Thursday, August 2, 2012

Around the horn in Europe

http://www.zerohedge.com/news/importance-being-earnest


The Importance Of Being Earnest

Tyler Durden's picture
Submitted by Tyler Durden on 08/02/2012 08:01 -0400



Submitted by Mark Grant, author of Out of the Box
The Importance Of Being Earnest
"Pray don't talk to me about the weather, Mr. Worthing. Whenever people talk to me about the weather, I always feel quite certain that they mean something else. And that makes me so nervous."

                                 -The Importance of Being Earnest
Today there will be no discussion of the weather. Today platitudes, arcane phrases, vague promises couched in banalities will no longer do. Mr. Draghi has laid down the gauntlet of actually providing a solution for Europe by having the ECB act as Superman, Batman and the Avengers and show up and make the last minute rescue and I fear that anything short of this will now send the markets into a tailspin. Expectations run high, Mr. Draghi may well have over-promised and any sort of under delivery will not be taken well. Today may be the most critical meeting, ever, of the European Central Bank and it is Mr. Draghi’s reputation, the ECB’s reputation that has been put on the line by Mr. Draghi’s bold comments.
This is also a play where it will be important to look behind the scenes. I suspect that the pushing and pulling to determine the lines and the acts of this drama have been frantic and also disturbing. France, Spain, Italy, Portugal, Greece et al are all lined up on one side and I am sure they are besieging Germany, Austria, the Netherlands, Finland et al to live up to their public pronouncements and provide monetary support to bail out the troubled nations in Europe. I would guess that the stress is acute. I think we have reached the inevitable point where Germany and the rest of the providers of capital are either going to begin their downward spiral to an average of funding costs and living standards or the Northern European backs will harden and they will decide that this is a path they will not tread. The ECB announcement today will signal far more than the next line of the European defense in my opinion. Today’s statement will mark just what the funding nations are willing to do or not and just how far Germany is willing to go. In a very real sense it is now Germany versus the troubled nations where any further significant aid will drag down Germany as it helps the crippled countries. You may think of a teeter-totter where any capital slid to one end will have the opposite effect on the other end. In my view we are at a major point of disembarkation and today is the day of decision.
While there has yet been no Lehman moment, some unexpected big bang moment with great consequences, we have had several Greek moments, a Portuguese moment, an Irish moment and a Spanish moment. Today we are going to have an ECB moment I predict that will define much more than Draghi’s brandishing of the ECB sword in a flurry of self-defense. Today you will witness, if you pay attention, exactly where the European Union is headed as defined by its central bank and the use of the EU’s Stabilization Funds. Today we will get some concrete answers and Mr. Draghi will have to do far better than “muddle through” to assure the bond markets of anything.
If normal patterns hold we will run up on the headlines, flatten out in the next few days and then decline once again as people think through the implications but today might not be a day for normal patterns. The rhetoric will be grand no doubt and dressed in its finest regalia but I have a suspicion that this time it won’t be enough. I suspect without real cannons and real bazookas and a massive amount of firepower that words alone will no longer suffice. Today I think will be rather like the Olympics and the famous words often echoed, “Today it all comes down to this” and the “this” will have to be specifically defined and then assessed by market participants.
"I've now realized for the first time in my life the vital Importance of Being Earnest."

                            -Oscar Wilde









http://globaleconomicanalysis.blogspot.com/2012/08/problems-in-spain-revenues-collapse.html


Wednesday, August 01, 2012 8:31 PM


Problems in Spain: Revenues Collapse, State Spends Nearly Twice as Much as Revenues Collected in First Half


It's hard to meet budget targets as promised to the bureaucrats in Brussels when revenues collapse and the State Spends Nearly Twice as Much as Revenues Collected in First Half.

Via Google translate (heavily modified by me) from El Confidencial: 
 The Spanish economy continues its adjustment process. But the results in terms of deficit reduction, remain meager. Very meager. To the extent that in the first half of the year-on-national accounts, government spending-which really is committed to spend but have not been paid, have grown by 17.6% over the same period of 2011 .

Or what is the same, the central government already has obligations amounting to 87.967 billion. The resources, however, only amounted to 44.879 billion (-4.1%), which means that during the first six months of the year the state has spent (or is obliged to spend) almost double what it has collected in revenues.

Debt service has become the second biggest problem in the budget (after unemployment benefits). In fact, interest payments of 12.239 billion euros, is already 23% more than the government pays public employees (9.953 billion euros). This does not mean, however, that the debt service is causing the budget shortfall. In fact, the primary deficit (excluding interest payments) amounted to 30.839 billion in just six months.


Rising unemployment has forced the state to make some additional contribution of 4,404 billion euros to the Public Employment Service (SPEE), while Social Security has received an additional 2.575 billion euros.


The central administration also had to make advance payments to the autonomous communities totaling 5.476 billion, and another 865 million have gone to local corporations. In total, 13.320 billion of additional costs upward bias the data deficit for the first of the year.


In any case, the underlying problem continues to be government revenue, strongly influenced by the deterioration of economic activity.


VAT receipts actually are falling at a rate of 8.6% on a comparable basis. Panelists expect the destruction of more than 300,000 jobs next year, 2% of the workforce. That is, ten times more than estimated as more likely the government.
The Spanish implosion continues and nothing can stop it.




( Editor's comment.. )   


and one action for inaction from the ECB today could be further inaction from Spain's government....




http://www.telegraph.co.uk/finance/financialcrisis/9445456/Pressure-on-Spain-to-bow-to-bail-out.html


Ambrose Evans-Pritchard
By , International Business Editor
9:34PM BST 01 Aug 2012
Comments180 Comments
The frantic diplomacy comes as investors wait nervously to see if German-led hawks on the ECB’s governing council will stand behind the bank’s chief, Mario Draghi, who triggered a euphoric stockmarket rally last week with hints of intervention in the Spanish and Italian bond markets.
"The situation is dramatic: markets will react very badly if the ECB doesn’t deliver,” said Dmitris Drakopoulos from Nomura, ahead of the ECB’s crucial policy meeting on Thursday. The bond markets are continuing to signal deep alarm, with safe-haven flows into German two-year debt pushing yields to minus 0.08pc.
Former ECB governor Athanasios Orphanides said Mr Draghi had boxed himself into a corner. “Expectations are now so high, the ECB will have to announce something,” he said.
Bundesbank chief Jens Weidmann shows no sign of relenting, warning on Wednesday that the ECB must not “overstep its mandate” or stray into fiscal rescues. He issued a blunt reminder that the German central bank is master of the euro project, and not “just one” bank among others. “We are the biggest and most important central bank in the euro system,” he told the Bundesbank journal.
While the Bundesbank does not command an ECB majority – and has been outvoted in the past – Mr Draghi must move with extreme care. Two German members of the ECB have already resigned in protest over bond purchases, seen as debt pooling by the back door. EU officials fear that Mr Weidmann may leave as well if pushed too far, risking a political storm in Germany.


http://www.telegraph.co.uk/finance/debt-crisis-live/9445750/Debt-crisis-live.html


12.45 BREAKING
The European Central Bank (ECB) has also kept its benchmark interest rate on hold at 0.75pc.
Its overnight deposit rate was also held, at zero.



11.16 Evangelos Venizelos, leader of the PASOK party, outlined 10 proposals for a "strategic framework" on Tuesday. They include a fresh drive to boost employment, and more protection for Greeks on low incomes.
The government finally reached accord on a €11.5bn package of cuts last night. Yiannis Stournaras, Greece's finance minister, said he will announce the specific measures "towards the end of August".
10.32 Some Germans may want the ECB to take decisive action, but according to the same TV station, most Germans want Greece to exit the euro.
The poll, which was conducted by Infratest dimap and seen by Bloomberg, showed that 65pc of Germans want Greece to leave the single currency, while 84pc thought the worst was yet to come.
However, 65pc of the 1,504 people polled said that the euro would still exist in a number of years.
10.20 Not all Germans are against the ECB buying Spanish and Italiandebt.
Michael Kemmer, the managing director of the Bundesverband deutscher Banken (BdB), which represents lenders including Deutsche Bank and Commerzbank, said that ECB should be allowed to buy sovereign bonds to calm markets. He told ARD TV in Germany:
10.05 Investors are slightly nervous ahead of the Draghi press conference. Spain was forced to pay higher rates at a debt auction this morning.
The country sold just over €3bn in three separate auctions of medium and long term debt. It paid average rates of 6.647pc at an auction of 10-year debt, compared with 6.43pc last month. Demand also waned, with 2.4 bidders for every bond on offer (v. 3.2 bidders at the last auction).
It also sold four-year bonds at average yields of 5.971pc (v. 5.536pc), and two year debt at average rates of 4.774pc (v. 3.592pc).
09.58 Following Mario Monti's comments yesterday that the European Stability Mechanism will, in his opinion, get a banking licence, Finnish PM Jyrki Katainen has other ideas. He told Italian newspaper La Stampa:
QuoteWe will make our proposal in September. So far what has been discussed has been using the ESM to buy bonds of countries in trouble on the secondary market, but I don't think that's the right solution.
Last year the ECB did that and calmed the markets for a few weeks and then everything went back to how it was before.
QuoteWe have to find the way to use the (ESM) more efficiently, for example by buying state bonds on the primary market. That would go straight at the problem, lowering spreads more strongly.

08.31 Most investors share Mr Peston's sentiment. A poll conducted by 


08.22 Robert Peston, the BBC's business editor, has been speaking on Radio 4's Today programme, where he has compared Mr Draghi's comments in London last week to Dirty Harry warning short sellers to "go ahead punk, make my day - because I can make your life very hard".



But he adds that unlike Dirty Harry, Mr Draghi doesn't have the biggest gun - that's reserved for Germany, which has made clear on several occasions that it doesn't like "the idea of spending unlimited sums propping up Italian and Spanish governments".
He predicts that the ECB will disappoint today, with "months of uncertainty" to come as the eurozone "lurch[es] from crisis to crisis".
08.05 So will he, or won't he? After vowing last week to do "whatever it takes to preserve the euro," traders, economists, and journalists alike will be hanging on to every word uttered by Mario Draghi at hisEuropean Central Bank (ECB) press conference today to see if he puts his money where his mouth is.
The ECB will announce its decision on interest rates at 12.45pm. This will be followed by a press conference at 1.30pm UK time.
Societe Generale shows that 69pc of its client base think that Mario Draghi will not announce anything substantive today. When asked if theECB will disappoint, one investor said:

and from Greece , the Press reaction to the Coalition bowing to the Troika....

Press Watch, August 2
by Dimitris Giannopoulos2 Aug 2012
Press Watch, August 2
Press Watch, August 2

Fear of the troika and the dire consequences of defying its diktat has once again prevailed in the decisions of the three party leaders who support the coalition government of Antonis Samaras.
Earlier words of dissent by the junior partners, Pasok’s Evangelos Venizelos and Democratic Left’s Fotis Kouvelis, only lasted for a day, giving way to full - albeit reluctant - compliance.
All that Samaras had to do at yesterday’s third meeting at Maximos House was to convey to them the repercussions of non-compliance with the troika-prescribed 11.7bn euros worth of cuts in wages, pensions, health or welfare benefits and other public sector costs, for Venizelos and Kouvelis to emerge from the premier’s residence “persuaded” to toe the memorandum line.
“It’s our last chance to remain in the euro”, Samaras was quoted as saying at the overcast coalition summit.
“As prime minister, I have a duty and responsibility for the decision,” he added, to which the other two leaders conceded the argument.
“Leaders’ accord after the storm,” reads tooday’s front-page headline of pro-Pasok daily Ethnos. “The timetable for the painful 11.7bn euro package has been finalized,” added the subheading.
“Time for paying the bill,” muses Ta Nea, noting that its headline for the previous day outdated: “…After the leaders’ time.”
“Wages, pensions, public utilities are targeted by the finance ministry” explained the subheading.
“Samaras’ line has prevailed,” celebrates the top title on the front page of the pro-bailout newspaper of record, Kathimerini.
“Decisions on the 11.6bn euros to be taken immediately,” warned the subheading, quoting the junior partner’s retreat: “Venizelos: The prime minister has the responsibility.”
But the populist euro-skeptical tabloid Avriani pulled no punches over the nature of yesterday’s meeting.
“Troika’s blackmail prevails. Leaders’ decision about the 11.5bn euro measures taken at gunpoint” blared Avriani’s customary full-page headline.
The radical left Syriza opposition newspaper Avgi draws the same conclusion in a more sarcastic interpretation. “The show is finished,” says its main title, referring to what it describes as the leaders’ “fake disagreements” at their previous meetings.
The long subtitle explains it all: “The leader of Pasok disagrees with the measures but doesn’t want to topple the government, while the Democratic Left president is still seeking ways to avoid piling new burdens on the weak. Syriza: The three coalition allies have as their sole concern how not to anger the troika.”


and from The Slog , the truth in Greece is dead.....


AUGUST 2, 2012 · 8:48 AM

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In Greece, the truth is dead. Only graft and the greater scheme of things remain.

This isn’t President Vladimir Putin swimming in the waters off Greek island Katalokon yesterday. Ooooo nononono. It looks like him to me, but Moscow says no, it’s powerful Russian banker  Andrey Kostin, complete with 45 security officers, four helicopters, and a large jet on standby. No, it still looks like Rasputin to me. Perhaps he was inspecting the Greek mineral wealth personally. But even if he was just on holiday, why deny it?
However, one thing I can tell you for sure about this shot: it doesn’t look anything like Andrey Kostin, because he looks like this.
Well, as The Slog’s been trying to make clear for some time now, Greece is the place to be these days. Anyone who’s anything in energy and rare-earth minerals is enjoying the waters there. It’s just that we mustn’t talk about it, because of course, the Greek crisis is purely about fat, idle greasy kebab-house owners not paying their taxes.
Be it geopolitics or debt repayment schedules, the truth is dead in Greece – bludgeoned to a pulp by the people in Washington, Brussels, Ankara, Athens and Moscow who just want to help the poor Greeks out of their fiscal hole. Take the Troika: now that Geithner is promising viable alternatives to the Brussels flow of milk and honey, the officials working for this 
Chinese triad gang
 EU/ECB/IMF philanthropy centre are falling over themselves to assist the Greek Establishment in its maze-like search for redemption and solvency.

For example, Troika officials are due to meet with Justice Minister Antonis Roupakiotis on Wednesday to discuss the liberalisation of the legal profession. Mainly this is about the faster dispensation of justice. Greece has hundreds of thousands of legal cases outstanding. For tax matters alone, there are 165,000 cases outstanding. The embezzlement of billions by past Greek leaders remains an investigation-free zone, but tax arrears…well, that’s important, because tax arrears bring more money in quickly, with which to pay off all those bondholders who probably bought the bonds as a cert for insolvency insurance in the first place.

But if the Troika is here to help, Berlin is concerned to keep those perfidious Greeks on their toes. German Transport Minister Peter Ramsauer has become the country’s latest politician to raise the prospect of Greece leaving the eurozone. In a television interview yesterday, Ramsauer said Greece “will no have no alternative but to leave the eurozone if it does not receive any further loans”.

The self-fulfilling logic of that one is decidedly odd, suggesting that Greece is about to truculently turn down the next tranche of bailout money in a fit of Mediterranean pique. Perhaps aware of what he had said, Herr Ramsauer added that Germany “should stop contributing to the aid for Greece if the IMF ends its help for the indebted country”. So, um, if the Troika  leaves Athens with bad vibes, Germany should back out too, and then, er, Greece will have no money and leave the eurozone. Yes, I think that’s what he meant. Maybe somebody should try and put his observation into words.
As it happens, Greece has its own legal & tax corruption watchdog, and thus doesn’t need such interventions by CSU MPs. Astutely (and amusingly) Leandros Rakitzis, Greece’s public administration inspector and top watchdog on corruption in the public services, observes that thus far,  “the debt crisis hasn’t lowered corruption, just the price of it”. Such an anti-inflationary effect should surely be applauded, but the entire less corruption = more tax income equation breaks down spectacularly when one learns that the worst offenders by far are officials working at…..the tax authority. (Who, by the way, just blagged themselves higher wages and more bonuses plus bigger pensions)

“The struggle against corruption is not easy and demands persistent political will,” Rakitzis wrote in a recent report. But that political will exists only as an aspiration in the watchdog’s mind: the civil servants committing the corruption crimes are usually to be found silently working at their old work places, following a minor knuckles rap or a hastily granted immunity.

Beyond them, corrupt evasion tends to emanate from the corporate sector: Financial Crimes Units (SDOE) of the Finance Ministry report that the majority of  businessmen in the Greek island holiday resorts, for example, never issue receipts, therefore depriving the State of at least 23% in Value Added Tax. The SDOE has found that a staggering 70% of businesses have committed tax evasions. As Elena Tsigante wryly observes, “This is an austerity drive being applied to moral values”.

Correct. None of the robots in Brussels, the IMF, the ECB, Athens and interested geopolitical players has told a scintilla of truth about Greece for a very long time now. The truth about Greece is dead and buried. It lies, forgotten, an unmarked grave among many others in that large cemetery called Honour.

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