http://www.telegraph.co.uk/finance/newsbysector/transport/9473476/World-shipping-crisis-threatens-German-dominance-as-Greeks-win-long-game.html
Growth:
Fiscal Balance (better than the Eurozone and the US):
Of course if the recession deepens even further and lasts considerably longer, the fiscal situation could worsen. There are signs this may already be taking place.
http://hat4uk.wordpress.com/2012/08/13/why-has-work-almost-stopped-on-the-new-ecb-frankfurt-headquarters/
Over 100 German ship funds have already shut down as the long-simmering crisis in global container shipping finally comes to a head. A further 800 funds are threatened with insolvency, according to consultants TPW in Hamburg.
They are not alone. Britain’s oldest shipowner, Stephenson Clark, dating back to 1730, went into liquidation last week, closing the final chapter of Britain’s coal trade and the industrial revolution.
It cited “incredibly depressed” vessel rates. The firm over-invested in the boom four years ago, betting too much on the China syndrome.
Germany is the superpower of container shipping, controlling almost 40pc of the world market. The Germans also misread the cycle and have been struggling to cope ever since with a legacy of debt and a glut of ships. Now everything is going wrong at once.
Container volumes arriving at European ports plunged in June, dashing expectations of a summer rebound. Imports fell 7.5pc from North America and 9pc from Asia. Flows into the Mediterranean region crashed by 16pc, reflecting the violence of the recession in Greece, Italy, Spain, and Portugal.
Buckling trade is the coup de grace for countless shippers still clinging on by their finger tips. “The market is barely paying above operating cost. If you are loaded with debt, you are in trouble,” said Martin Smith from ship operators Norddeutsche Vermögen in Hamburg.
It is much same story in the Pacific region where Danish shipper Maersk said that it is losing over $200 for every container on the Qingdao-Melbourne route. But what the Germans face is the double-whammy of a funding squeeze.
“If you don’t have a line of credit already, nobody is going to give you one. We’re suffering a liquidity crisis, and its almost impossible for single vessel owners,” said Mr Smith.
Commerzbank – the world’s second-biggest provider of ship finance, and reluctant owner of a flotilla of foreclosed ships – said it is shutting down its €20bn (£15.7bn) ship funding operations entirely to “minimise risk and capital lock-up” under tougher EU banking rules.
“The essential reasons are the high capital and rising liquidity requirements under Basel III,” it said. Commerzbank’s move is the latest evidence that forcing banks to raise capital ratios too fast – and too soon – can choke lending to the real economy. Most of the 20 top banks for the shipping industry have stopped all funding.
“Shipping is the biggest casualty of the new regulations. All the banks are reducing their portfolios, using any breach of covenant to get out of contracts. The second-hand ship market has broken down,” said Mr Smith. Both bulk ships and tankers are trading at lower levels today than during the worst moments of the 2008-09 crisis.
Clarkson’s ClarkSea Index for maritime freight rates has halved since mid-2010, and fallen by 80pc since 2008. This includes the wildly volatile Baltic Dry Index for bulk freight, which has crashed by 90pc to post-Lehman depths. Container rates have held up better but small “feeder” ships are mostly losing money. High oil costs are eating up margins.
“It’s familiar territory,” said Clarkson’s Shipping Intelligence Weekly. “As pressure builds, owners are forced to lay up ships and, with no cash flow, they can’t pay their bankers. As their ships are forced on to the market, prices spiral down. Well-heeled companies snap up the good ones and the rest go for scrap.”
The odd twist is that Greek shippers are the ones quietly snapping up bargains from distressed German companies “The Greeks are sitting on a pile of cash. They are in their own special cocoon completely removed from Greece’s political troubles,” said Dimitris Morochartzis from Lloyd’s List Intelligence.
“They played their cards really well during the boom, selling ships for a profit at the top of cycle. They are now buying them back for a fraction of the price,” he said.
The Greek group Costamare has spent $1.2bn (£764m) since early 2011 expanding its fleet. Last month it bought the Stadt Lubeck from an insolvent German group for $11.3m.
The striking feature of the deal was that Hypovereinsbank provided 100pc financing, a privilege denied to German shippers. “They like their Greek customers more than us,” said one German shipper, quoted by Lloyd’s List.
Giorgos Xiradakis from consultants XRTC said Greek firms are teaming up with Chinese banks. Chinese premier Wen Jiabao pledged $5bn in loans to the Greek shipping industry two years ago, part of a twin-headed plan to gain a stronger foothold in the EU market and to provide vendor financing for the Yangtze shipbuilding industry – currently in dire straits.
German shipping experts say that two-thirds of the country’s marine fleet is in financial distress. If the crisis drags on much longer, the Greeks may leapfrog ahead to become world leaders in container shipping. The irony of prudent Greeks cleaning up after a reckless debt spree by the Germans is lost on nobody.
and.....
http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/9473433/Standard-Chartered-Sands-flies-to-New-York-to-try-for-eleventh-hour-settlement-with-US-regulators-over-Iran-charges.html
The bank boss decided to intervene personally after a weekend of intense negotiations failed to persuade Benjamin Lawsky of New York State Department of Financial Services to water-down his ferocious attack onStandard Chartered.
Ms Sands set off to America even though Mr Lawsky continued to leave the bank in limbo over the format of Wednesday's hearing and which executive he wants to appear.
The DFS told The Daily Telegraph that the hearing could still be a private meeting between lawyers. But Mr Sands decided to handle the case given Standard Chartered’s New York bank licence is at stake as well as a $1bn fine.
In his explosive order published last Monday, Mr Lawsky claimed that Standard Chartered had processed $250bn of transactions on behalf of Iranian clients.
He demanded that Standard Chartered “appear and explain apparent violations of law” and to “demonstrate why [the bank’s] licence to operate in the State of New York should not be revoked.” The order wiped off more than 20pc from the bank’s market value within 24 hours.
Standard Chartered has admitted that some of the transactions it completed on behalf of Iranian clients did not comply with US sanctions. However it insists that just $14m of transactions were non-compliant while 99.9pc followed the rules, including the so-called “u-turn” laws that exempted some transactions from sanctions.
The bank’s legal team, led by Slaughter & May, has built a defence on its view that the DFS’s interpretation of the u-turn rules is “incorrect as a matter of law.”
Standard Chartered has also protested that Mr Lawsky had acted unilaterally and without telling the federal financial regulators which are supposedly leading the investigation.
The bank’s case is being scrutinized by the Department of Justice, the Federal Bureau of Investigation, the Federal Reserve, the Treasury Department and the Manhattan district attorney’s office.
The bank is determined to settle with the DFS and the other regulators as fast as possible.
But since Standard Chartered and the DFS are a “gulf apart on the charges”, according to one source, the bank is pushing for the DFS at least to agree to dropping its demands for its own hearing tomorrow and continued co-ordinated negotiations with all the regulators.
The bank has resigned itself to a large fine which analysts estimate could be as much as $1bn. Analysts have argued that the loss of the New York licence and possible damage of directors being forced to leave could take the total potential costs up to $5bn.
However, Standard Chartered is determined to limit the damage to its reputation and says it won’t agree to Mr Lawsky’s allegations that the bank “operated as a rogue institution.”
Mr Lawsky claimed “flagrantly deception actions” by the bank left the US “vulnerable to terrorists, weapons dealers, drug kingpins and corrupt regimes”.
Standard Chartered said it “strongly rejects the portrayal.”
and.....
MONDAY, AUGUST 13, 2012
Italy's prolonged recession could harm fiscal balances
Italy's deep recession is now a year old and the economy shows no signs of improvement. But it's important to point out that unlike Spain, Italy's main problem for now is growth (exacerbated by poor competitiveness), not fiscal balance.
Growth:
Relative GDP growth (source: DB) |
Fiscal Balance (better than the Eurozone and the US):
Fiscal balances (source: DB) |
Of course if the recession deepens even further and lasts considerably longer, the fiscal situation could worsen. There are signs this may already be taking place.
Reuters: - Finance Minister Vittorio Grilli said Italy's government would overshoot its 2012 deficit goal because of worse-than-expected growth but planned no extra budget cuts because Italy was on target to meet its EU obligations, a newspaper reported.and what's up with the ECB ?????
"We know there will be a worsening of the nominal deficit," Grilli told Rome's la Repubblica in an article published on Sunday. "Nonetheless, our compass remains the structural deficit, and on that we are and we will be perfectly in line."
..."When this recession is over, (the debt reduction plan) would permit a lowering in the debt-to-GDP ratio of 20 percentage points in five years," he said.This is particularly dangerous because of the size of Italy's debt (some €2 trillion). If bond yields spike again, interest expenses alone could worsen the fiscal situation considerably. As discussed earlier, time is not on Monti's side - as he desperately tries to cap Italy's cost of funds via the ESM/ECB.
http://hat4uk.wordpress.com/2012/08/13/why-has-work-almost-stopped-on-the-new-ecb-frankfurt-headquarters/
AUGUST 13, 2012 · 9:02 PM
Why has work almost stopped on the new ECB Frankfurt headquarters?
A new two-fingered skyscraper is rising up from the Frankfurt horizon. Already delayed and running over the initial €500 million cost, these new Towers of Babel have become infamous for Occupy protests – and associated eurotaxpayer demands to know why the m word will probably be a b word in terms of costs by the time roughly 2,500 employees are housed in the new building, which is scheduled for completion in 2014.
Ten days ago, The Slog received this email from a well-placed observer in Frankfurt (extract):
‘Is it possible for you to ask the Bankfurt mole to confirm or deny that there’s a work stoppage at the new ECB building inFrankfurt/Osthafen since c. mid July? Maybe they’re analysing whether they need it in the future. Or they already know that they don’t.’
As it happens, the Bankfurt Mole contacts me, not the other way round: he is a bloke largely on Transmit, and I rather suspect he’d be insulted to be asked such a question. Predictably, I’ve put it to him – and since then the phone hasn’t started ringing. But a further question to the architectural observer above elicited this:
‘A guy who comes along the construction site fairly frequently is wondering why there are almost no construction vehicles for the past few weeks. He also says the face of the building shows no progress for the past few weeks.’
All a bit sample-of-one and vague…as so many stories are at the outset. But further digging made my nose twitch.
Regular Sloggers will remember that last year I posted about the exponentially rising cost of LTRO: Long Term Refinancing Operations. The ECB already admits to a €1 trillion bill, but as euobserver rightly observes:
‘…what the ECB cannot solve is the core issue of having to steer one monetary policy for 17 different economies which are growing further apart….the general feeling at the moment is that at the top level, they are not 100% sure it will work.’
Have some eurocrats begun to get cold feet about the need for a new ECB building? The architect involved Coop Himmelblau(Blue Skies Cooperative) didn’t want to talk about it at all. The ECB itself referred me to some obscure Brussels number with a message that never seemed to stop being a message, no matter how many times one rang it.
Although the ECB New Premises Newsletter had been appearing more or less monthly, it sort of petered out in March of this year.
Type in the headline ‘New ECB building in Frankfurt’ to Paperboy.com, and no results come up. Not one. As by now a veteran observer of non-stop PR hubris when it comes to EU penis structures, I can tell you that usually, such a search would show up at least half a dozen results.
Even searching at the Frankurter Allgemeine Zeitung about this scored 0 results.
So, what else is a newshound to do in the end but ring some Frankfurt numbers? OK, this isn’t scientific – and my German is sprained these days bordering on fractured – but using Google earth and some imagination, the feedback today from those offices in close proximity to the new Tower of ECB strength was as follows:
* Very little work is taking place
* Saw no men on site last week
* Seems normal to me – nothing much happening
* Sorry, never notice either way
* Funny that, I’d been wondering the same thing.
Look, I’m not saying this is The Big Clue. But I can tell you that there is no industrial dispute involved. So the question remains: why is Supermario’s Spire of Mammon stuck at the 37th floor? Have the workers all started speaking in tongues, and deserted the site in terrified confusion? Or has some contrarian accountant in Brussels called a halt to proceedings, given the likelihood that the new ECB headquarters will never be needed?
I think we should be told.