveraging by firms and households.
On top of it all, the EU has foolishly forced banks to raise their core Tier 1 capital ratios to 9pc in the middle of a slump and at breakneck speed, causing an even sharper cut-back in lending than would have occurred otherwise.
Eurozone banks have cut their balance sheets by €4 trillion since late 2008. They have done this by pulling their money out of foreign ventures, especially southern Europe. Spain is the victim of a "sudden stop" in capital flows, just like Germany in 1928 when Wall Street cut off loans.
We can argue about the deeper causes of Spain's crisis. It had little to do with fiscal policy. Spain ran budget surplus of 2pc of GDP in 2006 and 1.9pc in 2007. Public debt fell to 42pc of GDP.
What destabilized Spain was a private credit boom. The country was flooded with cheap capital from North Europe. Interest rates were minus 2pc in real terms for Spain for year after year. The ECB poured petrol on the fire by gunning the Euro zone M3 money supply at twice its target rate.
We all agree that it was folly to build 750,000 homes each year at the top of the boom - La Burbuja - for a market of 250,000. Spain should have copied Hong Kong and others with a long experience of fixed exchange rates in forcing down the loan-to-value ceilings on mortgages to 70pc, 60pc, 50pc , etc, to choke the boom.
While that is obvious in hindsight, it is not what the EU authorities told Spain at the time. The EU was complicit in the Spanish bubble, and so were German banks. This is a collective failure.
Mariano Rajoy has doubtless made a mess of the crisis since taking power, but that is a detail in this greater drama. He is right to claim that Spain has "done its part" in cutting to the bone, even if he is tragically misinformed in thinking that this is what global markets want. What investors really want is a way out of the deflationary impasse.
The reason why Spain’s €100bn bank rescue has failed to stem the crisis is because the EU summit deal in late June has proved to be a sham. It did not break the deadly link between banks and sovereigns, as originally claimed.
Germany now says it never agreed to such a deal. The law passed by the Bundestag last week states clearly that the Spanish sovereign state is solely responsible for the extra debt. Spain's public debt will gallop up to 90pc of GDP this year, just at the moment when international investors are fleeing, and deposit flight from Spanish banks has reached €50bn a month.
Spain's foreign minister José Manuel García-Margallo accused the ECB of "doing nothing to put out the fire". The ECB's Mario Draghi retorted that it is not the job of his institution to sort out the finances of EMU states. Its task is to ensure "price stability".
Actually, the ECB is currently in breach of Article 127 (clause 5) of the Lisbon Treaty obliging it to contribute to "the stability of the financial system". The first duty of every central bank is to avert disaster.
It is time for Spain and the victim states to seize the initiative. They cannot force Germany, Holland, Finland, and Austria to swallow eurobonds, debt-pooling and fiscal union, and nor should they try since such a move implies the evisceration of their own democracies.
What they can to do is use their majority votes on the ECB's Governing Council to force a change in monetary policy. Germany has two votes out of 23, with a hardcore of seven or eight at most. The Greco-Latin bloc can force a showdown. If Germany storms out of monetary union in protest, that would be an excellent solution.
The Latins would keep the euro - until the storm had passed - allowing them to uphold their euro debt contracts. There would be less risk of sovereign defaults since these countries would enjoy a pro-growth shock from monetary stimulus and a weaker Latin euro against the Chinese yuan, the D-Mark, and the Guilder.
The currency misalignment eating away at EMU would be cured instantly. There might even be a stock market rally once the boil was lanced. It would certainly be a better outcome than the current course of deflationary Troika regimes and loan packages for economies trapped with the wrong exchange rate, destined to end with one country after another being thrown out of EMU in a chain reaction.
For Germany it would entail a revaluation shock and stiff losses for German banks and insurers with large holdings of Club Med debt.
If Germany wished to soften the blow, it could do exactly what Switzerland is now doing by holding the Swiss franc to CHF 1.2 against the euro by unlimited intervention. It could fix the D-Mark rate against the Latin euro at whatever was deemed bearable, for as long as needed.
Is Mr Rajoy willing to entertain such heresies? Or Italy's Mario Monti, after a life committed to the euro Project? Or France's Francois Hollande, still in thrall to Quai d'Orsay orthodoxies and the strategic primacy of the Franco-German alliance -- now just a mask for German hegemony?
Yet a full fledged "rescue" of Spain is already on the cards. It will cost €400bn, bringing matters to a head swiftly. Contagion to Italy seems inevitable, with knock-on effects for French banks with €600bn of bank exposure to the Italian debt of different kinds. The EU bail-out machinery becomes irrelevant in such a conflagration.
The Latin Bloc are all too aware of this awful prospect, even if the latest safe-haven flows into France may tempt some in Paris to misjudge the dangers.
They dallied with revolt in June, only to be rebuffed by Berlin. It is time to sharpen swords for a real fight.



and...


http://www.zerohedge.com/news/no-more-mr-nice-guy-imf-set-kick-out-greece


No More Mr. Nice Guy As IMF Set To Kick Out Greece

Tyler Durden's picture
Submitted by Tyler Durden on 07/22/2012 15:15 -0400




It appears that following the resignation letter fiasco from Friday, the venerable IMF is trying to regain some level of credibility in the world. In a note obtained by SPIEGEL,senior IMF officials patience has clearly come to an end and has decided that, with Greece likely to go bust by September, it is no longer willing to provide additional Greek aid (we assume in light of the push-backs on the promised cuts that the aid was based upon). Pointing to this now being a euro-zone problem, their cessation of Greek aid is even more critical since both Holland and Finland pledged support because the IMF was involved. August 20th marks an important short-term hurdle as Greece is required to pay back EUR3.8bn to the ECB - and with collateral being withdrawn, we wonder how long before the ECB pulls the plug entirely - even on Greek T-Bills. Whether this is sabre-rattling before the delayed TROIKA visit or the IMF (and the rest of the TROIKA) indeed deciding enough is enough and realizing finally that more debt (or even maturity extensions) does not solve the problem of too much debt - only default will do that!



and....





http://investmentwatchblog.com/breaking-eu-officials-international-monetary-fund-to-pull-plug-on-greece/#.UAwaMJZcTZg


ATHENS - Fears that Greece could be forced into bankruptcy in September have been raised by a report that the International Monetary Fund (IMF) is about to pull the plug on providing additional finance to the debt-ridden Mediterranean country.
A report to be published in Monday’s edition of Der Spiegel claims that the International Monetary Fund (IMF) is considering ending financial aid to Greece. According to Bloomberg the information in the Der Spiegel report was provided by “unidentified European Union officials.”
The report states “High ranking officials at the Fund have informed the European Union that the IMF is no longer willing to provide Greece with more aid.” Apparently the patience of high-ranking IMF officials has worn thin.
The IMF is one part of Greece’s troika of creditors, together with the European Union and European Central Bank. Their joint assessment on the Greek program of reforms is not due until August according to Ekathimernini , indicating the IMF has prematurely arrived at its’ decision whilst continuing to impose conditions on Greece.
The troika are due to arrive in Athens on July 24 to consider further austerity measures to be proposed by the Greek coalition government for its’ creditors approval.

and.....






http://www.zerohedge.com/news/floodgates-open-four-more-spanish-regions-seek-bailout-german-n%C3%BCrburgring-faces-bankruptcy


Floodgates Open As Four More Spanish Regions Seek Bailout; German Nürburgring Faces Bankruptcy

Tyler Durden's picture
Submitted by Tyler Durden on 07/22/2012 10:36 -0400




Even as Europe has become an utterly dysfunctional experiment in everything relating to modern economics and monetary theory, it has one redeeming feature: it has proven that the Defection regime under Game Theory is 100% correct. It says that once the defections from an unstable Nash equilibrium begin, there is no stopping until the entire system collapses under its own weight. This is precisely what has happened in Spain, where first Catalunya, then Valencia on Friday, and now virtually everyone else is set to demand a bailout. From Bloomberg: The Balearic Islands and Catalonia are among six Spanish regions that may ask for aid from the central government after Valencia sought a bailout, El Pais reported. Castilla-La-Mancha, Murcia, the Canary Islands and possibly Andalusia are also having difficulty funding themselves and some of these regions are studying plans to tap the recently created emergency-loan fund that Valencia said it would use yesterday, the newspaper said, without citing anyone."
"Spain created the 18 billion-euro ($23 billion) bailout mechanism last week to help cash-strapped regions even as its own access to financial markets narrows." What Spain's perfectly insolvent and highly corrupt regions also know is that the bailout money, like in the case of the ESM, will be sufficient for one, perhaps two, of the applicants. The rest will be out of luck.
Where the bailout money will come from? Ultimately from Germany of course. There is however one minor glitch. Some 80 millions Germans may soon be rather angry to learn that while they are working extra hours to fund the rescue of a few insolvent windmills, their own most legendary racetrack, the Nürburgring, is facing bankruptcy as soon as next week. From Spiegel:
With millions of euros in debts and an inability to pay back its loans, the operator of Germany's fabled Nürburgring racetrack, home to many of the country's Formula One races, could declare bankruptcy next week. It may be the end of the legendary racecourse, which first opened in 1927.







Formula One racing is in the blood of many Germans. The country is home to such car racing legends as Michael and Ralf Shumacher and Sebastian Vettel. And every two years, tens of thousands of Germans descend on the world-famous Nürburgring motorsports complex in the village of Nürburg for Formula One races.

But the days at the fabled track may soon be coming to and end. On Wednesday, the state of Rhineland-Palatinate, which owns the race track, said it would ask the operating company to file for insolvency, and bankruptcy proceedings could begin as early as next week.

The state's governor, Kurt Beck, is blaming the European Commission for not approving a €13-million ($16-million) state aid package in time for a July 31 payment deadline. The consequence, Beck said, "is a very high probability of an insolvency at the end of the month because of insufficient liquidity." After that, orderly bankruptcy proceedings would follow, he said. The state aid envisioned for the track would require EU approval.

Beck said the European Commission, the European Union's executive body, had sent positive signals in recent days that it might approve the aid, but it has now apparently delayed a decision. In recent years, the EU has sought to put a halt to years of giving millions in state aid for the failing race track complex.

...

Nürburgring is famous in Germany not only as a site that hosts Germany's Formula One races, but also as the location of the massive Rock am Ring music festival, which draws thousands of spectators to see headline music acts every spring.

Since 2007, Formula One races in Germany have alternated biannually between Nürburgring and the Hockenheimring track in the neighboring southern German state of Baden-Württemberg. The planned 2013 race is currently jeopardized by the dispute between Rhineland-Palatinate and the racetrack's operating company.

Nürburgring is one of the world's most famous race tracks. The 25-kilometer long course first opened in 1927. A new track was built in 1984 to accommodate Formula One racing. But in recent years, the future of the massively expensive Formula One race at the site has been in doubt. The state of Rhineland-Palatinate has threatened to reduce the level of subsidies it provides. The June conviction of former banker Gerhard Gribkowsky, who admitted he had accepted $44 million in bribes from Formula One boss Bernie Ecclestone, has also created uncertainty. For weeks now, speculation has been rife that Eccelstone could face corruption charges in Germany.

You want to piss a German off? Stand between them and their local Formula 1 race.

 





http://soberlook.com/2012/07/desperate-for-more-ecb-funding-and.html?utm_source=BP_recent


SATURDAY, JULY 21, 2012


Desperate for more ECB funding and running out of collateral, Spain is creating a new type of covered bonds

Spanish banks are running out of collateral that can be pledged at the ECB. The ECB no longer permits banks' own bonds guaranteed by their government (beyond what's already been pledged) to be used as collateral (see the document in this post).

What about using more covered bonds? Unfortunately with unemployment pushing 25% and housing declining quickly, demand for mortgages has dried up.



Changes in demand for loans to households (seasonally adjusted, source: Bank of Spain)

That means mortgage-backed covered bonds (Cedulas) can no longer be issued. These bonds were quite popular in the Eurozone during the bubble years, but are now mostly sitting at the ECB as collateral.

In a desperate attempt to create more covered bonds in order to extract additional lending from the ECB, the Spanish government is about to authorize a new type of securitization structure:
Reuters: - Spanish banks are hoping that the new structure - Cedulas de Internacionalizacion (CI) - will extend this funding lifeline by allowing collateral, previously excluded, to be used.


Under the terms of the new law, export finance credit from high quality financial institutions or guaranteed public sector entities can be used to back a new issue.


This would have the added benefit of lowering issuers' funding costs because covered bonds benefit from lower haircut valuations compared with securitisation, Moody's said.


The ECB accepts self-issued covered bonds as collateral, but not self-issued senior unsecured debt, it added.
Spanish banks are already borrowing €337bn from the ECB (in practice the banks are borrowing from the Bank of Spain who is funding all that lending via TARGET2 loans from the Eurosystem). With these new bonds in place the central bank lending will increase further. Over time the nation's whole economy will in effect be funded by the central bank and any private credit that can be packaged into covered bonds will be pledged as collateral.



and from Greece comes the following items.....




http://www.ekathimerini.com/4dcgi/_w_articles_wsite1_1_22/07/2012_453237


IMF tempted to pull the plug on Greece, report says


The International Monetary Fund is considering ending its support to Greece, a report to be published in Der Spiegel on Monday says.

Greece could default as soon as September, according to the same report, which claims that patience of officials at the Washington-based organization with Greece is wearing thin.

“High ranking officials at the Fund have informed the European Union that the IMF is no longer willing to provide Greece with more aid,” according to a translated version of the report.

The IMF has maintained that Greece must reduce its debt-to-GDP ratio to 120 percent by 2020 if its debt is to become
sustainable in the medium term, but its officials are very pessimistic about the country's ability to do so, according to the report.

“Giving the country more time to meet its targets would, according to troika estimates, mean an extra 10 to 50 billion euros in relief aid,” the report said. But many eurozone governments are unwilling to give Greece more leeway, it said.

At the same time, most governments see the risks from a Greek eurozone exit as manageable, it added.

Representatives from the EU/ECB/IMF troika are expected in Athens this week for a fresh assessment of the new government's economic program.

Athens has a 3.2-billion-euro bond held by the ECB to pay when it matures on August 20. Given that there will be no loan tranche due until after eurozone leaders have analyzed the troika’s report in September, it is not clear how this bond will be paid.



and......



Danger of euro exit still real, Kouvelis warns


Greece has not fully escaped the danger of leaving the euro area, the Democratic Left leader said in an interview on Sunday, while urging faster reforms to remedy the debt-wracked nation's structural deficits.
In comments made to Skai television channel on Sunday, Fotis Kouvelis, the boss of the third biggest party in Greece's power-sharing coalition, warned against any more horizontal cuts in the recession-hit country, while criticizing austerity measures passed by the previous administrations as “uneven, unfair, unbearable and counter-productive.”
The moderate leftist leader instead called for policies aimed at boosting growth and curbing unemployment. He also urged measures to crack down on tax dodging, corruption and the black market.
Greece, currently in its fifth year of recession, depends on financial aid from the European Union and the International Monetary Fund which have imposed budget cuts that have caused a wave of corporate closures and triggered job losses. Unemployment hit 22.5 percent in April.
Kouvelis told Skai Greece needed to renegotiate the terms of its bailout program and seek an extension of the fiscal adjustment period. But any modifications, he said, must be pushed through contacts with the governments of Greece's EU peers and not through the troika of creditors, which he dubbed a “mediator institution.”
But on Saturday, German Foreign Minister Guido Westerwelle ruled out any renegotation of Greece's budget austerity program.
“I see desires emerging in Greece to renegotiate and substantially question the country's obligations to carry out reforms. I have to say simply, that will not do. It is a Rubicon that we are not going to cross,” Westerwelle told German daily Bild.
Troika inspectors are expected in Athens this week for another in-depth inspection of the new government's economic program.


and....


Tsipras predicts Greek default
21 Jul 2012
Tsipras said that very soon, the government would be "presenting" a return to the drachma as a solution (file photo)
Tsipras said that very soon, the government would be "presenting" a return to the drachma as a solution (file photo)

The leader of the main opposition Radical Left Coalition (Syriza) party, Alexis Tsipras, was quoted as predicting the country's default, while also forecasting that the government will "soon present" a return to a national currency (drachma) as a national success.
In an interview published with Real News newspaper on Saturday, Tsipras said any re-negotiation of a memorandum signed by Greece with its EC-ECB-IMF creditors ended on the night of the June 17 election, while charging that any payment extension is "essentially a longer rope with which to hang ourselves."
He also criticised the government for abandoning, as he said, any discussion over restoring cuts made to pensioners receiving low pensions, re-instituting collective bargaining talks and increasing the tax-free ceiling for individual taxpayers.
He even attacked Finance Minister Yannis Stournaras, for whom he had spoken positively of during the vote of confidence discussion in parliament, saying he is the definition of a finance minister that the EC-ECB-IMF 'troika' would have chosen. (AMNA)


and.....




http://globaleconomicanalysis.blogspot.com/2012/07/prepare-for-spanish-implosion.html

( Spain may run out of money quicker than 40 days with moves like these - cue those bank runs for Spain... )


Saturday, July 21, 2012 5:59 PM


Prepare for Spanish Implosion: Businesses Threaten to Leave Spain Over Tax Hikes; Finance Minister Proposes 56% Tax on Short-Term Financial Transactions


Cristobal Montoro, the Spain's finance minister has made a liquidity destroying proposal to tax short-term financial transactions at an astonishing 56% tax rate. Businesses are already upset over hikes in the VAT and have threatened to leave Spain.

Interestingly, in spite of raising taxes elsewhere, the VAT was lowered on the highly subsidized renewable energy sector.

Why? Here is the answer: "Secretary of State for Finance, Ricardo Martinez Rico, is the leading advisor in the industry".

Prepare for Spanish Implosion

Here is the "as-is" Google translation of the El Econimista article Waiting for the Intervention. Emphasis in bold not added.
The Bundesbank is opposed to the purchase of deduda, the only thing that can save Spain and Italy. Autonomy, conflict, power and government crisis rumors complicate everything.

The situation is out of control. The government approved last week the biggest adjustment of his story in hopes that it would serve to calm the markets. But it was not. The risk premium yesterday overcame the barrier of hundred basis points, something never seen, and the bond closed at 7.27 percent. The first question that arises is what should make efforts so painful as the increase in VAT or removal of the extra pay of officials if markets continue to punish us hard. It would be naive to think that just announced a big cut, things would begin to change. There are still many uncertainties that sow mistrust.

The fine print of 65,000 million adjustment shows that there is more emphasis on income than expenditure. Tax revenues provide about 38,000 million, compared to 27,000 in less spending. This, coupled with the rise in income tax, makes Spain one of the countries with the highest direct and indirect tax burden on the planet Earth. Economists warn that this tax increase may cause a contraction in gross domestic product (GDP) higher than expected by the Government. Especially in 2013, in which the drop exceed 1 percent, twice the official estimate.

Apart from the contradictions of the official figures of the adjustment and the controversy, was put in doubt the 22,000 million in revenue under VAT, only so far this year has accumulated a fall of 10 percent. The increase will boost the economy submerged and can neutralize the expected increase in revenue, defended himself as finance minister, Cristobal Montoro, as opposed to undertake this measure. The general impression is that more cuts are to be decided. Montoro himself fed this thesis to warn this week in Congress that state coffers are empty.

The other settings should focus on the regions and aim to remove 427,000 employees created by them during the last ten years (see story on Monday in elEconomista). However, this week has been strong resistance from regional governments to make further cuts. The call of the President of the Generalitat, Artur Mas, a regional rebellion against the Government is a paradigm for stimulating this international distrust.

Many people wonder, moreover, what moral authority left to the PP's general secretary, Maria Dolores de Cospedal, to convince the rest of communities governed by their party, when his government of Castilla-La Mancha is among reprimanded. No, of course.

I do not think right now an investor in and outside our borders who believe in the autonomy will obey Montoro. The finance minister was guilty of naivete in advance at the beginning of the year 5.176 million for half of the estimated settlement funding system because it has stopped to tighten their belts. In addition, ICO 15,000 million in loans to cover the debt did not help anything.

In the energy sector also confusion reigns. Vice President, Soraya Saenz de Santamaria, yesterday attributed the delay in reforms that several ministers were outside Spain, including Industry, José Manuel Soria. But the reality is that Soria travel left after slamming the door and refuse to accept the distribution of tax burden and renewable power on the table by Montoro. Some companies threatened to move the headquarters of their business outside Spain to avoid the very strong tax hike planned by the minister of finance.
The reduced charge provided for solar energy, although it is one of the most subsidized, and the fact that former Secretary of State for Finance, Ricardo Martinez Rico, is the leading advisor in the industry, Abengoa, raises many critical and casts suspicion on the cleaning process. If autonomy is not yet speak openly of rebellion, in power so clearly.

To add more uncertainty, Montoro announced his willingness to levy confiscatory rates close to 56 percent of the purchase or sale of short-term securities. An initiative incomprehensible allegedly coming from a government liberal or right, we like a capricious regime such as the populist Venezuelan President Hugo Chavez.

To complete the clinical astonishing about our rulers, the rumors of clashes between the ministers of finance and economics, Luis de Guindos, or between it and the head of the Economic Office, Alvaro Nadal, have given way to a possible government crisis to designate a single responsible in economic affairs. The recent article by Foreign Minister, Jose Manuel Garcia-Margallo, El Pais, dedicated to solving economic problems rather than addressing the many international crises, pitted the bonfire of the vanities. Margallo with Josep Pique are the secrets to a hypothetical vice presidential candidates economy. It is true that in Europe caused a great embarrassment to the current division of responsibilities between the Treasury and between them and the Economic Bureau, which serves as a minister in the shade to chair the Executive Committee for Economic Affairs in the absence of Rajoy.
The spark that triggered this Molotov cocktail on black economic forecasts and instability of the government team is highly liquid Treasuries. The data show that the mattress is exhausted debt issued earlier this year at affordable prices, so from now the Treasury must pay prohibitive prices, which make untenable the vote.

The mere request of the autonomous community of Valencia to qualify for the liquidity fund announced by the Treasury market sparked fears and attacks on the risk premium. The alarm was given by the auction on Thursday, because it showed no there is a demand for government debt beyond the lyrics to one year. With banks in retreat, because they have run out of ammunition delivered earlier this year by the ECB, nobody can predict how they will renew the 28,000 million coming due next October.

The German Parliament gave strong support for the bank bailout. But the statements by Bundesbank President Jens Weidmann, the end of last week, encouraging all to seek the intervention Rajoy, are a sign of strong opposition within the ECB to resume purchases of debt of Spain and Italy, all that could save us. It is also an indication that Germany is not aware of the risk to the single currency. Experts predict that if Spain is operated, the eye of the hurricane will move over Italy and eventually destroy the entire European project. The countdown to self-destruction of the euro is already underway. We'll see if we can stop it.
Countdown To Self-Destruction

Some of that translation is a bit choppy, but it is certainly easy enough to understand the entire gist of the article.

My Take 

Spain certainly needs reforms such as shedding government workers, removing subsidies, and revising work rules to make it easier to fire (and thus hire) workers.

However, Spain does not need increased VAT taxes and it certainly does not need a 56% tax on financial transactions.

In short, Spain is resisting the measures that would be productive, and implementing those measures that will do the most harm.

Spain Set to Implode

Spain is set to implode. I agree with the author that "a countdown to self-destruction" is underway. Also see Death Spiral in Spain; Six Spanish Regions Seek Aid; Bankrupt Spain to Bail out Bankrupt Regions

and.....





http://www.zerohedge.com/news/black-friday-blame-game-escalates-spain-out-money-40-days


'Black Friday' Blame-Game Escalates As Spain Is Out Of Money In 40 Days

Tyler Durden's picture
Submitted by Tyler Durden on 07/21/2012 17:06 -0400




With Valencia bust, Spanish bonds at all-time record spreads to bunds, and yields at euro-era record highs, Spain's access to public markets for more debt is as good as closed. What is most concerning however, as FAZ reports, is that "the money will last [only] until September", and "Spain has no 'Plan B". Yesterday's market meltdown - especially at the front-end of the Spanish curve - is now being dubbed 'Black Friday' and the desperation is clear among the Spanish elite. Jose Manuel Garcia-Margallo (JMGM) attacked the ECB for their inaction in the SMP (bond-buying program) as they do "nothing to stop the fire of the [Spanish] government debt" and when asked how he saw the future of the European Union, he replied that it could "not go on much longer." The riots protest rallies continue to gather pace as Black Friday saw the gravely concerned union-leaders (facing worrying austerity) calling for a second general strike (yeah - that will help) as they warn of a 'hot autumn'. It appears Spain has skipped 'worse' and gone from bad to worst as they work "to ensure that financial liabilities do not poison the national debt" - a little late we hesitate to point out.


(Via Google Translate)

Spain has no "Plan B" more.The money will last until September. Then you have to spend the Treasury after a break in August and again fresh government bonds. However, if the interest and the risk premium on the record highs of the past "Black Friday" hold, is the fourth largest economy in the Euro zone - to Greece, Ireland and Portugal - the fourth rescue candidate.

How much has shaken the unrelenting storm in financial markets and alarmed the country's government can be seen in an almost desperate sounding aggressive opinion of the Spanish foreign minister. At a conference with other European leaders in Palma de Mallorca attacked José Manuel García-Margallo, the European Central Bank (ECB) with unprecedented severity as Tunix bank.

García-Margallo accused the ECB, which has reportedly bought for five months, no more Spanish government bonds and thus the pressure on Spain not reduced before, to keep "hidden". Literally, he added. "It does nothing to stop the fire of the (Spanish) Government debt," his claim on the ECB in the sign of European solidarity now to intervene in favor of his country, was not all. When asked how he saw the future of the European Union and its common currency, he replied that it could "not much longer go on," that countries such as Germany, debt free could, while others such as Spain standing water up to his neck.



What had happened 20 at that July 2012, the Black Friday signaled as early as the Thursday night by the images of nationwide protest rallies"Greek standards." Here, the organized power of protests by the unions were run primarily employed by the public service with the exception of a few final acts of violence in the capital peacefully everywhere. But the union leaders called the warnings of a "hot autumn", wants a second general strike this year wore on waking certainly not to reassure international investors in regard to the soundness and solvency in Spain.


Then came the early afternoon of the next big bang: Valencia asked the first of the seventeen regions of Spain for help from the newly created National Salvation Fund (FLA), because it has serious liquidity problems. Since it did not help that a quarter of an hour later from Brussels came the news that the Euro Group have released the more than 100 billion euros to recapitalize ailing Spanish banks and the first installment of disposable 30 billion for the already partly nationalized banks until the end of July were.



The faces of government officials fossilized

Of this and of the parliament on Wednesday adopted drastic austerity program of 65 billionunfazed, overthrew the Spanish stock market fell by almost six percent. At the same time increased the risk premium on Spanish government bonds already well above the Greek-Irish-Portuguese rescue addition to a record level of 610 basis points above German reference value. The interest rates for ten-and thirty-year bonds ended the trading day at around 7.3 percent is also acute in the danger zone.


The faces of government officials who had to announce on Friday itself even more bad news fossilized rapidly. Even the hard from her left Façon to be brought Deputy Prime Minister Soraya Sáenz de Santamaría called it "incomprehensible" that the markets in Spain punished in such a way where his government produce it for six months in the timing of the reform and austerity at a time.



In desperation sought the Deputy Prime Minister verbal refuge with federal Finance Minister Wolfgang Schaeuble said, "I fully agree with him. The situation we are experiencing is so because of the large uncertainty that exists in the euro zone. "Then dodged all questions, whether on the bank bailout now inevitably will come to the whole country, but closed already no longer sufficient. At the two major ghosts in the background, namely the possible insolvency of Spain or a breakup of the euro, was at that time then stir no more.


Six other regions are in need of help

The bad news flipped finally on his own Finance Minister Cristobal Montoro. He admittedthat the recession will extend to a negative growth of an estimated 0.5 percent of gross domestic product (GDP) in 2013 for one year. Given falling tax revenues and rising social expenditure - unemployment is expected later this year rising to over 25 percent - is no longer with the previously approved mini growth of 0.2 percent expected. This year it will just as it has several foreign analysts, including the International Monetary Fund (IMF), have predicted to go down significantly: minus 1.5 percent.



Then had Montoro, the best pen-pushers in the cabinet of Prime Minister Mariano Rajoy, another piece of bad news: Because of rising interest rates and unemployment benefitswould have to increase government spending in the coming year and by 9.2 percent. As an upper limit for the next budget, he called 126 billion euros (116 this year) and estimated the proportion of debt service on up to 39 billion. So this would be the largest budget item in general.


As the Minister of Foreign Affairs in Palma went out of his skin diplomats and deposed the emergency call to the ECB, the swirling dust of Valencia had not only not set, but spread to other regions. The six other candidates are called rescueCatalonia - the former "engine" of the Spanish economy alone corresponds approximately to the volume of Portugal -Balearic Islands, Canary Islands, Castile-La Mancha, Murcia and Andalusia may have. It is the largest and most populous region. You scrape all of the insolvent and can along without help from the central Wages Liquidez Autonómico (FLA), neither their use nor pay for the bonds maturing their suppliers.



Monti comes to Madrid

18 billion euros to put the government in the FLA pot. Of which 6 billion a called dormant "advance" the government agency with the best credit rating: the National Lottery. Valencia, a stronghold of the conservative People's Party, whose representatives are there over the years contributed megalomaniac buildings and even a new airport, which is never a plane has landed, is expected to require first aid as two billion. In Catalonia, there should be a bit more expensive. Perhaps the most obvious may be the last three decades Socialist-ruled Andalusian black hole, no one even dares to predict.


Prime Minister Rajoy also remained true to its strategy over the weekend not to step into self-publication. But it became known that he for the second Mario Monti, has been invited to Madrid - august his Italian neighbors - and co-conspirators against Chancellor Angela Merkel at the last European summit in Brussels. This will enable the two friends in Berlin alone at the thought of causing goose bumps "Euro Bonds" on a common approach and probably speak a new attempt to lure the ECB from its "hiding place". Some doubt now, though, that Monti wanted to identify themselves too closely with the Bredouillenspaniern, yet there is Italy, the 'risk premium' now suspended well.



Vice Premier Sáenz de Santa María was meanwhile from the exchange. "Now we need to work to ensure that the financial liabilities (the banks) do not poison the national debt" That's easier said than done if the EU and the ECB is not Spain under the arms . access Brussels to act from the perspective of Madrid always a snail's pace, where the Spanish crisis but is now viewed primarily as a "euro crisis" for which one - need new, credible supporting stability mechanisms - with central bank help. Be if Spain, which this year will have around 60 billion euros to repay loans due rescued, would have, there are two variants: the already "traditional" with loans to macroeconomic conditions and visits to the "Men in Black" or the use of Other funds from the bank bailout fund.


In almost all European capitals, including Madrid, has been in the past week vehemently denied that the 100 billion euros would be used not only to clean up the banks. But somewhere in the agreements is a smooth passage in which this kind - would allow - after approval of the euro group, and probably also of the German Bundestag. Perhaps as soon as a Foreign Minister García-Margallo hard to knock.

and.......




Westerwelle: No austerity renegotiation with Athens


BERLIN — German Foreign Minister Guido Westerwelle ruled out any renegotation of Greece's budget austerity programme in an interview published on Saturday.
"I see desires emerging in Greece to renegotiate and substantially question the country's obligations to carry out reforms. I have to say simply, that will not do. It is a Rubicon that we are not going to cross,» Westerwelle told the daily Bild.
He called on Athens to clearly demonstrate that it wanted to remain in the eurozone. «Greece must not just say that it wants to stay in the eurozone, but must also implement a clear policy of reforms and keep its commitments,» he added.
On Wednesday Greece's Finance Minister Yannis Stournaras admitted the crisis-hit country still had «some way to go» to finalize 11.5 billion euros in spending cuts demanded by its EU-IMF creditors in return for fresh loans.
Auditors from the European Union, International Monetary Fund and the European Central Bank -- the so-called troika of Greek creditors -- are expected in Athens next week for another in-depth inspection of the new government's economic programme.
The troika's report will determine whether Greece will receive fresh loans of 31.5 billion euros by September due under its debt rescue program.
[AFP]














ekathimerini.com , Saturday Jul 21, 2012 (17:15)


and.....



Riot police intervene to break steel plant strike


 Greek riot police guard the entrance of the Halyvourgia steelworks factory during a protest, in Aspropyrgos, west of Athens, on Friday.
Scuffles broke out between riot police and protesters Friday when a prosecutor was dispatched to reopen the Halyvourgia steel plant in Aspropyrgos, western Attica, following a nine-month strike by workers that had effectively closed down the facility.
Police had been on standby when the gates of the facility opened at 5.30 a.m. and clashed with striking workers and members of the Communist-affiliated PAME labor union.
The senior plant manager sustained head injuries during the fracas while some protesters clashed with employees who wanted to return to work. Six people were arrested, charged with committing violence, and later released pending trial.
The police intervention reportedly came at the behest of Prime Minister Antonis Samaras on Thursday night after talks between Labor Minister Yiannis Vroutsis, unionists and the Halyvourgia management broke down. According to sources, Samaras stressed the importance of upholding the law and protecting citizens’ right to work, as well as to strike. “The right to work is sacred and the government will do everything to protect it,” Samaras is quoted as saying. His words were echoed by government spokesman Simos Kedikoglou, who also questioned the motives for leftist opposition SYRIZA supporting striking workers. “With whom are they expressing solidarity?” he said. “It was the workers that asked for the police to intervene.” Earlier, SYRIZA had condemned the police action as “a raw, unprovoked, military-style intervention.”
Friday’s intervention followed a court order issued a month and a half ago which deemed the strike by Halyvourgia workers illegal. The plant had been closed since October 31, when employees refused to accept a reduced salary and working week. Since then Halyvourgia’s management has fired at least 50 of its 400 workers and is reportedly planning to transfer the Aspropyrgos operations to Volos, in central Greece.














ekathimerini.com , Friday Jul 20, 2012 (21:20)


and.....

http://www.keeptalkinggreece.com/2012/07/17/greek-delays-postpone-troika-visit-progress-report/


Greek Delays Postpone Troika Visit & Progress Report? Bridge Loan ‘Til September?


Posted by  in Economy

While the Greek government struggles to find ways – read: austeirty measures cuts – and save 11.5 billion euro for the next two years, the Troika representatives seem to take their time. While it was expected that Greece’s lenders representative would start their visit to Athens on July 24th 2012, a spokesman from the European Commission refrained on Tuesday to give exact dates.

European Commission’s spokesperson for economic and monetary affairs and the euro, Simon O’Connor, said he had no knowledge of how long the mission would stay in Athens or of when the troika’s report on Greece’s fiscal adaptation program would be completed. The Troika inspectors are set to return to Athens in the coming days, O’Connor said however.

A delay in Troika’s report would delay also the release of the bailout tranche, originally set for August. “No Troika money, no wages and pensions” is the usual blackmailing formula Greeks have been hearing since May 2010, when the country sought the aid of IMF and the EU.

When even my two cats, (5 and 14 years old) know very well that not a single cent from the Troika bailout goes to Greeks but ends in the pockets of Greece’s lenders.

Meanwhile Reuters reported that Greece’s government is seeking a bridge loan from the country’s foreign lenders to cover  its financing needs until September, a finance ministry source said on Tuesday.

Cash-strapped Greece is set to run out of money in weeks without further aid from the European Union and International Monetary Fund bailing out the country.

Greece’s European partners have promised that they will find a solution to cover the country’s funding needs through August, but have yet to specify how that will be done.

“We are fighting to secure the bridge loan by September,” a finance ministry official told reporters, speaking on condition of anonymity.
  

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