Wednesday, September 26, 2012

European risk is back big time - CDS surge , yields for Spain's debt cross 6 percent again , Germany has another uncovered auction , Greece and Spain items of interest as Greece has another major strike - which followed Spain's major protest yesterday ! Catalonia has accelerated regional elections to November 25th ( rather than 2014 ) and hints at a referendum on sovereignty.......Andulucia region indicates it may seek a 5 billion liquidity line from the Central government's regional liquidity fund......

http://www.businessinsider.com/this-is-the-most-intense-video-weve-seen-yet-of-spanish-protesters-attacking-a-cop-2012-9

( wait until Regions start to secession actions..... )


This video of the Spanish protest is by far the most intense one yet.
It's a reverse angle of the video we posted yesterday of the protesters attacking a cop. And it's way more intense.
Protesters attacking a cop starts at around 1:20.



and......




http://globaleconomicanalysis.blogspot.com/2012/09/firebombs-teargas-riots-near-greek.html


Wednesday, September 26, 2012 10:16 AM


Firebombs, Teargas, Riots Near Greek Parliament; 57% Say Greece Should Abandon Pledges Made to Troika


Once again things are out of control in Greece. A general strike is underway, and schools, hospitals, and transit are affected. Firebombs and teargas have hit Athens as Greek citizens protest the latest round of austerity measures.

Please consider Greek Strike Sees Violence as Police Use Tear Gas by Parliament
 Police fired tear gas near the Greek Parliament after protesters threw fire-bombs as thousands of people joined a strike opposing wage cuts and austerity that Prime Minister Antonis Samaras said are vital to keep the euro.

Demonstrators streamed into the central Syntagma Square in Athens, opposite the Parliament House, shouting slogans such as “struggle, clash, overturn: history gets written by those who disobey.” Police spokesman Takis Papapetropoulos estimated the crowd at 35,000 people. 

Schools, hospitals, ferries and government services shut down in the first walkout since February. Shops will close from 3 p.m. today to let staff take part in demonstrations. Public transport is operating from 9 a.m. to 9 p.m. to allow protesters to attend rallies in Athens city center. A three-hour walkout by air traffic controllers will disrupt flights around the country.

 Athens, the capital, has been wracked with demonstrations by groups ranging from police officers to parents of three or more children in the past week as Finance Minister Yannis Stournaras remained locked in talks with officials from the European Union, the IMF and the European Central Bank.

 Hooded youths throwing fire-bombs at police were met with tear gas today, forcing some of the marchers to scatter. Teams of riot police guarded the Finance Ministry and surrounding streets.

 The IMF has indicated that any additional financing for Greece will have to come from Europe, where officials have told Samaras no discussion can be held on debt relief or on extending the time to implement measures until he honors pledges made for the country’s second rescue package.

 Polls show continued dissatisfaction with economic policies. More than 57 percent said the country shouldn’t keep to pledges made in exchange for the bailout as the policies have failed, compared with 40 percent who said it should stick to its commitments, according to a Metron Analysis poll for Ependytis newspaper.
Sentiment Has Turned

Sentiment in Greece has turned, and likely turned for good. 57% of Greeks have had enough of austerity to the point they would rather default.

Turn back the hands of time a bit and think how this might have played out if Greece simply left the euro and defaulted three years ago as it should have. Tourism would likely have increased and if  Greece had implemented true structural reforms rather than tax hikes, its economy would be stable or recovering now.

Instead, the country is in ruins, tourism is down, and in an on-again-off-again fashion, absolute chaos breaks out.

Another round of austerity and tax hikes can only make things worse at this point, and the people know it. This will pressure political parties to not go along with Samaras.

If another round of elections were held today, there is no way Samaras would win. Instead, the radical left, and radical right (both of which want to exit the euro), would be fighting over the pieces.

The nannycrats in Brussels and Chancellor Merkel are to blame for this sad state of affairs.

Finally, please note that the big fear of the nannycrats and Merkel is not that Greece leaves the euro per se, but rather Greece leaves the euro and the Greek economy starts to recover.


Well, here's the deal and it is something I said years ago: the sooner Greece abandons the euro, tells the Troika to go to hell, and defaults, the better off it will be.

Mike "Mish" Shedlock






http://www.telegraph.co.uk/finance/financialcrisis/9569353/Spains-crisis-flares-again-as-AAA-club-scuppers-bank-rescue-deal.html


Ambrose Evans-Pritchard
By , International Business Editor
8:50PM BST 26 Sep 2012
Comments83 Comments
Yields on 10-year Spanish bonds punched back above the danger line of 6pc and spreads over German Bunds reached 450 basis points, intensifying pressure on Madrid as it continues to resist a sovereign bail-out.
The alliance of hardline creditors said the European Stability Mechanism (ESM) – or bail-out fund – could not be used to cover “legacy assets” from past banking crises, even after the eurozone’s banking supervisor starts work next year.
This prevents the ESM from recapitalising Spain’s crippled banks directly under a €100bn (£79bn) loan package agreed with Madrid in June. The burden will fall entirely on the Spanish state.
The Spanish newspaper Expansion said the AAA trio had “dynamited” the EU accord. The extra debt burden is likely to be around €60bn or 6pc of GDP, depending on bank stress tests to be unveiled on Friday. Pessimists fear it could rise to 15pc of GDP once full losses from the property crash are crystallised.
The European Commission appeared shocked by the German-led volte-face, saying the original summit deal was “quite clear”. All EMU leaders signed a pledge to break the “vicious cycle” between banks and states. The document said the ESM must be allowed to “recapitalise banks directly”, clearly referring to Spain.



and....

http://www.telegraph.co.uk/finance/comment/damianreece/9569427/Spain-is-turning-into-the-new-Greece-and-Mariano-Rajoy-has-himself-to-blame.html


9:32PM BST 26 Sep 2012
Comments2 Comments
When the economic situation is bad (the country’s GDP estimates fell again on Wednesday) there’s nothing like a dose of political mismanagement to give things a good hard shove towards the same abyss that Athens disappeared into sometime in the middle of last year.
It’s only September but the scenes from Madrid in recent days prompted me to revisit the annual predictions in which we indulge every January. At the start of the year, as we looked forward to another 12 months of experimental eurozone economics, not to mention politics, with renewed austerity measures and another euro treaty, this column said: “None of this has been tested at the ballot box and I predict a year of popular political protest across the eurozone, some of which will turn violent, prompting shocking scenes as governments use force to regain order.”
You can’t let a gun off slowly, but Spanish prime minister Mariano Rajoy has been openly flirting with the idea of seeking a bail-out from the European Central Bank in recent days but only if capital market investors forced Spain into it by sending yields on Spanish government debt higher.
In the land of bull fighting, he has waved the proverbial red rag. Lo and behold, Spanish bond yields duly shot up again on Wednesday to 6pc, pricing Spain out of the markets and forcing him closer to going cap in hand to Frankfurt, assuming the ECB bail-out is actually real as opposed to an empty promise. This, in turn, will undermine his political credibility at home which the riots in Madrid and secession fever in Cataloniareveal is already suffering.


It reminds me of John Major’s government in 1992 and a determined Norman Lamont giving George Soros any excuse to bet against the pound and test just how determined the Treasury really was about defending sterling.








http://www.cnbc.com/id/49162890

( look at what has descended upon folks in spain ...  dumpster diving for food )


Spain Recoils, as Its Hungry Forage Trash Bins for a Next Meal



Published: Tuesday, 25 Sep 2012 | 1:26 PM ET
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By: Suzanne Daley
The New York Times
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On a recent evening, a hip-looking young woman was sorting through a stack of crates outside a fruit and vegetable store here in the working-class neighborhood of Vallecas as it shut down for the night.


Getty Images
The European Union (EU) flag, left, flies alongside the Spanish national flag.
At first glance, she looked as if she might be a store employee. But no. The young woman was looking through the day’s trash for her next meal. Already, she had found a dozen aging potatoes she deemed edible and loaded them onto a luggage cart parked nearby.
“When you don’t have enough money,” she said, declining to give her name, “this is what there is.”
The woman, 33, said that she had once worked at the post office but that her unemployment benefits had run out and she was living now on 400 euros a month, about $520. She was squatting with some friends in a building that still had water and electricity, while collecting “a little of everything” from the garbage after stores closed and the streets were dark and quiet.
Such survival tactics are becoming increasingly commonplace here, with an unemployment rate over 50 percent among young people and more and more households having adults without jobs. So pervasive is the problem of scavenging that one Spanish city has resorted to installing locks on supermarket trash bins as a public health precaution.
A report this year by a Catholic charity, Caritas, said that it had fed nearly one million hungry Spaniards in 2010, more than twice as many as in 2007. That number rose again in 2011 by 65,000.
As Spain tries desperately to meet its budget targets, it has been forced to embark on the same path as Greece, introducing one austerity measure after another, cutting jobs, salaries, pensions and benefits, even as the economy continues to shrink.
Most recently, the government raised the value-added tax three percentage points, to 21 percent, on most goods, and two percentage points on many food items, making life just that much harder for those on the edge. Little relief is in sight as the country’s regional governments, facing their own budget crisis, are chipping away at a range of previously free services, including school lunches for low-income families.
For a growing number, the food in garbage bins helps make ends meet.
At the huge wholesale fruit and vegetable market on the outskirts of this city recently, workers bustled, loading crates onto trucks. But in virtually every bay, there were men and women furtively collecting items that had rolled into the gutter.
“It’s against the dignity of these people to have to look for food in this manner,” said Eduardo Berloso, an official in Girona, the city that padlocked its supermarket trash bins.
Mr. Berloso proposed the measure last month after hearing from social workers and seeing for himself one evening “the humiliating gesture of a mother with children looking around before digging into the bins.”
The Caritas report also found that 22 percent of Spanish households were living in poverty and that about 600,000 had no income whatsoever. All these numbers are expected to continue to get worse in the coming months.
About a third of those seeking help, the Caritas report said, had never used a food pantry or a soup kitchen before the economic crisis hit. For many of them, the need to ask for help is deeply embarrassing. In some cases, families go to food pantries in neighboring towns so their friends and acquaintances will not see them.

In Madrid recently, as a supermarket prepared to close for the day in the Entrevias district of Vallecas, a small crowd gathered, ready to pounce on the garbage bins that would shortly be brought to the curb. Most reacted angrily to the presence of journalists. In the end, few managed to get anything as the trucks whisked the garbage away within minutes.
But in the morning at the bus stop in the wholesale market, men and women of all ages waited, loaded down with the morning’s collection. Some insisted that they had bought the groceries, though food is not generally for sale to individuals there.
Others admitted to foraging through the trash. Victor Victorio, 67, an immigrant from Peru, said he came here regularly to find fruits and vegetables tossed in the garbage. Mr. Victorio, who lost his job in construction in 2008, said he lived with his daughter and contributed whatever he found — on this day, peppers, tomatoes and carrots — to the household. “This is my pension,” he said.
For the wholesalers who have businesses here, the sight of people going through the scraps is hard.
“It is not nice to see what is happening to these people,” said Manu Gallego, the manager of Canniad Fruit. “It shouldn’t be like this.”
In Girona, Mr. Berloso said his aim in locking down the bins was to keep people healthy and push them to get food at licensed pantries and soup kitchens. As the locks are installed on the bins, the town is posting civilian agents nearby with vouchers instructing people to register for social services and food aid.

*  *  * 


and.....





http://ftalphaville.ft.com/blog/2012/09/26/1178781/recaps-and-the-esm-treaty/
( What do the Finns , Germans and Austrians think ? ) 

Recaps and the ESM treaty

Posted by Joseph Cotterill on Sep 26 11:53.
We missed this on Tuesday — the ESM’s answer to a fairly important ESM legal question.
(KR = Klaus Regling, ESM chief)
Can the discussed changes to the seniority status and the direct bank recapitalisation of the ESM be decided without a new ratification of the ESM treaty?
KR: Seniority for ESM loans is a mutual understanding between ESM members and is mentioned in recital (13) of the ESM treaty. Reference is made to the decision of Heads of State and Government in that regard. A repeal or amendment of their earlier statement would therefore also require a decision by the Heads of State or Government. In several Member States it would require support by the national parliament.
With regards to direct bank recapitalisation, it is our opinion (based on Article 19 of the Treaty) that it would be possible without a treaty change, by a unanimous decision of the Board of Governors. We know that the Governors would not do this without support from their parliaments. Some lawyers even argue that a treaty change would be required.
Well maybe they should sort that one out.
and related piece....

http://ftalphaville.ft.com/blog/2012/09/26/1177721/taking-responsibility-the-esm-way/


Taking responsibility, the ESM way

Posted by FT Alphaville on Sep 26 09:11.
Well, see if you can make out what they’re saying here.
That’s the statement on direct ESM recaps of eurozone banks, which the finance ministers of Germany, the Netherlands, and Finland jointly issued on Tuesday.
Reuters has puzzled over it:
…one senior euro zone official familiar with the discussions that took part in Helsinki said: “All I can say is that the statement means that ESM direct recapitalization should not be used to take care of old problems.”
The FT has puzzled over it:

This was an apparent reference to banks shored up and wound down under Ireland’s €64bn bank bailout programme.
Although officials did not clarify how the new principles would apply to current cases, the statement also called into question whether the scheme would apply to Spain’s most troubled banks, which are scheduled to be bailed out with eurozone money in November.

And it’s puzzling to us. We see ‘legacy asset’ and usually think of things like impaired loans, assets in run-off, and bad banks, which are managed separately from banks. At least at first glance, we assumed that’s what they meant. Namely, that these are assets which the ESM might not want to end up managing.

Again, the sentence in question is “2) the ESM can take direct responsibility of problems that occur under the new supervision, but legacy assets should be under the responsibility of national authorities”. Is that just setting out a division of labour? The ECB and the EBA have their own powers and operations, but they also outsource a lot of things to national central banks. In part because NCBs have the expertise, in part because they have the jurisdiction, and in part because European institutions like these don’t have the staffing levels to do everything on their own.

So maybe reading something as sweeping as ‘old problems’ into that statement is way too far. But then, the above ‘basic principles’ do still come across as tricky on this point of converting old recaps into direct ESM recaps — if one wants to stick with the more dramatic interpretation.
Along these lines, we suppose the northern governments could be trying to nail down that direct investment in banks by the ESM shouldn’t be retroactive after all, or replace existing state-backed capital. That would clear up an ambiguity in the original statement on ESM recaps, from June.

This would hit Irish hopes for example. That’s maybe inevitable however you look at this odd little satement. Anglo for example, which sank the Irish state, is pretty clearly in “legacy asset” run-off, with a plan for full resolution in 2020, and which might be difficult to unpick now. A restructuring plan for the promissory notes which also back Anglo would need a deal with the ECB, rather than the ESM. But would “legacy asset” stuff preclude the ESM substituting for the Irish government stakes in AIB, Bank of Ireland, and ILP? They’re all going concerns.

Then there’s the idea of the ESM directly backstopping any future Irish bank recaps which come under supervision. This seems pretty clear-cut, but then what if those recap arrangements also include creating legacy asset vehicles. One last case, via Nomura’s analysts Dimitris Drakopoulos and Lefteris Farmakis (who wrote a hefty note on direct ESM bank recaps and peripheral debt this week – in the usual place):

Permanent TSB (PTSB) is the banking subsidiary of Irish Life and Permanent (ILP), which is set to be separated when Irish Life is sold to private investors. So far PTSB has been the problematic child of Ireland’s adjustment programme, missing deleveraging targets (that BoI and AIB have met comfortably) and surprising negatively with the rise in its mortgage arrears.
More than half of PTSB’s balance sheet (which was €43.8bn by H1 2012) consists of ‘tracker’ mortgages (€22.5bn) generated during the property market boom in 2004-8. The mortgages are very low yielding currently and are impairing profitability because of the bank’s cost of funding. Furthermore, as principal repayments kick in (around 3-5 years after origination) arrears are set to increase further, eroding the capital provided to ILP.
While we will not cover the restructuring plans in detail here, the main interesting parameter is a split of the PTSB by end of September to three units: (i) the core retail bank, which will be the viable bank franchise; (ii) an asset management unit (AMU) to house legacy assets, which includes poorer quality and impaired assets; and (iii) the U.K. residential mortgage operation, which will be divested as soon as possible. The AMU would hold about one-third of PTSB assets, mostly non-performing or high-risk residential mortgages, low interest trackers, and non-core business.

All we want is a little clarity.

And we haven’t even got into Spain.




and....

http://www.zerohedge.com/contributed/2012-09-25/eurozone-con-game-just-keeps-cracking


The Eurozone Con Game Just Keeps Cracking

testosteronepit's picture
Submitted by testosteronepit on 09/25/2012 21:06 -0400



Wolf Richter   www.testosteronepit.com
“European leaders have not been able to meet their responsibilities,” French Prime Minister Jean-Marc Ayrault said about Germany and some other countries that are reluctant to pile more taxpayer money on Greece, whose economy is grinding to a halt, and whose government, deprived of the flow of bailout funds and cut off from the financial markets, can no longer fulfill its promises.
And Greeks are leery of new “structural reforms” currently fought over by the coalition government. They oppose more cuts in salaries, pensions, and health care. On Wednesday, they will attempt to bring the economy to a halt with a general strike and demonstrations in Athens and Thessaloniki. Meanwhile, Germany and other countries are wondering how Greece can possibly “reform” if the government can’t agree on the reforms to inflict on its people, and if the people aren’t willing to suffer them.
To his French compatriots, Ayrault defended the Fiscal Union treaty, which, after having been silenced to death, has come under blistering attack from the far right and the far left ahead of the parliamentary debate. They’re clamoring for a referendum, something the government wants to avoid at all costs—the people might well kill it, as they’d killed the European Constitution in the referendum of 2005 [read.... A French Rebellion Against Unelected Bureaucrats: “European Coup D’Etat And Rape Of Democracy”].

“This treaty doesn’t damage the budgetary sovereignty of parliament,” he said. “There is no transfer of sovereignty.” THE issue with that treaty. Even the German Constitutional Court acknowledgedthat it transferred sovereignty to the European Union. “There must be much more,” Ayrault told his listeners. “The reorientation of Europe” would continue, he said. “Europe is a combat.”

Indeed. A melee broke out in Madrid on Tuesday between protesters trying to occupy Parliament and riot police with batons. In Barcelona, Artur Mas, President of the Catalan government, announced that he’d hold early election on November 25 to initiate Catalonia’s path to “self-determination.” Another blow to the central government, which strongly opposes the early elections and categorically opposes any form of independence by Catalonia. Political turmoil just when Spain is teetering near the financial abyss [read.... Catalonia Cries for Independence, Spain Might Break Apart, And Its Military Threatens To “Crush” The “Vultures”].

The same day, ECB President Mario Draghi headed to Berlin for a charm offensive. His meeting with Chancellor Angela Merkel focused on “the economic and monetary union” and on preparations for the next EU summit in October, the 22nd such summit to solve the debt crisis once and for all. Then at the Conference of German Industry, he defended his plan to purchase “unlimited” amounts of government bonds from countries like Spain and Italy. There was really no alternative to his program, he said.

Alas, rumors began swirling around that legal experts at the Bundesbank have been vivisecting every syllable of the EU treaties that govern the ECB to determine the amount and duration beyond which these purchases might violate the treaties. Apparently, the Bundesbank, which has vigorously opposed Draghi’s plan, is preparing for a complaint before the European Court of Justice.
Still, Draghi patted himself on the back. “The Eurozone makes progress, investors acknowledge it,” he told about 1,000 managers. The ECB had succeeded in rebuilding confidence, he said.

Yet, confidence is in short supply among the very managers he was talking to. The Ifo Business Climate Index fell for the fifth month in a row. Particularly hard hit were expectations for the next six months which dropped to a level not seen since mid-2009, when the Federal Republic was emerging from the worst GDP collapse in its history.

Part of the problem: German industry has been highly skeptical of the bond-buying program, declared Hans-Peter Keitel, President of the Association of German Industry (BDI). He warned against relying on the ECB to deal with the debt crisis—thus fully backing Bundesbank President Jens Weidmann. Politicians should use the ESM bailout fund and structural reforms, he said, though the ECB’s printing press would be the “seemingly more comfortable path.”

So, to use the words of the French Prime Minster Ayrault, what are the “responsibilities” of the “European leaders?” Bailing out banks. Particularly German and French banks whose basements are full of decomposing paper from periphery countries. And bailing out investors of all stripes. Certainly, no one has yet bailed out the Greeks themselves, those who’ve lost their jobs or had their salaries cut. They don’t figure into the equation when politicians and unelected bureaucrats plot their next moves.
Jan Bennink, a columnist and self-described anti-EU populist, muses: “guys like me, who make films, sing songs, and publish stuff, suddenly have a lot to worry about from those grey mice in Brussels with their newspeak and absolute power.” And he wonders, “Is there anything more frightening than bureaucrats with a dream?” For his fantastic and troubling article, read.... The New Great Dictators Are Gaining Momentum In Europe.


and.....

http://www.zerohedge.com/news/2012-09-26/european-risk-back-cds-surge-spain-10-year-back-over-6-germany-has-second-uncovered-


European Risk Is Back: CDS Surge, Spain 10 Year Back Over 6%, Germany Has Second Uncovered Auction In Three Weeks

Tyler Durden's picture
Submitted by Tyler Durden on 09/26/2012 06:14 -0400



Remember when we said two months ago that one way or another the market will need to tumble to enforce the chain of events that lead to Spain demanding the bailout which has long been priced in, and (especially after yesterday's violent protest) Rajoy handing in his resignation? Well, it's "another." After nearly 3 months of suspending reality, in hopes to not "rock the boat" until the US presidential election, reality has made a quick and dramatic appearance in Europe, where after a day in which the EURUSD tumbled, events overnight have finally caught up. What happened? First, ECB's Asmussen said that the central bank would not participate in anydebt restructuring, confirming any and all hopes that the ECB would ever be pari passu with regular bondholders were a pipe dream. Second, Plosser in the US said additional QE probably won't boost growth which has reverberated across a globe in which the only recourse left is, well, additional QE. Finally, pictures of tens of thousands rioting unemployed young men and women in Madrid did not help. The result: Spain's 10 Year is over 20 bps wider, and back over 6%, Germany just had a €5 billion 10 Year auction for which it only got €3.95 billion in bids, which means it was technically a failure, and the second uncovered auction in one month, and finally CDS across the continent, not to mention the option value that is the Spanish IBEX which may fall 3% today, have finally realized they are priced far too much to perfection and have, as a result, blown out.
  • Portugal 521 bps, +46
  • Spain 390  bps, +22
  • Italy 360 bps, +25
  • Germany 56 bps, +4
  • France 120 bps, +9
  • Ireland 307 bps, +20
Of all procyclical news, perhaps the second German bond auction failure in under a month was the most disturbing, reflecting the biggest problem with "capital markets" - a schism between what the secondary centrally-manipulated market indicates is fair value, and what end demand truly is. Confirming this was the German Finance Agency spokesman Joerg Mueller who said that the auction showed "weakening investor interest -- in a volatile market -- in bonds with a maturity longer than five years." Indeed it does. 
For the full update of overnight events we go, as usual, to DB's Jim Reid:
Rajoy does have a fair bit on his plate at the moment though and yesterday was a pretty bad day for Spain newsflow wise. Protestors clashed with riot police outside the national parliament as Spaniards rallied against earlier budget cuts. Estimates on the number of protesters varied from several thousand to tens of thousands. Earlier Spain’s government announced that the cumulative YTD central government budget deficit had widened to EUR50bn (or 4.8% of GDP) in August, wider than the deficit seen in the same month last year (3.8%). Meanwhile in the Spanish regions, the head of the Catalan regional government announced that early regional elections will take place on 25th November this year (rather than in 2014 as scheduled). In its latest communication, CiU, the centre-right nationalist ruling party in Catalonia, mentioned the possibility to "consult the population on sovereignty", without making it clear whether this consultation would take the form of a referendum or merely early elections. According to DB's European economists, it seems that the second solution has been chosen which is likely the least disruptive as it would offer more room for ambiguity on the issue of future relations with the rest of Spain. Also Spain's Andalucia region said it will study seeking a EUR5bn liquidity line from the central government’s regional liquidity fund. Spain's deputy PM confirmed that the fund is expected to launch this week. It seems that trying to be a national level European political expert is  necessary these days, but maybe Spain is showing that you also need to immerse yourself in regional politics too.
The negative tone to the European news was added to by the German, Dutch and Finnish finance ministers issuing a joint statement yesterday saying that while the ESM can take direct responsibility of banking sector problems that occur under a common banking supervision framework, “legacy assets should be under the responsibility of national authorities”. While the meaning of the statement was not entirely clear, the FT and WSJ took it to mean that the current plan to directly recapitalise Spain’s banks may be jeopardised. The WSJ added however, that a potential compromise could be reached where  national government remain responsible for bank bailouts in the interim, but the ESM would take over capital injections after a Euro-wide banking supervisor was in place, citing an unnamed EU official.
The joint statement weighed on sentiment late in the US session and the weaker tone has continued into overnight markets with the KOSPI (-0.7%) and Hang Seng (-1.0%) both trading in the red this morning. The Nikkei is underperforming (-2.0%) as a large number of stocks trade ex-dividend today. Yesterday’s downbeat statement from Maersk, the world’s largest shipping company, who announced capacity cuts on Europe-Asia routes is weighing on a number of exporters. In its third quarter policy meeting statement, the PBOC said it will maintain “prudent monetary policy” in line with signs that the growth is “stabilising at a slower pace”. On that same note, the PBOC pumped a record RMB290bn into the money markets yesterday via reverse repos in an effort to ease liquidity ahead of next week’s weeklong national holiday.
On a more downbeat note, the Philly Fed’s Charles Plosser, a non-voter, said that QE3 will not boost economic growth or lower unemployment and raises the risk of long-run inflation, in line with his hawkish stance. Plosser said that currently elevated unemployment rates are structural in nature and therefore not amenable to monetary policy solutions (Reuters). Monti’s statement that he would not be running in Italian elections next year also weighed on  sentiment late in the US session.
Returning to European headlines, speaking at a German industry conference in Berlin, Draghi said the ECB’s OMT program is a bridge to EU members rather than a solution to funding problems and that it was up to governments to follow through with "decisive actions". Draghi added that he expects the Eurozone to return to growth next year. Merkel's office issued a statement after the Chancellor’s meeting with Draghi in which the pair agreed considerable reform efforts by Eurozone governments were still needed to boost competitiveness and restore credibility. In Greece, the finance ministry said that the country will have a EUR13-15bn funding gap if Greece is given an additional two years to meet fiscal targets. The finance ministry added that Greece may seek a roll-over of bonds held by the ECB as one option to bridge the financing gap. (Reuters). Finally, German newspaper Bild said that lawyers at the Bundesbank were checking into the legality of the ECB's OMT program. The Bundesbank refused to confirm the report.
Turning to the day ahead, it should be a relatively quiet day in terms of data. In the European time zone, the key data releases to look out for will be German CPI, French consumer confidence and jobs data and Italian/UK retail sales. In the US, the August new home sales print is due. A number of leaders are scheduled to speak at the UN General Assembly including Italy’s PM and the EU’s Van Rompuy. Also worth noting is a joint conference with the Bundesbank’s Weidmann and Italian FM Grilli scheduled for the London afternoon.
Meanwhile, Greece’s two largest unions have called a 24-hour strike today.

and....

Spanish 10Y Bond Yield Breaches 6% - Highest In 3 Weeks As Nothing Still Fixed

Submitted by Tyler Durden on 09/26/2012 - 06:57Bond CDS Equity Markets fixed France Italy Portugal
The yield on 10Y Spanish bonds just broke back above 6% for the first time in three weeks as the spread to Bunds also broke above 450bps. Now up over 33bps this week (along with Italy +20bps and Portugal +36bps), it seems the market is waking to the idea that words are simply not as good as actions and even actions are irrelevant if they simply kick the can. The front-end of the Italian and Spanish curves are underperforming today (Italy 2Y +12bps and Spain +22bps) as the OMT-front-running exuberance a-la-LTRO is being unwound. It seems European credit markets were indeed on to something yesterday as they underperformed. Spanish and Italian equity markets are down around 3% with France off more than 2% and credit spreads widening notably further in financials and corporates - as EURUSD slides to 1.2850.

and....

http://www.zerohedge.com/news/2012-09-26/next-steps-spain


Next Steps For Spain



Tyler Durden's picture
Submitted by Tyler Durden on 09/26/2012 06:28 -0400


Via RanSquawk
Spanish Budget Announcement Crib Sheet – How/what/when/why?
With the ESM passing through the German high court, and the ECB formally announcing their OMT bond-buying programme, the next headache for European asset classes to digest comes from the will-they-won’t-they speculation regarding a Spanish sovereign bailout. With Spain’s withering finances, elevated borrowing costs and rapidly shrinking tax revenues, the need for governmental assistance is known by all. As such, this report has been compiled to run through each possible bailout scenario and the possible impact across the asset classes.
Timeline:
Thursday 27th September
  • Spain are expected to release their economic reforms as speculated over the past week. The release could pave the way for a Spanish bailout request.
  • Friday 28th September
    • Spanish banking audit results. Expectations currently stand for Spanish banks to require EUR 60bln, with a majority going to towards the recapitalization of Bankia.
    End-September
    • Moody’s review on Spain’s Baa3 credit rating is due.
    Sunday 21st October
    • Galicia regional elections, PM Rajoy’s region. Reports have suggested that Spain could hold on until after these regional elections before requesting sovereign aid.
    Monday 12th November
    • Eurogroup meeting. Other analysts have suggested that PM Rajoy could delay a formal request until after this meeting.
    Late November/Early December
    • Catalonia could bring forward their regional elections, according to the Catalan leader. Catalonia is one of the wealthier regions and is the largest contributor to Spanish GDP. One topic of discussion for these regional elections will likely be the increasingly popular notion of tax autonomy for the region, as civilians believe Catalonia suffers a net loss from the central government’s regional funding strategies.
    • Scenarios:
      1. Spain makes a formal request for aid this week from the Eurozone bailout mechanisms and conditions attached to the aid are not too harsh.
      This would be the most risk-on possibility as Spain will be going a long way to receiving the cash it needs, however, it must be noted that this is likely to be the scenario that is already been priced into the global markets and as such, any upside move in the EUR or stocks may in fact be short lived. The Spanish IBEX is currently trading firmly above the 8,000 point mark, even though it is down 5% year-to-date, despite rallying by nearly 40% from it’s lows in July. Any relief rally will be beneficial to the Spanish banking sector and Spanish 10y yields could head towards the 5.5% mark to the downside, last seen in early April.
      2. Spain makes a formal request for aid this week but the conditions attached are deemed very strict and possibly unattainable.
      Anything other than scenario 1 is likely to be taken negatively by the markets with Spanish bonds in particular bearing the brunt and the 200DMA for the 10y yield could come into play at 5.931% and the 6% mark above. The EUR will also come under pressure but not perhaps as violently as some would expect given that the funds will still be available to Spain and agreements can always be changed as seen by the Spanish deficit target for 2012 which had already been revised higher twice this year.
      3. Spain says the bailout request is delayed until after the regional elections or even further.
      Similar to scenario 2 but any sell-off will be rather more aggressive in nature as this will be seen as Spain just kicking the can down the road. Again the Spanish bonds and EUR will be assets to watch with Bunds also seeing safe-haven flows. There are likely to be spill-over effects into other asset classes with oil markets moving lower in-line with other riskier asset classes. Spot Gold could be supported as it remains one the few safe places to park cash.
      List of Spanish Banks to watch:
      • BBVA (BBVA SM)
      • Banco Santander (SAN SM)
      • Bankia (BKIA SM)
      • Caixabank (CABK SM)
      • Banco Sabadell (SAB SM)
      • Bankinter (BKT SM)
      • Banco Popolar (POP SM)
      Lenders with high exposure to Spain:
      German lenders have a particularly large exposure to Spain at USD 139.9bln, of which USD 45.9bln is banking exposure. Specifically, Deutsche Bank (DBK GY) and Commerzbank (CBK GY), who have EUR 29.7bln and EUR 13.5bln in exposure respectively.

      and.....

      http://www.telegraph.co.uk/finance/debt-crisis-live/9566810/Greek-general-strike-and-debt-crisis-live.html


      19.27 European Central Bank policymaker Erkki Liikanen has said Spainmust decide on a bailout request on its own, but any such move will come with strong conditions.
      19.24 The European Parliament has agreed plans to improve financial market transparency and end speculation, notably dealmaking blamed for volatile food prices.
      The assembly's economic affairs committee unanimously agreed - by 45 votes in favour - new rules based on a proposal last year by the EU executive to update European Union regulation on markets in financial instruments, known as MIFID.








      13.55 We are compiling a picture gallery of the protests in Greece. Police officers have had to dodge flames this afternoon as protesters throw fire bombs and molotov cocktails.

      A fire bomb explodes behind a riot police officer (AFP).
      Riot policemen engulfed in flames (EPA).


      A riot police officer is helped by a colleague after falling (Reuters).
      13.12 More dramatic pictures of the protest in Athens are coming in now.
      A molotov cocktail explodes beside riot police near Syntagma Square (Reuters)

      At least 50,000 Greeks are understood to be protesting (Reuters)
      13.04 European stock markets have fallen further this lunchtime. The FTSE 100 in London is now down 1.3pc at 5,783.41, while the IBEX 35 in Madrid has fallen 3.5pc to 7,895.50 and Milan's FTSE Mibindex is down 3pc at 15,455.10.
      12.43 You can watch a live feed of the protests on Greek TV website Skai here. Protesters have now decided to set fire to a tree outside patrliament (pictured):
      12.21 The Greek protest is beginning to escalate, with police firing teargas in response to protesters throwing stones and petrol.
      12.10 At least 50,000 people are now on the streets in Athens, chanting "we won't submit to the troika" of lenders and "EU, IMF, out!"
      12.04 Looks like police are readying themselves for the protest to grow this afternoon, according to these tweets:
      11.34 Bond yields are also on the rise in Ireland. The October 2020 Irish bond has risen 17 basis on the day to 5.21pc, following worrying signals from Germany yesterday that EU leaders could unravel their plans to directly recapitalise problem banks.
      11.13 The European Commission has approved a four-month extension of temporary state guarantees for Dexia, the troubled bank that became the first victim of the eurozone debt crisis in October last year. France,Belgium and Luxembourg have provided €55bn of guarantees for the bank, which was first bailed out in 2008. The EU approval was due to expire at the end of the month but will now run until the end of January.
      11.02 To Germany, where the last hurdle to the eurozone's new bailout fund has been cleared this morning with a cabinet declaration that answers concerns raised by its Constitutional Court. Germany was the last country to complete ratification of the European Stability Mechanism, which is designed to stem the crisis. The cabinet granted the court's request to give the German parliament a veto over any increase in Berlin's contribution to the €700bn fund.
      10.54 Spain's 10-year government bond yield has hit 6pc this morning for the first time in a week. High but not quite as frightening as 7.53pc back in July.
      10.52 Protesters are now gathering outside the Greek Parliament. It looks like the authorities have boarded up the windows in preparation.
      10.52 Protesters are now gathering outside the Greek Parliament. It looks like the authorities have boarded up the windows in preparation.
      10.37 With impeccable timing, the Greek government has this morning finished drafting a raft of austerity measures worth €12bn. Their initial proposals were rejected earlier in the month by the European Commission, European Central Bank and the IMF. Most of the cuts involve cutting wages, pensions and welfare benefits, which will surely go down well with those protesting during today's general strike.


      Centuries-old Hadrian's Library in Athens is closed for the general strike (Reuters)

      10.25 Amid today's market jitters, Italy has got a short-term debt auction away this morning.

      The country sold €9bn of six-month debt at average yields of 1.503pc. This compares with 1.585pc at a similar auction last month. However, demand waned slightly, with 1.39 bidders for every bond on offer (v.1.69).

      10.05 The first pictures of today's strike are trickling in. So far, they're mainly of people looking lost in airports:
      A man stands inside Athens' Eleftherios Venizelos airport during a 24-hour labour strike in Athens (Photo: Reuters).
      Empty train platforms:

      A train is parked at the central station in Athens (Photo: AP).
      ...and disappointed tourists:
      A tourist couple talk to staff at the closed gates of the archaeological site of Acropolis (Photo: EPA)

      10.02 Inflation in Germany looks likely to slow this month, with consumer price inflation set to fall below the European Central Bank's eurozone target of under 2pc, according to the latest data, which shows easing price pressures in four states. Annual inflation fell from 1.9pc to 1.6pc in August in North Rhine-Westphalia, the largest of the states by population.
      09.42 In France, consumer confidence has fallen for a third month on concerns over job security and president Francois Hollande's upcoming budget cuts. Sentiment fell to 85 in September, from 86 in August, according to statistics office INSEE. This is against a long-run average of 100.

      09.40 The euro has hit a two-week low against the dollar this morning, following the statement by Spain's central bank and the Rajoy interview as well as violent anti-government protests in Madrid. It fell 0.4pc to $1.2848, the lowest since Sept 12.
      09.25 Spain's central bank has just revealed the country's GDP continued its sharp fall in the third quarter. In its latest monthly assessment, the bank said:
      QuoteAvailable data for the third quarter of the year suggests that GDP kept falling at a significant rate, in a context of high financial tensions.
      09.03 Spain's Prime Minister Mariano Rajoy is being a little less coy than usual on the subject of a bailout. In an interview with the Wall Street Journal, he has said that if interest rates on the country's debt were "too high for too long...I can assure you 100pc that I would ask for this bailout."
      08.43 Today workers in Greece will hold their first major general strike against the coalition government's programme of austerity since it took power in June. They are protesting against a new round of retrenchment demanded by EU and IMF lenders. The strike is expected to ground flights, disrupt local transport and shut public offices. About 3,000 police have been deployed in Athens in an attempt to prevent a repeat of the rioting that has accompanied previous demonstrations.
      University teachers stage a peaceful protest outside parliament on Tuesday evening, holding candles and marching from the Greek finance ministry last night (Photo: EPA).


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