http://www.zerohedge.com/news/and-todays-most-shocking-headline-we-have
Submitted by Tyler Durden on 09/13/2012 09:33 -0400
and.....
http://www.zerohedge.com/news/cue-greek-denial
Submitted by Tyler Durden on 09/13/2012 10:38 -0400
and......
http://www.ekathimerini.com/4dcgi/_w_articles_wsite1_15633_13/09/2012_461243
Coalition sees step as less onerous than other cuts needed to seal troika deal
An effort to conclude an agreement between the government and the troika on about 11.5 billion euros of spending cuts is likely to lead to the retirement age in Greece rising from 65 to 67, Kathimerini understands.
Sources said Thursday that the coalition is poised to concede to the change as part of the austerity package demanded by the troika. Greece overhauled its pension system in 2010 but a new retirement age rise would lead to savings of 1 billion euros per year. The government believes this measure is a less damaging step than seeking the savings elsewhere.
“The troika has to accept our less harsh measures when two-thirds of the package is coming from cuts to wages, pensions and benefits,” a government source told Kathimerini, adding that the increase in the retirement age is likely to be easier for members of the coalition to accept, rather than “four extremely tough” measures that would have to be taken to find 1 billion euros in savings.
Nevertheless, the government still faces some tough choices to settle on the 11.5 billion euros of cuts with the lenders.
Kathimerini understands that one of the options being considered is the scrapping of the tax-free threshold, which is currently at 5,000 euros after being lowered last year. The troika has proposed that as part of an overhaul of its tax system, Greece should introduce just four brackets, with those earning up to 22,000 euros paying 18 percent income tax, those earning between 22,000 and 45,000 paying 35 percent in tax, those on 45,000 to 100,000 paying 40 percent, and anyone making over 100,000 paying 45 percent.
The government received a boost Thursday when International Monetary Fund spokesman Gerry Rice said there was a possibility that Greece could be given more time to meet its fiscal targets, although this would depend on the “ability to offer financing.” “There are good arguments to extend the period for Greece to implement its fiscal adjustment,” he said.
Meanwhile, Greece’s representative at the IMF, Thanos Catsambas, denied that in an interview with the Wall Street Journal he had said Greece would need a third bailout. “Greece will require additional financing, which may take the form either of official sector involvement or of additional loans, hopefully on more favorable terms,” Catsambas told the newspaper.
http://globaleconomicanalysis.blogspot.com/2012/09/noose-tightens-but-on-whom.html
It has done so only under conditions that will greatly complicate EMU rescue politics in the future.
Here are some instant thoughts. I will be writing at greater length about the court later today for the newspaper.
Germany's ESM share is capped at €190bn, so what happens if Spain and Italy are forced to step out of the rescue machinery because they themselves are in too much trouble to fund the mechanism?
The Court made it clear that Germany will not automatically pick up the slack.
"The Federal Republic of Germany must clearly express that it cannot be bound by the Treaty establishing the European Stability Mechanism in its entirety if the reservation made by it should prove to be ineffective."
This matters. It may well be tested.
The Court also killed off any idea of a banking licence for the ESM, viewed as crucial to give it adequate firepower.
"As borrowing by the ESM from the European Central Bank, alone or in connection with the depositing of government bonds, would be incompatible with the prohibition of monetary financing entrenched in Article 123 TFEU, the Treaty can only be taken to mean that it does not permit such borrowing operations."
Target2 Liabilities
Pritchard goes on to discuss Target2, and on that score he appears to be in exact agreement with what I stated in German Court Approves ESM While Ruling "No Unlimited Liability, Parliament Must Approve Changes in Ceiling"; Sigh of Relief Reaction.
He also caught something I didn't:
"An acquisition of government bonds on the secondary market by the European Central Bank aiming at financing the Members’ budgets independently of the capital markets is prohibited as well, as it would circumvent the prohibition of monetary financing."
But does that matter?
With everyone but the Euroskeptics cheering the decision, Pritchard claims the "Noose Tightened".
After thinking about that for a while, and I have a number of questions.
Questions for Ambrose
Observation
By the time the anyone even recognizes the "noose has tightened" it will be far too late to do anything rational about the situation (which brings to the forefront bonus questions).
Additional Bonus Questions
The answer to 6 is probably not, at least according to Occam's Razor. However, regardless of how you feel about conspiracy theories or the answer to question 6, the answer to 7 is "yes", and the sad answer to question 8 is "no".
The best course of action for Germany and the EU is for Germany to exit the eurozone now.
Unfortunately, as a result of a pathetically wimpy ruling by the constitutional court that is 100% guaranteed to lead to "noose tightening", Germany will face the eurozone exit question at a time when the consequences of that decision, no matter which way Germany chooses, will be far more painful than they are today.
Thus, the answer to my primary question "Noose Tightens, But On Whom?" is German citizens, not misguided or stubborn politicians out to make history.
Please thank Chancellor Merkel for this sad state of affairs. Had she spoken out against Draghi's foolish plan the court would likely have killed it, and German citizens would have had the referendum they deserved.
For a discussion as to why the OMT cannot possibly solve anything, please see Monti Warns Italian Unions; Over 200,000 Jobs at Risk; Italy's Insane Labor Rules.
and..
http://www.telegraph.co.uk/finance/debt-crisis-live/9539600/Debt-crisis-live-Italy-borrowing-costs-plunge-at-auction.html
They have really knocked the barriers down on this one. Relative to the market levels everything has gone at least five basis points in yield terms than they were in the secondary market. The cover... you wouldn't say it was enormous, but it's very good by Italian standards. It really does go to show how much optimisim there is on the back of the OMT, on the back of the Constitutional Court decision and eminently partly also fuelled by hopes for QE3 tonight.
Following a meeting with Prime Minister Antonis Samaras, the leader of Democratic Left, Fotis Kouvelis, was the staunchest in his opposition to some of the measures, believed to include a six-day working week, increasing the retirement age to 67 and significant sackings in the civil service.
In a big way buy government bonds and finally say goodbye from their model of the Bundesbank - towards Banca d'Italia.
And For Today's Most Shocking Headline We Have...
Fresh out of the flashing red headline-a-tron:
- IMF OFFICIALS SAY GREECE WILL NEED A THIRD BAILOUT
- IMF SAYS GREECE CAN'T FILL FUNDING GAP ON ITS OWN, UP TO EUROZONE AND ECB TO FIND MONEY FOR GREECE
- GREECE MET ONLY 22% OF PROGRAM TARGETS FOR 2011
- EURO EXIT WOULD SET GREECE BACK BY MANY DECADES
Nobody, NOBODY, could have anticipated that fighting record debt with recorder debt, could possibly fail. And cue Germany telling Greece the party is now over, which, is what (a sliding EURUSD for those confused) it has wanted all along.
So much for the stabeeleetee.
From Dow Jones:
Greece will need a third bailout package from the euro zone, and the country's European creditors will have to find the money for it, according to a senior International Monetary Fund official."Greece will require additional financing, which may take the form either of official-sector involvement or of additional loans, hopefully on more favorable terms," Thanos Catsambas, an IMF alternate executive director, who represents Greece at the Fund's board, said in an interview.Mr. Catsambas is an IMF veteran with experience of Fund programs in Europe, Asia, Latin America and the Middle East. In his current position, he has knowledge of the continuing negotiations between Greece and its troika of creditors—the IMF, the European Union and the European Central Bank.Troika representatives are currently in Athens to assess Greece's situation and the possible disbursement of a €31 billion ($39.99 billion) loan, part of a second bailout package that totaled €173 billion. The payment is imperative for the Greek government to avoid running out of cash, but officials now suggest they don't expect a final decision on how to proceed with Greece until November.The coalition government of Prime Minister Antonis Samaras is facing growing public anger as it is tries to revive delayed structural reforms and implement fresh cutbacks of around €11.5 billion over the next two years.The creditors are unanimous that this is Athens' last chance if the financing is to continue. Without the loan payment, the government would run out of cash in a matter of weeks and would have to find new ways of meeting its current obligations, such as pensions and public-sector wages. In an extreme scenario, this may require leaving the euro zone and printing a new currency.Mr. Catsambas called this last option "an undesirable eventuality that will set the country back many decades."Mr. Catsambas insisted that it should be the euro zone and ECB that take the strain of filling the rest of the gap."Extension of repayment of the IMF [part of] loans is impossible as all terms and conditions of IMF loans to all countries are based on rules that are not negotiable," he said. The failure of Greece to implement its agreements, and the lack of a sustainable debt trajectory, make it impossible for the IMF, under its own charter, to lend any more.Mr. Catsambas said that the previous coalition government under Lucas Papademos, who took over from George Papandreou in November last year, estimated that "only 22% of the commitments under the troika-supported program were implemented" in 2011. Mr. Catsambas noted that the public sector still needs to be shrunk as a result.Goodbye 8 day Greek work week. Here comes the 9 day work week.
and.....
http://www.zerohedge.com/news/cue-greek-denial
Cue The Greek Denial
Precisely an hour ago, just after Dow Jones broke the news that a Greek IMF director confirmed what everyone with half a frontal lobe knows very well, namely that Greece needs at least one more bailout, and realistically many, many more, because recorder debt can never fix record debt: you need recordest debt for that (just ask Keynesians), we said this:
And, as always happens in these cases, here it comes:
- GREEK FINANCE MINISTER DENIES REPORT THAT GREECE NEEDS A THIRD BAILOUT
- COUNTRY'S POSITIONS ARE FORMULATED ONLY BY HIMSELF AND PRIME MINISTER SAMARAS
Alas, the cat is now out of the bag, and any further denials out of Greece merely bring the moment of departure closer. Not even the EURUSD algos are buying it.
and......
http://www.ekathimerini.com/4dcgi/_w_articles_wsite1_15633_13/09/2012_461243
Retirement age set to rise
Coalition sees step as less onerous than other cuts needed to seal troika deal
 |
Sources said Thursday that the coalition is poised to concede to the change as part of the austerity package demanded by the troika. Greece overhauled its pension system in 2010 but a new retirement age rise would lead to savings of 1 billion euros per year. The government believes this measure is a less damaging step than seeking the savings elsewhere.
“The troika has to accept our less harsh measures when two-thirds of the package is coming from cuts to wages, pensions and benefits,” a government source told Kathimerini, adding that the increase in the retirement age is likely to be easier for members of the coalition to accept, rather than “four extremely tough” measures that would have to be taken to find 1 billion euros in savings.
Nevertheless, the government still faces some tough choices to settle on the 11.5 billion euros of cuts with the lenders.
Kathimerini understands that one of the options being considered is the scrapping of the tax-free threshold, which is currently at 5,000 euros after being lowered last year. The troika has proposed that as part of an overhaul of its tax system, Greece should introduce just four brackets, with those earning up to 22,000 euros paying 18 percent income tax, those earning between 22,000 and 45,000 paying 35 percent in tax, those on 45,000 to 100,000 paying 40 percent, and anyone making over 100,000 paying 45 percent.
The government received a boost Thursday when International Monetary Fund spokesman Gerry Rice said there was a possibility that Greece could be given more time to meet its fiscal targets, although this would depend on the “ability to offer financing.” “There are good arguments to extend the period for Greece to implement its fiscal adjustment,” he said.
Meanwhile, Greece’s representative at the IMF, Thanos Catsambas, denied that in an interview with the Wall Street Journal he had said Greece would need a third bailout. “Greece will require additional financing, which may take the form either of official sector involvement or of additional loans, hopefully on more favorable terms,” Catsambas told the newspaper.
He later said he was referring to the existing program, not a new one.
and.....
http://www.ekathimerini.com/4dcgi/_w_articles_wsite2_1_13/09/2012_461244
|
http://globaleconomicanalysis.blogspot.com/2012/09/noose-tightens-but-on-whom.html
Thursday, September 13, 2012 12:06 AM
Noose Tightens, But On Whom?
Ambrose Evans-Pritchard has an interesting piece in The Telegraph regarding the German constitutional court's upholding of the ESM with conditions.
Pritchard often takes a contrarian view, and with near-unanimous opinions that the court caved in, he has a different view.
It's the kind of post that makes you stop and think, which is why I keep reading Ambrose, even though we frequently clash over monetary policy.
Pritchard claims German Constitutional Court tightens the noose yet further.
Pritchard often takes a contrarian view, and with near-unanimous opinions that the court caved in, he has a different view.
It's the kind of post that makes you stop and think, which is why I keep reading Ambrose, even though we frequently clash over monetary policy.
Pritchard claims German Constitutional Court tightens the noose yet further.
Just as it gave the go-ahead for Maastricht, Lisbon, the Greek rescue, and the EFSF bailout fund with a "Yes, but" with the 'but' mattering most in the end — Karlsruhe has now endorsed the European Stability Mechanism (ESM) with strings attached as well.
Here are some instant thoughts. I will be writing at greater length about the court later today for the newspaper.
Germany's ESM share is capped at €190bn, so what happens if Spain and Italy are forced to step out of the rescue machinery because they themselves are in too much trouble to fund the mechanism?
The Court made it clear that Germany will not automatically pick up the slack.
"The Federal Republic of Germany must clearly express that it cannot be bound by the Treaty establishing the European Stability Mechanism in its entirety if the reservation made by it should prove to be ineffective."
This matters. It may well be tested.
The Court also killed off any idea of a banking licence for the ESM, viewed as crucial to give it adequate firepower.
"As borrowing by the ESM from the European Central Bank, alone or in connection with the depositing of government bonds, would be incompatible with the prohibition of monetary financing entrenched in Article 123 TFEU, the Treaty can only be taken to mean that it does not permit such borrowing operations."
And it laid down some markers on the ECB's Draghi Plan for bond purchases:
"An acquisition of government bonds on the secondary market by the European Central Bank aiming at financing the Members’ budgets independently of the capital markets is prohibited as well, as it would circumvent the prohibition of monetary financing."
As for the bigger picture, here is the crucial point:
"The German Bundestag is prohibited from establishing mechanisms of considerable financial importance which may result in incalculable burdens with budget significance being incurred without the mandatory approval of the Bundestag."
"In this context, the Bundestag, as the legislature, is also prohibited from establishing permanent mechanisms based on international treaties which are tantamount to accepting liability for decisions by free will of other states, above all if they entail consequences which are hard to calculate."
Target2 Liabilities
Pritchard goes on to discuss Target2, and on that score he appears to be in exact agreement with what I stated in German Court Approves ESM While Ruling "No Unlimited Liability, Parliament Must Approve Changes in Ceiling"; Sigh of Relief Reaction.
He also caught something I didn't:
"An acquisition of government bonds on the secondary market by the European Central Bank aiming at financing the Members’ budgets independently of the capital markets is prohibited as well, as it would circumvent the prohibition of monetary financing."
But does that matter?
With everyone but the Euroskeptics cheering the decision, Pritchard claims the "Noose Tightened".
After thinking about that for a while, and I have a number of questions.
Questions for Ambrose
- Noose tightens on whom?
- Do the politicians care?
- Going one further, do the pro-euro advocates hope the noose tightens forcing Germany as quickly as possible into a no-win solution?
- What indication is there the politicians simply will not raise the ceiling?
- What indication is there that the constitutional court will do anything about things if the EU, ECB, or Bundestag oversteps their bounds?
Observation
By the time the anyone even recognizes the "noose has tightened" it will be far too late to do anything rational about the situation (which brings to the forefront bonus questions).
Additional Bonus Questions
- Is that the nannycrat plan all along?
- Isn't death by hanging still death?
- Is there any escape for Germany?
The answer to 6 is probably not, at least according to Occam's Razor. However, regardless of how you feel about conspiracy theories or the answer to question 6, the answer to 7 is "yes", and the sad answer to question 8 is "no".
The best course of action for Germany and the EU is for Germany to exit the eurozone now.
Unfortunately, as a result of a pathetically wimpy ruling by the constitutional court that is 100% guaranteed to lead to "noose tightening", Germany will face the eurozone exit question at a time when the consequences of that decision, no matter which way Germany chooses, will be far more painful than they are today.
Thus, the answer to my primary question "Noose Tightens, But On Whom?" is German citizens, not misguided or stubborn politicians out to make history.
Please thank Chancellor Merkel for this sad state of affairs. Had she spoken out against Draghi's foolish plan the court would likely have killed it, and German citizens would have had the referendum they deserved.
For a discussion as to why the OMT cannot possibly solve anything, please see Monti Warns Italian Unions; Over 200,000 Jobs at Risk; Italy's Insane Labor Rules.
and..
http://www.telegraph.co.uk/finance/debt-crisis-live/9539600/Debt-crisis-live-Italy-borrowing-costs-plunge-at-auction.html
11.59 The Bank of Italy's chief has said that ECB bond-buying conditions won't be linked to new austerity measures, but will be dependent upon "progress in a given direction". We'll bring you more detail on that as we have it.
The FTSE 100 is the only market in the black, with a negligible gain of 0.04pc, while the CAC is off 0.58pc, the DAX has dropped 0.29pc, the IBEX is 1.06pc lower and the FTSE MIB is down by 0.61pc.
11.01 There were also bond auctions in the UK and Ireland this morning.Britain sold £3.5bn of 10-year debt at 1.825pc, the highest since Spring, but still an enviable level for most of Europe. Ireland sold €500m of three-month debt and saw yields fall by more than half since the last comparable auction, to 0.7pc.
10.30 Italy's seen its borrowing costs fall to a near two-year low at a bond auction this morning: it sold a total of €6.5bn in government bonds. Among that was €4bn in three-year debt, drawing an average yield of 2.75pc, down from 4.65pc in July.
Marc Ostwald, stragegist at Monument Securities, said:
They have really knocked the barriers down on this one. Relative to the market levels everything has gone at least five basis points in yield terms than they were in the secondary market. The cover... you wouldn't say it was enormous, but it's very good by Italian standards. It really does go to show how much optimisim there is on the back of the OMT, on the back of the Constitutional Court decision and eminently partly also fuelled by hopes for QE3 tonight.
10.24 Ewald Nowotny, a member of the ECB's governing council, is speaking on the European banking supervision plan at the moment. He says he'd be happy for eastern European nations to join up if they wanted to, and that he welcomes the central bank's role in the plan - as long as it has the resources to do the job.
He also says that national supervisors will continue to monitor smaller banks, which goes against a British request (see 08.19) that all lenders, no matter how small, fall under its remit.
10.04 Trouble is brewing in Greece. There were talks yesterday to finalise another €11.5bn in cuts demanded by the troika, but two junior coalition partners objected to immediate public sector lay-offs, reports ekathimerini:
Following a meeting with Prime Minister Antonis Samaras, the leader of Democratic Left, Fotis Kouvelis, was the staunchest in his opposition to some of the measures, believed to include a six-day working week, increasing the retirement age to 67 and significant sackings in the civil service.
Both he and PASOK leader Evangelos Venizelos objected to immediate civil service layoffs. As for the proposed labor market reforms, Kouvelis said there was “no way” the government should accept the demands of the troika.
09.55 The EU is giving Egypt €500m in "macroeconomic aid", reports Reuters.
09.40 Our man in Brussels, Bruno Waterfield, points us to this article from Handelsblatt which he describes as a "German moanfest". CDU Bundestag member Klaus-Peter Willsch says that the Constitutional Court decision marks a change in ECB policy from a Bundesbank model to a Banca d'Italia plan (excuse the Google translate foibles):
In a big way buy government bonds and finally say goodbye from their model of the Bundesbank - towards Banca d'Italia.
08.19 The issue of European banking supervision continues to gain in complexity: yesterday Jose Manual Barroso said banking union was key to solving the debt crisis, and that it was the first step towards creating a "federation of nation states".
Later, Angela Merkel said that only big banks should fall under the supervision of this new regulator.
Then, last night, The Daily Telegraph saw a secret British negotiating document in which the Treasury argued that leaving smaller German banks outside of this new scheme would “pose significant risks to euro area financial stability”. But although Britain wants all of the eurozone's banks to be supervised, it's got no intention of allowing its own banks to be brought into the scheme.
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