http://www.zerohedge.com/news/overnight-sentiment-back-zombie-mode
Submitted by Tyler Durden on 08/22/2012 06:59 -0400
http://www.telegraph.co.uk/finance/debt-crisis-live/9490724/Debt-crisis-Greece-pleads-for-room-to-breathe-live.html
We have a clear process in place as regards Greece. The troika will return to Athens early in September to continue the review of the second program which has been under way now for some time, and on the basis of that assessment the Eurogroup will then be in a position to take decisions on these issues.
If it concerns delaying reforms and budget cuts, then it is not a good idea.
By warning of the negative consequences and asking for more time and not more money, Mr. Samaras appears to be testing the room for manoeuvre on the German side. While there is a strong message from the German government that it is not willing to agree to more funding for Greece, there seems to be some room in respect of the timing. However, as Greece continues to run a primary deficit, more time means more funding needs, which suggests that it will be very difficult to close the gap between Greece and the Troika.
09.38 Yesterday's market euphoria has come to an end this morning as investors await the outcome of Mr Samaras' jaw-jaw with Mr Juncker and minutes from the US Fed's last rate meeting. PoorJapanese trade data also sent markets lower.
It is in Germany's interest, its commercial interest and economic interest, not just its foreign policy idealistic interests, to really restructure the debt that other countries owe them.
In order to arrive at net spending cuts of €11.5bn, we have to take fiscal measures with a nominal value of €13.5bn.
Let me be very clear: We require no additional money. All we want is a little room to breathe, to get the economy going and to increase government revenues. More time does not automatically mean more money.
Antonis Samaras embarks on an Homeric Odyssey today as he tries to save Greece's place in the eurozone amid open speculation of a Greek exit by fellow eurozone members, notably Finland.
Overnight Sentiment: Back To Zombie Mode
Hopes that today may finally see an increase in trading volatility and volume following yesterday's reversal session will likely be dashed as the event wasteland on the horizon continues for the third day in a row. As DB explains, the FOMC meeting minutes and Juncker’s visit to Athens are likely the two main sources for key headlines today. While backward looking and certainly predating Lockhart's hawkish comments from yesterday, the FOMC minutes today are expected to shed further light on the kind of policy currently under consideration and the economic conditions required before easing is warranted. One thing that will not be discussed is the circularity of launching more QE even as gas prices have never been higher on this day in history, soy and corn are back at all time highs, and the market trading at multi-year highs. As repeatedly explained before, the option for the FOMC include pushing out the targeted exit date for fed funds, providing “exit guidance” on balance sheet measures (i.e. asset sales), various mixes of additional balance sheet expansion (including the possibility of an open-ended QE program) and cutting interest on reserves. It is virtually certain that none of these will be enacted at the Jackson Hole meeting in one week, 2 months ahead of the presidential election, but hope springs eternal.
Beyond today’s meeting the Beige Book (29 Aug) is a key update before the oft anticipated Jackson Hole event on the 31 August, DB continues. Jackson Hole clearly could be a forum for Chairman Bernanke to outline his policy strategy but it remains unclear to Deutsche Bank how strong a case could be built around a large-scale QE with equities currently flirting around a post-crisis high. The S&P 500 has not moved more than +/-1% for 12 consecutive session, the longest streak since 11 May 2011. Market eased gains after Fed’s Dennis Lockhart said that he remains undecided on further easing. Lockhart, who’s a voting FOMC member and holds a mild-dovish stance, said that monetary policy can exert a powerful influence on the economy but is not a panacea. He also added that “There is a risk to monetary policy being employed too aggressively and without effect to address economic problems that can be resolved only by fiscal reforms”.
Moving back to Europe, Samaras’ meeting with Juncker is scheduled to take place 5pm London time with a joint statement to follow. It is perhaps too early for Greece to ask for bailout concession today but the budget slippage as reported by recent press could be discussed. George Saravelos noted that PM Samaras is likely hoping for supportive language from key EU politicians indicating potential program adjustments. It’s a busy week for Mr. Samaras with Merkel’s and Hollande’s meeting on Friday and Saturday respectively to follow.
Away from Greece the latest Dutch opinion polls by the TNS Nipo yesterday showed a tight race between PM Mark Rutte’s pro-euro Liberal Party (VVD) and the far-left Socialist Party (SP) ahead of the 12 September general election. The poll showed that the Liberals and Socialists enjoyed support that would translate into 34 seats apiece in the 150 seat parliament. Last week Socialist leader Emile Roemer openly criticised the EU’s obsession with the 3% maximum budget deficit target and over the weekend also said that “The only thing a government can do in these times of crisis is stimulating the economy... Certainly not senseless austerity". It looks like a multi-party coalition is the most likely post election outcome in Netherlands.
Overall, anyone expecting major market-moving developments with the market living out the last days of vacation before the September roller coaster returns, will be disappointed.
http://www.telegraph.co.uk/finance/debt-crisis-live/9490724/Debt-crisis-Greece-pleads-for-room-to-breathe-live.html
11.38 The European Commission has insisted that there is a “clear process” to determine whether Greece is granted concessions on its bail-out conditions. Spokesman Simon O’Connor told reporters:
We have a clear process in place as regards Greece. The troika will return to Athens early in September to continue the review of the second program which has been under way now for some time, and on the basis of that assessment the Eurogroup will then be in a position to take decisions on these issues.
11.13 The Dutch aren't so keen on giving Greece an extension to its austerity programme either, according to the country's finance minister.Jan Kees de Jager told reporters:
If it concerns delaying reforms and budget cuts, then it is not a good idea.
11.00 Germany got an auction away today where it was forced to pay higher rates to sell two-year debt.
By "higher rates," I mean zero. The country sold €4.0825 of two-year bonds at average yields of 0pc. This compares with a yield of -0.06pc at an auction last month. Demand was also lower, with 1.5 bidders for every bond on offer (v. 2 bidders at the last auction).
10.58 Meanwhile, analysts at Citigroup continue to see a 90pc change of "Grexit". In a note today, Jürgen Michels and his team say Mr Samaras'comments to Bild were "testing the room for manoeuvre on the German side":
By warning of the negative consequences and asking for more time and not more money, Mr. Samaras appears to be testing the room for manoeuvre on the German side. While there is a strong message from the German government that it is not willing to agree to more funding for Greece, there seems to be some room in respect of the timing. However, as Greece continues to run a primary deficit, more time means more funding needs, which suggests that it will be very difficult to close the gap between Greece and the Troika.
10.42 Should Greece be given more time to implement austerity measures? According to one ally of German Chancellor Angela Merkel, it may not be such a bad idea.
MP Michael Meister told German newspaper Handelsblatt that a reliable timetable for Greece's recovery was "crucial," and thatGermany would "carefully consider" the options once a report from the troika was completed in September.
However, colleague Klaus-Peter Willsch told the paper that every euro dispensed to Greece made an exit even more expensive for Germany, and called for a freeze to all payments until conditions were met. He said:
What's the point of the German taxpayer getting IOUs if the debtor cannot or will not pay?
09.45 However, Spanish borrowing costs are close to falling back below 6pc. The yield on 10-year government bonds fell 6 basis points this morning to 6.098pc. Less than a month ago, borrowing costs hit 7.75pc.
09.38 Yesterday's market euphoria has come to an end this morning as investors await the outcome of Mr Samaras' jaw-jaw with Mr Juncker and minutes from the US Fed's last rate meeting. PoorJapanese trade data also sent markets lower.
Japanese exports to the European Union plunged 25.1pc year-on-year amid the region's debt crisis, the country's finance ministry said today.
The FTSE 100 in London fell 0.9pc to 5,805.78, while the CAC 40 in Paris fell 0.5pc to 3,494.56 and Frankfurt's DAX 30 slipped 0.7pc to 7,038.63. The IBEX 35 in Madrid fell 1pc to 7,474.05.
09.16 EU debt inspectors will visit Spain on Friday to discuss the creation of a "bad bank" that will purchase toxic assets linked to its property sector and hold them until buyers can be found, according to reports.
Spanish daily Expansion said that "troika" officials from the ECB, IMF and EU will meet with the Bank of Spain and government officials to define assets that will qualify.
An official representing the European Financial Stability Facility (EFSF), or the eurozone's temporary bail-out fund, will also be present, according to Expansion.
08.57 Germany should restructure the debt it is owed by other countries for its own good, according to a member of the Bank of England'sMonetary Policy Committee.
Adam Posen told the BBC that Germany or anyone looking after the country's interests would be "ill-advised" to supervise a eurozone break-up. He said:
It is in Germany's interest, its commercial interest and economic interest, not just its foreign policy idealistic interests, to really restructure the debt that other countries owe them.
It was German government decisions and German banks who lent the money to all these countries so they could buy German exports. [Germany has] been running a scheme and so just as everywhere around the world you want to restructure the debt, you can’t make it all on the borrower. [Lenders] have to take a hit [too].
[If the eurozone collapsed] Germany's currency would shoot through the roof, Germany's trade relations would be disrupted, and Germany's banks would then be on the bailout list instead of poor people and other countries, forever.
08.48 Mr Samaras' comments came amid reports that the country needs to find an additional €2bn in spending cuts over the next two years to offset the impact of lower tax revenues caused by Greece's deepening recession.
Under the terms of its €130bn bail-out agreed in March, Athens must find spending cuts worth 5.5pc of GDP, or about €11.5bn. However, a senior official told Reuters:
In order to arrive at net spending cuts of €11.5bn, we have to take fiscal measures with a nominal value of €13.5bn.
08.36 Meanwhile, Greek PM Antonis Samaras has called on international lenders to give the country "a little room to breathe" on its austerity targets. He told German daily Bild in an interview:
Let me be very clear: We require no additional money. All we want is a little room to breathe, to get the economy going and to increase government revenues. More time does not automatically mean more money.
08.21 Greek prime minister Antonis Samaras will attempt to loosen some of the strings attached to the country's multi-billion euro bail-out today when he meets Jean-Claude Juncker, chairman of the euro group of finance ministers.
Damian Reece, the Telegraph's Head of Business, examines Mr Samaras' "Homeric Odyssey" in today's City Briefing:
Antonis Samaras embarks on an Homeric Odyssey today as he tries to save Greece's place in the eurozone amid open speculation of a Greek exit by fellow eurozone members, notably Finland.
He begins today by hosting Jean-Claude Juncker, chairman of the euro group finance ministers, to begin his pleading for more time so the country can force through the cuts needed to reduce its budget deficit. His quest then moves to Berlin on Friday to speak with Angela Merkel and then Paris the next day for talks with Francois Hollande. Samaras wants an extra two years to hit targets set under the terms of Greece's €130bn bail out deal.
Key to restoring credibility will be Greece's attempt to push through €11.5bn of cuts over the next two years as demanded under the bailout - which Samaras's administration has yet to fully piece together after weeks of wrangling.
Juncker, the most influential European policymaker to visit Athens since Samaras's conservative-led government took power in June, is expected to bluntly tell Samaras that Greece must carry out promised cuts and that little room for leeway exists.
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