http://www.athensnews.gr/portal/1/57390
| Press watch, August 1 | |||||
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A brewing rift between, on the one hand, Prime Minister Antonis Samaras, and, on the other hand, Pasok leader Evangelos Venizelos and Democratic Left chief Fotis Kouvelis, erupted into the open yesterday, necessitating yet another meeting of the three coalition partners at the Maximos House today at 5pm.
Today’s media hold little hope for the leaders’ attempt to break the deadlock over the choice of cutbacks worth 11.7bn euros and the time period needed for their implementation.
Newspapers highlight Venizelos’ bitter remarks about Samaras’ effort to appear as the most “responsible” of the three before the troika by ignoring the Pasok leader’s suggestions about an extended timetable for implementation of the cutbacks.
“First clash in the government coalition” reads the headline of conservative tabloid Adesmeftos Typos, blaming the crisis on Venizelos’ “aggressive” statements.
The pro-Pasok daily Ethnos was more reticent in accusing any particular leader for the rift. “Sudden deadlock in the talks”, said the headline, with the emphasis and capital letters on “sudden” – as if relations between the government partners weren’t already strained before yesterday’s meeting.
An Ethnos front-page editorial warned that “communication games” could “undermine cohesion of the ruling coalition that would ultimately endanger the country’s survival”.
The pro-Pasok Ta Nea also refrained from laying blame for the impasse, calling on the coalition partners to sober up.
“The leaders’ big time” reads the paper’s front-page title next to the three mug-shots of the three leaders on a dark background.
But Ta Nea subtitle notes that “Samaras insists on taking tough measures now, while Venizelos’ and Kouvelis’ position calls for a ‘political negotiation’ with the troika” to ameliorate the austerity package.
The top-page banner title of the pro-troika newspaper of record, Kathimerini, also acknowledges “Strong tremours in the government”, stressing, however, that the troika has already rejected Venizelos’ proposal to break up the 11.7bn euro package into two parts spread over a four-year period instead of just 2013-2014.
The radical left main opposition party organ, Avgi, suggests that the differences between the three leaders is a ploy to blame the social costs of the massive cutbacks on one another.
“Hide-and-seek with the measures” muses the headline, while the subheading stresses that “Samaras is ready for a big ‘yes to all’ for the sake of safeguarding the country’s position in the euro”.
But for the populist anti-euro tabloid Avriani, the latter is the worst option because “the foreign minister of bankrupt Belgium has made the provocative proposal” to “Place Greece under guardianship for a whole generation” – shouted the paper’s customary full-page title.
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and.....
http://www.testosteronepit.com/home/2012/7/31/is-germany-preparing-for-a-spanish-default.html
Is Germany Preparing For A Spanish Default?
TUESDAY, JULY 31, 2012 AT 4:47PM
Hope persists that Germany would not only bail out Spain and the rest of the Eurozone but would also tolerate the Fed-ization of the European Central Bank. Even Treasury Secretary Tim Geithner was hounding German Finance Minister Wolfgang Schäuble, who was on vacation like the rest of Europe. And yet, Deutsche Bank, Germany’s de-facto vice-ministry of finance whose CEO serves as éminence grisebehind elected officials and bureaucrats alike, well, that venerable institution at the core of Germany Inc. appears to be closing the book on Spain.
And it’s Spain everyone is worried about. Not Greece. Which appears to have become a fait accompli. Even with Geithner. After his meetings with Schäuble and ECB President Mario Draghi, Geithner called Spanish Economy Minister Luis de Guindos. According to “sources of the Spanish government,” they tossed around solutions to stabilize the Eurozone and resolve the debt crisis that is ravaging Spain and Italy. Not a word about Greece. It has fallen off the agenda.
Spain is suffering from stratospheric unemployment, banks on life support, a moribund economy, and bankrupt autonomous regions. One of them, Catalonia, announced itwould not be able to pay hospitals, schools, social organizations, child care centers, etc., public and private, for contracts they have with the government. The noose tightens.
So a week ago, de Guindos met with “el todopoderoso Wolfgang Schaüble,” the almighty Schäuble, as El País calls him (including the umlaut on the wrong vowel), to work something out. It’s urgent. Spain will run out of money in October unless it can raise enough to cover the bonds that are coming due, pay for its ongoing deficit, and bail out its regions. But it doesn’t want to pay the elevated risk premium the market demands for its bonds, and it doesn’t want to ask for a bailout because it doesn’t want the Troika—the austerity jocks from the ECB, the EU, and the IMF—breathing down its neck and run the show, as they’ve done with such great success in Greece. Spain wants to keep its sovereignty and dignity. If nothing can be worked out, Spain would, according to government sources, default. That word made it into print. With immediate effect [read.... The Extortion Racket Shifts to Spain].
So the best solution on the Spanish wish list would be for the ECB or the bailout funds (the EFSF and later the ESM) to buy Spanish bonds, either in the secondary markets to force yields down, or directly, but without any bailout conditions—precisely what the German Bundesbank and the Ministry of Finance have vowed to oppose: bailouts would come with conditions, namely budget cuts and structural reforms.
Alas, as long as “el todopoderoso” Schäuble demands conditions, Spain won’t request a bailout. Not until the very last minute. A game of chicken, with default as consequence. Geithner was probably telling de Guindos to back off and request a formal bailout and get it over with as soon as possible to avoid a crisis whose effluent might drift across the Atlantic and seep into the shaky US economy. President Obama’s reelection would be at stake.
But then Deutsche Bank released its earnings. They weren’t pretty; 1,900 jobs would be cut. And ominously, the bank, which walks in lockstep with the German Ministry of Finance, had dumped 37% of the Spanish sovereign debt still remaining on its books. By the end of June, it only held €873 million, down from €1.4 billion three months earlier. A process that is likely to continue—now that default and October had appeared in the same paragraph in Spanish papers. And so the bank is walking away from Spain, in synch with el todopoderoso Schäuble’s rejection of Spain’s wish list.
Deutsche Bank isn’t the only one. Capital flight continues to set new records in Spain. According to the Bank of Spain’s just released Balance of Payments, €41.3 billion left the country in May, bringing the first five months of the year to €163 billion. Eleven consecutive months of declines! For a total of €259 billion. 21.6% of GDP. And those are the people who know best.
The coordinated confidence-inspiring words from the Eurozone’s fearless leaders about doing whatever it would take to save the euro was a sign that they were afraid of Spain. Its threat of default had been effective. The ECB caved. And in doing so, it threw down the gauntlet. Read.... War Of The Central Banks?
http://www.telegraph.co.uk/finance/debt-crisis-live/9442373/Debt-crisis-live.html
11.15 A Spanish rebellion is brewing. The head of the Andalusian government has vowed to fight the country's strict debt rules in court.
Yesterday, an Andalucian representative reportedly stormed out of a budget meeting between Cristobal Montoro and the country’s 17 regional governments because of demands for further belt-tightening. Catalonia refused to attend.
Catalonia is protesting the government's decision to impose a strict deficit target of 1.5pc of GDP, while Andalusia’s president is unhappy with the debt limit target of 13.2pc of GDP that has been set by the central government.
Jose Antonio Grinan said that the limit would mean Andalusia would have to slash its debt by €2.74bn next year, and post budget surpluses, described by Mr Grinan as "impossible during a recession".
10.45 Germany has sold five year debt at record low interest rates this morning. The Bundesbank said it sold €3.35bn of five year notes at average rates of 0.31pc, compared with 0.52pc at a similar auction in July. There were 2.6 bidders for every bond on offer.
10.38 Meanwhile, Philipp Roesler, Germany's economy minister, has echoed Mr Weidmann's comments this morning. He told reporters that while "what [the ECB] does is its decision [...] we expect it to concentrate on its core monetary tasks.”
On the prospect of the eurozone's permanent bail-out fund (the European Stability Mechanism) being granted a banking license so it can accessECB funds, Mr Roesler said:
The chancellor and I have discussed it and we are united that a bank license cannot be our way [...] we don’t want an inflation union but a stability union. Fiscal discipline and economic reforms have to be the way forward. Other ways are not suitable.
10.17 Germany's central bank has reminded everyone this morning who calls the shots in Europe.
In an interview published on its website today, Bundesbank president Jens Weidmann stressed that the ECB should not exceed its mandate and said that the German central bank is more "important" than others in the eurozone. He said:
[The ECB] must be aware that its independence obliges it to respect its own mandate and not to exceed it.
When asked what the challenges were for the Bundesbank because it is only voice among 17 in the eurozone, he responded:
We are the largest and most important central bank in the Eurosystem and we have a greater say than many other central banks in the Eurosystem.
09.41 The gloomy news continues at home. British manufacturing fell at its fastest pace in more than three years last month, according to a Markit/Chartered Institute of Purchasing & Supply (CIPS) survey.
The UK manufacturing PMI slipped to 45.4 in July, from 48.6 in June. Economists surveyed by Bloomberg had expected a reading of 48.4.
UK manufacturing activity is now at a 38 month low, led by a sharp contraction in output and new orders. David Noble, CEO of the CIPS, said:
09.18 The eurozone as a whole saw manufacturing activity fall to a 37 month low last month, with a PMI of 44.0 (lower than the flash estimate of 44.1 made last week), from 45.1 in June.
09.06 There's a slew of European manufacturing data out this morning.
And so far, it's bad news all round.
Manufacturing in France sunk to a 38 month low in July, according to a closely watched survey. Markit's Purchasing Managers’ Index (PMI), which measures the performance of the manufacturing economy, fell to 43.4 in July, from 45.2 in June. This was its lowest reading since May 2009, and well below the 50 level that divides growth from contraction.
Europe's strongest economy isn't faring too well either. AlthoughGermany's PMI rose to 45 in July from 43 a month ago, manufacturing activity is still contracting, and the country experienced the sharpest falls in output and new orders since April 2009, and the longest continuous period of falling new orders since the survey began in April 1996.
Italy experienced the sharpest rate of job losses in the sector since October 2009, while Spain also saw a steep decline in output and new orders.
As for Greece, this graph pretty much says it all:
The Greek PMI stood at 41.9 in July, Markit said. That was up from 40.1 in June, but still well below the 50.0 no-change mark that separates growth from contraction. The PMI has now registered below 50.0 for thirty-five successive months (Source: Markit)
08.48 Spanish and Italian borrowing costs are also flat this morning. Ten year yields are currently trading at 6.7 and 5.99pc respectively.
08.38 Italian PM Mario Monti continues his European tour with a visit to Finland today, where he will meet PM Jyrki Katainen and EU commissioner for economic and monetary affairs Olli Rehn.
In an interview today with Finnish daily Helsingin Sanomat, Mr Monti said that Italy might European rescue funds and the ECB to buy its sovereign debt. He told the paper:
The basic idea is that Italy does not seem to need special aid right now, especially not to save its economy [but we may need some breathing space so] We’re thinking of a possible intervention in various combinations involving the EFSF, the ESM and the ECB.
08.31 Greece is planning to sell €6bn of Treasury bills this month to cover its financing needs - €2bn more than initially planned, according to Greek newspaper Kathimerini. The newspaper said that the extra cash will be used to repay two €3.2bn bonds maturing this month - but will likely come at a high price.
08.18 Spanish economy minister Luis de Guindos is reportedly pushing for more austerity after Germany hinted that it would reward Spanishprudence with help to lower its borrowing costs in the market.
Mr de Guindos was mulling further cuts to health and education spending in return for German support of Spanish bond buying by the ECB, according to Bloomberg. It cited "two people in Madrid familiar with his thinking".
and from The Guardian live blog , snippets on Greece and the view from Bundesbank....
Greece talks "on a knife's edge"
News in from Greece where our correspondent Helena Smith says marathon talks continue over efforts to find €11.5 bn (£9bn) in spending cuts – a condition of a further injection of EU-IMF rescue funds for the debt-crippled country. Another crunch meeting has been announced for 5pm (local time) between the three party heads participating in the governing coalition, led by the centre-right New Democracy party and prime minister Antonis Samaras.
Helena writes:
Helena writes:
Coming up with an austerity package that will convince international creditors that Greece means business without offending a populace already reeling from cuts, has become a hire-wire act for the Greek government. As the authoritative Ta Nea newspaper put it this morning, the three leaders “have their backs against the wall.” Hand-wringing over the measures – which all agree are vital if the near-bankrupt country is to be kept afloat -- reflects the huge sensitivity of inflicting yet more belt-tightening on a nation experiencing a fifth straight year of recession amid record levels of joblessness and poverty. “The three leaders will face a critical test of unity during their scheduled meeting this afternoon,” Ta Nea opined from its front page. “Important differences” between the prime minister’s office and the finance ministry and the two leftist parties supporting the conservative-led administration had surfaced, the paper said. The signs of discord were such that the fragile coalition’s “cohesion is hanging by a thread,” it reported. She adds:
Greek coffers are drying up fast with the deputy finance ministry Christos Staikouras describing the situation as being “on a knife’s edge.”
But the government also knows that the backlash will be hard. The far-left main opposition Syriza party has issued an excoriating statement saying today that with its policies the coalition is “leading Greece back to the drachma and bankruptcy.”
Syriza added: “The three political leaders are trying to hide behind each other and altogether they are trying to hide from the Greek people. They have already agreed on the harsh new measures and are simply orchestrating how they will present them.”Updated at 11:01 BST
Bundesbank risks row with ECB
Ian Traynor, our Europe editor, reports on a looming clash between the head of Germany's Bundesbank, Jens Weidmann, and his European Central Bank counterpart, Mario Draghi. Weidmann has pushed the diplomatic boundaries in an interview this morning, Traynor writes:
Jens Weidmann, the head of the Bundesbank, has put himself on a collision course with ECB chief Mario Draghi ahead of tomorrow’s crucial ECB governing council meeting which has generated expecations that Draghi could unveil a massive intervention to slash Spanish and Italian borrowing costs.In an interview issued by the Buba to mark the 55th anniversary of its founding today, Weidmann robustly has a go at the French, the British, the Americans, and indirectly at Draghi, while also oozing scepticism about plans for a new eurozone banking supervisory regime leading to a political union - policies publicly advocated by the German government.
The ECB’s independence means it has to “ respect and not overstep its own mandate…What is politically desirable and what is economically prudent have often not matched up. Whether we're talking about interest rates or some sort of non-standard measures, in the end it always comes down to the central bank being instrumentalised for fiscal policy objectives. However, policymakers thereby overestimate the central bank's possibilities and expect too much of it by assuming that it can be used not only for price stability, but also for promoting growth, reducing unemployment and stabilising the banking system. This pattern occurs again and again; this time it is perhaps even more pronounced than in the past.”
Weidmann last week took issue with Draghi’s statement in London that the ECB would do anything to save the euro and the two men are to meet tomorrow for what the Frankfurter Allgemeine Zeitung describes as “an exchange of ideas over a cup of coffee.”
Weidmann says that “some” in the UK and the US have been urging a more relaxed attitude to inflation in Germany to help the eurozone’s weakest. “Germany does not have to accept inflation rates which broadly unmoor inflation expectations,” he declares. Similarly, arguments about
weakening German competitiveness to help others are “absurd.”Weidmann points out that Paris and Berlin have always taken
strikingly different positions on the roles of central banks,
stressing that the culture clash is as strong today as ever it was. “Two very different world views were colliding. They have continued to do so in all political debates – essentially, up to the present day.”That would suggest little meeting of minds on the way ahead which is supposed to entail greater centralised eurozone control of fiscal and economic policy in return for mutualisation of eurozone liabilities. Weidmann sounds very sceptical.
“Seeing how reluctant some countries are to relinquish their fiscal policy autonomy – even in return for financial assistance – it is hard to imagine political union being achieved in the foreseeable future.”
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