http://hat4uk.wordpress.com/2012/09/25/greece-in-or-out-the-two-armies-are-face-to-face/
http://ftalphaville.ft.com/blog/2012/09/25/1175661/the-greek-budget-shortfall-gets-bigger/
http://www.telegraph.co.uk/finance/debt-crisis-live/9564009/Debt-crisis-live.html
There are no signs that this percentage will fall and this is very worrying [...] It will be a very difficult winter - perhaps the toughest in the last three years. Many businesses will not make it.
We need to think about stability. An institutional crisis damages Spain in the eyes of outsiders.
1. Overdraft facilities or any other type of credit facility with the European Central Bank or with the central banks of the Member States (hereinafter referred to as ‘national central banks’) in favour of Union institutions, bodies, offices or agencies, central governments, regional, local or other public authorities, other bodies governed by public law, or public undertakings of Member States shall be prohibited, as shall the purchase directly from them by the European Central Bank or national central banks of debt instruments.
Submitted by Tyler Durden on 09/22/2012 20:16 -0400
GREECE IN OR OUT: the two armies are face to face
A finely-balanced tussle about the fate of Greece had the markets on edge today
The forces swirling around Greece’s punch-drunk head remain more difficult to lasso than ether. But an exhaustive check with every source (and reading of every signal) by The Slog over the last two days suggests very strongly that two diverse coalitions – with diametrically opposed opinions and aims – are struggling to gain the upper hand. The goal of one side is to ensure Athens stays in the eurozone; the aim of the other is to effect its exit with all dispatch.
From the day these latter stages of Greek agony began to unfold – around the late Autumn of 2011 – The Slog has maintained a consistent line: that far more is in play here than simply whether Greece can live up to its promises in relation to debt repayment and austerity schedules. As 2012 has progressed, however, both strategic geopolitics and domestic schisms throughout the developed West have contributed to the complexity, facing every serious analyst, as to what is or isn’t going on – and likely to happen.
Along the way, some of the players have changed sides – most notably the White House. Last January the Obama administration was moving Heaven and Earth to ‘amputate’ Greece and create a firewall around it, while at the same time hoping to embracing it and get access to military bases and energy/mineral supplies in return. Now the US ruling Party is pulling out all the diplomatic stops to keep Greece in, and the euro stable – the better to facilitate Obama’s re-election
Joining the Democrats on the ‘in’ side of the fence are France (terrified of its major banks blowing over in the aftermath of a Greek default), Angela Merkel (conscious of the likelihood that Germany will pick up Greece’s internal EU bad debts) and Beijing (worried that an unstable eurozone will tip China over into a dramatic slump).
On the ‘out’ side of the game, it immediately starts to get complicated. Figuring they can only gain from Grexit, Romney supporters within the American banking and bureaucratic system are – there is now no doubt in my mind – conniving with all the muscle and money they can muster at the creation of a major Hellenic crisis . Their main conduit for so doing is the Troika of international bondholders and lenders, many of whom see the election of Romney as being a likely return to business as usual. Despite the oft-employed description of the IMF as ‘Keynesian’ by many financial press opinion leaders, in reality there are more debt hawks there now than doves: while the bondholders left outside of the ECB are, on the whole, firmly of the belief that debts must be seen to be paid….with excommunication if they aren’t.
In the same camp are the private Bankfurters and Weidmann-led Bundesbank, most of whom are now convinced that any attempt to save the entire peripheral ezone axis could only end in financial disaster for Germany. Their ideal solution would be the banishment of Greece, Portugal and Ireland. Mario Monti of Italy is of a similar mind, having long felt that further monies given to Greece in particular are wasted. Mariano Rajoy of Spain is torn, but in private is reputed to believe that a devolved Spain under EU ‘protection’ is inevitable sooner rather than later.
Only two players have a foot in both camps, and neither represent what one could call a surprise. The German Finance Minister Wolfgang Schäuble doesn’t want a crown of thorns when he becomes the financial leader of the Fiskal Union proposed by Berlin-am-Brussels; but equally, he doesn’t want a meaningless bauble either. Herr Schäuble is strongly of the view that Greece should be forced out, and all the available market-convincing firepower focused on Spain and Italy. But as ever, he favours boasting about the money available to support these countries, rather than indiscriminate bond-buying. Whereas the ECB boss Mario Draghi would very probably buy every ClubMed bond unsold at auction – although he too is now four-square behind Greek amputation…but after November 6th. As a technocrat, he does not believe that messy Greek default plus American panic could be controlled.
Even this three-wheeled applecart could be overturned if Antonis Samaras’s Coalition partners persist in their stance of refusing to accept the full package of austerity policies being demanded by the Troika. Nobody in Athens is really sure whether the Venizelos motive is the downfall of New Democracy or calling the Brussels/Berlin bluff, or both. We must simply all hope that the Fat Man knows what he is about.
Based on what I’ve been told, what I’ve read, and the tone of various public pronouncements, my money is still very firmly on Greece sticking with the euro. The forces in favour of it appear to be in the ascendancy. My fear is that, at some time after November, the splits in Germany and ClubMed about the fate of the Greeks will come under intolerable strain. But on balance, continue to think that Berlin will be out of the game before Athens.
and....
http://ftalphaville.ft.com/blog/2012/09/25/1175661/the-greek-budget-shortfall-gets-bigger/
The Greek budget shortfall gets bigger
Apparently that Greek shortfall is even bigger than the even bigger figure reported in the German press on Monday.
From Eurointelligence:
Spiegel Online and Suddeutsche Zeitung have updates on the Greek budget gap, which is even bigger than previously assumed – around €30bn. This is the accumulated short-fall the troika is expected to identify in its forthcoming report – the amount Greece has to raise, save, restructure, default on, if it wants to make it through the second loan programme. Spiegel writes that the troika will say that the recession has totally counteracted the budgetary savings, while the government has failed to introduce structural reforms.
Spiegel says this leaves three scenarios: getting the €31bn tranche anyway with more leeway for reforms; a new debt restructuring; or… a forced exit. Which, it says, is not an option, politically.
More from Eurointelligence:
The troika will also state that Greece will not meet the long-term goals of funding the budget without external help from 2015 and a complete return to financial markets in 2020. Suddeutsche says the EU does not want Greece to fail, but it does not want to pay the €30bn either. There was thus a danger that they would shift the responsibility to the ECB.
http://www.telegraph.co.uk/finance/debt-crisis-live/9564009/Debt-crisis-live.html
10.25 Italy has paid the lowest interest rate since March to get a two-year debt auction away.
The country sold almost €4bn of two year debt at average yields of 2.532pc, compared with 3.064pc at the last auction in August.
Demand waned slightly, with 1.65 bidders per bond on offer (v. 1.95)
10.18 There are no plans for Germany to introduce a special tax on high earners, she says.
10.15 Turning to the German economy, she says that the country's budget deficit is likely to total 0.9pc of GDP this year, and that the government is committed to delivering a balanced budged by 2014. She adds that Germany needs to increase domestic demand.
10.09 Europeans must acknowledge their economic gaps honestly, saysMrs Merkel.
On a banking union, she says that the European Banking Authority(based in London) has not been up to the task of policing Europe's banks. She says she is in favour of supervision, and adds that banks will not be able to receive cash injections without more common oversight.
10.01 Angela Merkel is speaking about the euro crisis at the Federation of German Industries in Berlin.
She says that Germany has not avoided the fallout from the crisis, and insists that the eurozone needs "stamina" to overcome it (translation courtesy of Bloomberg).
She (again) rejects the idea of eurobonds, and reiterates her message that bail-outs must be accompanied by “responsibility”.
09.49 Spain has got a short term debt auction away this morning at slightly higher interest rates.
The country sold €1.4bn of three-month debt at average yields of 1.203pc, compared with 0.946pc at a previous auction in August. It also sold €2.6bn of six month debt at average rates of 2.213pc (v 2.026pc).
Demand was steady, with 3.29 bidders for every bond on offer at the three-month debt sale (v. 3.35).
09.42 Greece's recession has forced almost a third of businesses inAthens' commercial triangle to close down, according to research by a retail lobby group.
The National Confederation of Greek Commerce (ESEE) said that 31pc of shops located near Syntagma Square had closed since the recession. ESEE head Vassilis Korkidis told Reuters:
There are no signs that this percentage will fall and this is very worrying [...] It will be a very difficult winter - perhaps the toughest in the last three years. Many businesses will not make it.
09.11 Spaniards are gearing up for another day of protests today.
Thousands are expected to gather this evening outside parliament in Madrid to call for fresh elections. They claim that PM Mariano Rajoy and his party misled voters to get elected last November.
I can't find any pictures at the moment, but according to AP, Spain'sparliament has already taken on the appearance of a "heavily guarded fortress", with police blocking access from "every possible angle".
09.05 Spain's largest region is causing another crisis for the country, according its deputy prime minister.
Soraya Saenz de Santamaria told Spanish radio this morning thatCatalonia’s push for independence was damaging the country's image. She said:
We need to think about stability. An institutional crisis damages Spain in the eyes of outsiders.
Catalonia has an economy about the size of Portugal's.
08.56 The Bundesbank is at it again this morning.
Following yesterday's blistering attack on the International Monetary Fund (IMF), where it accused officials of spraying around money like confetti, Germany's central bank is now examining whether the ECB's bond buying programme is legal.
According to reports in Bild this morning, the Bundesbank and ECBare examining the boundaries of the programme, and the circumstances in which it would breach EU treaties.
Article 123 of the Lisbon treaty says this:
1. Overdraft facilities or any other type of credit facility with the European Central Bank or with the central banks of the Member States (hereinafter referred to as ‘national central banks’) in favour of Union institutions, bodies, offices or agencies, central governments, regional, local or other public authorities, other bodies governed by public law, or public undertakings of Member States shall be prohibited, as shall the purchase directly from them by the European Central Bank or national central banks of debt instruments.
Bild said that the issue could be referred to the European Court of Justice, and added that the ECB and Bundesbank wanted to "arm" themselves for this scenario.
and as a reminder ...... BTW , does the Bundesbank read Zero Hedge ?
Guest Post: Draghi's Coup D'Etat And Why OMT Is Illegal
- Bond
- Central Banks
- European Central Bank
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- Italy
- Monetary Policy
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Submitted by Blankfiend of Fibs And Waves blog,
According to Mario Draghi, OMT, or Outright Monetary Transactions, is a program of conditional bond buying targeted at specific countries to restore the perception of the euro's irreversibility and stability, and repair a broken monetary policy transmission mechanism. Once launched, OMT has no ex antelimits, it is within the ECB's price stability mandate, and it can be halted or interrupted based on achievement of its objectives or non-compliance with conditions imposed upon the targeted national government.
I would posit that OMT is much more than what the party line states. Here are some alternative interpretations for your consideration. I challenge you to refute the logic of any of them.
OMT is a Eurobond equivalent, targeted toward specific countries. Given that ECB holdings are joint and several backed by all of the National Central banks (NCB's) that make up the European System of Central Banks (ESCB), any losses on these bond purchases would be distributed among the NCB's according to their capital key. OMT would be a peculiar type of Eurobond, with some parallels to the discard red vs. blue Eurobond schema. Instead of being differentiated by levels of debt-to-GDP (greater or less than 60%), these bonds would be differentiated by country of issue. For example, if Spain enters this program, its bonds would now have the backing of the ECB, while Italy's would not. Now, the red vs. blue idea was discarded precisely because it would have established a market preference for the blue bonds (joint and severally backed Eurobonds) versus the red bonds, which would have only had the backing of the issuing sovereign. Is it so difficult to imagine that the market would quickly develop a preference for the bonds of countries on OMT life support, to the detriment of those NOT on it?
OMT is a banking license for the ESM. Once the ESM buys the debt of a target country on the primary market, the ECB will follow with potentially unlimited purchases on the secondary market. This obviously allows the resources of the ESM to be greatly extended without a formal banking license or leverage scheme. At the same time, it completely bypasses any safeguards countries may think they have in place to limit their bailout related losses. This is, of course, due to the joint and several liabilities of the NCB's that comprise the ESCB. Ironically, an official banking license for the ESM has been declared clearly in violation of Article 123(1) of the TFEU by no less than the ECB itself. The OMT is an obvious scheme to bypass that "technical inconvenience."
OMT is a sham. While I have no doubt that our beloved Italian central banker will be more than willing to purchase the bonds of program countries, I do not believe for one minute that he would have the resolve to either permanently halt or reverse those purchases if a large target country backslides on its commitments. I am sure that the markets - and the beneficiary national governments- recognize this as an empty threat as well. If Draghi carried through on his threat in any meaningful way, he would be abandoning the goals of monetary transmission and euro irreversibility he claims to be striving for. This is particularly true for big countries like Spain and Italy, sort of like mutually assured destruction. Once countries like this are on the OMT methadone program, there will be no discharging them for abuse.
OMT is fiscal policy by Central Bank fiat. Eurobonds, ESM banking licenses, and ESM leverage schemes have all been previously rejected by various European political leaders, most notably Angela Merkel and the Finns, but also Nicholas Sarkozy. OMT is a clever way to skirt all of those objections and concerns in order to restore confidence in sovereign European debt markets. At the same time, it is a backdoor method of committing national fiscal authorities to backstopping potential extra-national losses far in excess of what those fiscal authorities were ever willing to commit their taxpayers. OMT is a full-scale abandonment of the concept that a supra-national central bank should not be able to undertake measures which could subsequently force the hand of national fiscal authorities. OMT embarks us upon the treacherous path of fiscal policy by unelected, unaccountable central bank bureaucrats.
OMT is a Credit Facility. Let's see.... We have an unlimited program specifically designed to support the sovereign debt of targeted countries. We have implausible revocability, dubious terms for enforceability, open-endedness regarding both time and quantity of support provided, and, supposedly, no recourse by the lender. Furthermore, the provider of this credit is specifically willing to buy even if no one else will. Admittedly, the credit provider will not buy on the primary market. However, when you examine the TFEU, there are two distinct restrictions in this regard. The commonly cited one obviously forbids the ECB from primary market sovereign debt purchases. But the one that Draghi wants us to ignore forbids ECB credit facilities in favor of national governments. "In favor of" is clearly broader in scope than the primary market restriction.
OMT is ILLEGAL. Here I am beating a dead horse, as I have made this argument several times before. But, one more time for effect:
OMT IS ILLEGAL AS IT VIOLATES ARTICLE 123 (1) OF THE TFEU, WHICH CLEARLY PROHIBITS THE ECB FROM ESTABLISHING A "CREDIT FACILITY ... IN FAVOR OF NATIONAL GOVERNMENTS."
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