http://www.telegraph.co.uk/finance/financialcrisis/9580303/Spain-ready-to-ask-for-bailout-but-Germany-says-to-wait.html
and...
http://globaleconomicanalysis.blogspot.com/2012/09/at-some-point-hat-runs-out-of-rabbits.html
According to El Economists, Catalan Separatists Not Quite at Absolute Majority.
I am sticking to my long held belief that "Eventually will come a time when a politician will hold up a copy of the EMU treaty, declare it null and void, and the debt null and void right along with it. That politician will be elected."
Yields have come down since my July 24, appearance on Capital Account: Discussion of Social Media Panic in Italy, Soaring Yields in Spain, and the Upcoming 20th Euro Summit, Bound to be Another Failure so it appears there was another rabbit left at the time.
However, the government of Portugal recently had to back off announced austerity measures following a mass protest, and additional protests elsewhere have become more frequent and more violent.
http://www.zerohedge.com/news/2012-10-01/presenting-spains-economic-collapse-context
Submitted by Tyler Durden on 10/01/2012 18:04 -0400
Recent data by the ECB shows that the domestication of Euro area bond markets continued in Q2. Figure 1 shows that the share of non-domestic bonds among banks’ holdings of Euro area bonds continued its downtrend. Core banks have sold around €400bn of bonds of other Euro area countries (i.e. non-domestic) since 2009, largely a reflection of core banks fleeing from the periphery. The main counterpart of this flow was peripheral banks which bought almost €500bn of domestic non-bank bonds over the same period. Peripheral banks made space for domestic bonds by selling more than €100bn of nondomestic bonds since 2009.
Moody's probably can't delay action much longer - and it simply stretches credulity how they can maintain an investment grade rating when they have had Spain on Baa3 (-ve review) over the summer on review. And it is most unlikely to be a one-notch move or to be left on stable.
- The clarification of the remaining open questions regarding the size and terms of the banking support package.
We have signalled we would not downgrade Spain if they were to ask for support [but it must] demonstrate it can move forward, both in terms of the banking sector, we had the results of the stress tests, but also bringing the deficit down. The budget plan released last week - there are still question marks over that.
German manufacturers remained cautious in terms of their purchasing activity and inventory levels during September. Stocks of finished goods fell at the most marked pace since March 2011, and pre-production inventories dropped for the thirteenth successive month. Input buying meanwhile dropped sharply in September, thereby extending the current downturn in purchasing to eight months. Subdued demand for raw materials contributed to another improvement in vendor performance. The current period of shortening lead-times from vendors is the most marked since 2008/09.
Underlying the latest weak PMI figure was a steep reduction in the volume of new orders received by French manufacturers during September. The rate of contraction in new work accelerated to the sharpest for three-and-a-half years, with panellists commenting on a tough economic climate and clients postponing orders. Although data suggested that the main weakness in demand was from the domestic market, export sales also contracted at an accelerated pace.
The latest twist in the eurozone's three-year-old sovereign debt crisis comes as financial markets and some other European partners are pressuring Madrid to seek a rescue programme that would trigger European Central Bank buying of its bonds.
"The Spanish were a bit hesitant but now they are ready to request aid," a senior European source told Reuters on Monday. Three other senior eurozone sources confirmed the shift in the Spanish position, all speaking on condition of anonymity because they were not authorised to discuss the matter.
German Finance Minister Wolfgang Schaeuble has said Spain is taking all the right steps to overcome its fiscal problems and does not need a bailout, arguing that investors will recognise and reward Spanish reforms in due course.
Privately, several European diplomats and a senior German source said Chancellor Angela Merkel preferred to avoid putting more individual bailouts for distressed eurozone countries to her increasingly reluctant parliament.
"It doesn't make sense to send looming decisions on Greece, Cyprus and possibly also Spain to the Bundestag one by one," the senior German source said. "Bundling these together makes sense, due to the substance and also politically."
and...
http://globaleconomicanalysis.blogspot.com/2012/09/at-some-point-hat-runs-out-of-rabbits.html
Sunday, September 30, 2012 2:27 PM
At Some Point the Hat Runs out of Rabbits; First Catalonia, Now Basque Separatists Call for Independent Country; El Pais Survey Shows 43% Catalans For Independence, 41% Opposed
Calls for the splintering of Spain have picked up steam. Euskal Herria Bildu (EHB, a left-wing, Basque nationalist party) has called for "A Great National Act" in Favor of Independence according to El Pais.
EH Bildu has called "a great national political act" in favor of the independence of the Basque Country for the next October 13 in the BEC Barakaldo (Bizkaia), announced its candidate for lehendakari, Laura Mintegi in an appearance before the media at EA headquarters in Bilbao.
Mintegi explained that the purpose of the meeting is to claim a free Basque state in Europe. The nationalist left has led in recent times to BEC, in a space with a capacity for 15,000 people, some of his most important acts to demonstrate their ability to mobilize. force.
The sovereignist coalition vindicate independence there to say "clearly and directly" to those "who do not want to hear, who kidnap our rights in the name of the Constitution imposed on us" you want "a free state in Europe."El Pais Survey Shows 43% Catalans For Independence, 41% Opposed
Mintegi has defended "the pressing need to build a framework sovereign" in the Basque country that allows this community to have the tools to address their own economic, social and employment. "Only from the sovereignty we orient our policies towards true social justice," said the candidate.
In his view, "it is truly reckless remain at the expense of a corrupt system like Spanish, you're sacrificing the rights and freedoms of all the people to ensure the interests of a political and economic elite." With the "corrupt system" called on "break ties".
According to El Economists, Catalan Separatists Not Quite at Absolute Majority.
About the option of independence for Catalonia, El País published a survey in which, in case of a referendum, 43% would vote for secession, compared with 41% who would decide against.
The complete data interpretation contrasted with other numbers registered in June, when only 21% of respondents said anti-secession and another 21% abstained. The current difference can be understood as a translation of abstention towards not to Catalan independence, which in June this survey enjoyed the favor of 51%.At Some Point the Hat Runs out of Rabbits
Various surveys seem to be fluctuating wildly so I am not sure any of the are accurate at the moment. That said, it is clear anger over austerity measures is picking up steam. Protests in numerous countries is proof enough.
I am sticking to my long held belief that "Eventually will come a time when a politician will hold up a copy of the EMU treaty, declare it null and void, and the debt null and void right along with it. That politician will be elected."
Yields have come down since my July 24, appearance on Capital Account: Discussion of Social Media Panic in Italy, Soaring Yields in Spain, and the Upcoming 20th Euro Summit, Bound to be Another Failure so it appears there was another rabbit left at the time.
However, the government of Portugal recently had to back off announced austerity measures following a mass protest, and additional protests elsewhere have become more frequent and more violent.
http://www.zerohedge.com/news/2012-10-01/presenting-spains-economic-collapse-context
Presenting Spain's Economic Collapse In Context
We have presented many charts over the last few weeks showing the collapse in retail sales in Spain, along with surging unemployment, bankruptcies and non-performing bank loans. But to do justice to the situation, you’ve got to put it in context of the last 150 years, and JPMorgan's Michael Cembalest provides just such context.Spain’s adventure in the Eurozone has sent it into an economic tailspin the likes of which have not been seen, with the exception of the Spanish Civil War, since the 19th century. At that time, the Spanish empire was at the tail end of its colonial decline, and was an under-regulated, agrarian, closed economy subject to frequent crises. The chart shows the details, highlighting the economic declines during revolutions, depressions and agricultural epidemics. Spain’s recent decline has now matched them.
Overnight Sentiment Improves On Record Eurozone Unemployment, 14th Consecutive PMI Contraction
Submitted by Tyler Durden on 10/01/2012 - 07:10200 DMA Bank of England BOE Bond Creditors Displaced Moving AverageEurozone France Germany Greece Gross Domestic Product headlines Italy MarkitMiddle East Recession recovery Reuters SocGen Unemployment United Kingdom
After dropping to its 200 DMA, and threatening to breach its recent support level of 1.2800, the EURUSD has seen the usual powerlift over the past 4 hours, on two key events out of Europe: Eurozone unemployment, which came at a record 11.4%, up from 11.3% (which just happened to be revised to 11.4%) but because it was in line with expectations of the ongoing recession, all was forgiven. The other event was Eurozone manfucaturing PMI, which rose by the smallest amount possible from the 46.0 in August to 46.1, on expectations of an unchanged print. That 0.1% "beat" is what has so far set off a near 100 pip rush higher in the EURUSD, which has ignored the Chinese weakness overnight (the SHCOMP is closed for the Chinese Golden Week), as well as the UK PMI which did not share in the European "improvement" and tumbled from 49.5 to 48.4 on expectations of a 49.0 print (so much for that latest BOE easing), and instead is transfixed by headlines proclaiming the strongest PMI in 6 months. What also is being ignored is the components in the Eurozone PMI, with the leading New Order index falling to 43.5 from 43.7. But the data being ignored the hardest is the French PMI which tumbled to 42.7, the lowest print in 41 months, of which as MarkIt's chief economist Chris Williamson said "France is perhaps the new worry, with its PMI slumping to the lowest for three-and-a-half years." Coming at a 3+ year low when France desperately needs its new wealth redistribution budget to be credible, is not the best possible outcome. Bottom line: Europe is in a recession, but maybe not outright depression just yet, so the thinking is - buy the EUR, strengthen the currency, make German exports weaker, and make sure the recession becomes a full on depression. Or something like that.
and from The Telegraph....
We don't have another option. We can't just sit around doing nothing.
...peak at 178 percent of GDP in 2015. Once growth did recover, fiscal policy achieved its target, and privatizationpicked up, the debt would begin to slowly decline. Debt to GDP would fall to around 160percent of GDP by 2020, well above the target of about 120 percent of GDP set by European leaders.
There are discussions on the measures. The troika wants clarifications.
Figure 2 shows that Greece and Ireland, the countries with the biggest adjustment so far, i.e. biggest decline in unit labour costs and current account deficits, have experienced the highest economic (lost output) and social costs (increase in unemployment).
When the Greek PSI took place, the debt of Greece was around €350bn, €259bn of which in bonds. Of these bonds around €52bn was held by the ECB/Eurosystem. Of the €207bn in private hands, around €130bn was held by non-domestic investors. The rest was mostly held by domestic banks and state pension funds which had to be recapitalized following the PSI. Around €5bn of bonds held by private non-domestic investors escaped PSI as they were foreign law bonds. Therefore, the Greek PSI provided a net debt relief to Greece of around 53.5% x €125bn = €67bn, or 33% of GDP. Applying the same haircut and assumptions (i.e. only general government bonds are subjected to haircuts), the net debt relief to Spain from haircuts on non-domestic holders would be only €66bn or 6% of GDP and for Italy €265bn or 17% of GDP.
15.12 Meanwhile, Greek unions are planning more strikes. Nikos Kioutsoukis, general secretary of private sector union GSEE, said:
We don't have another option. We can't just sit around doing nothing.
15.10 Nobody is happy in Greece today. European debt inspectors are reportedly querying about €2bn of the country's €13.5bn package of austerity for 2013 and 2014.
A Greek finance ministry official told reporters that the so-called troika of the ECB, EU and IMF were unhappy with part of Greece's budget-cutting proposals.
15.42 This chart is a reminder of what the IMF said in February in a leaked report titled: Greece: Preliminary Debt Sustainability Analysis. Much was made of the "tailored downside scenario," where the IMF said that programme delays could see the debt ratio:
...peak at 178 percent of GDP in 2015. Once growth did recover, fiscal policy achieved its target, and privatizationpicked up, the debt would begin to slowly decline. Debt to GDP would fall to around 160percent of GDP by 2020, well above the target of about 120 percent of GDP set by European leaders.
17.24 Greece finance minister has admitted that the troika has asked for clarification on its latest package of austerity measures. Yannis Stournaras told reporters:
There are discussions on the measures. The troika wants clarifications.
14.39 Greece's draft budget is now on the finance ministry's website. It's all Greek to me though (literally).
14.23 Reuters has got more details of Greece's draft budget.
It says that the country's budget deficit will come to 6.6pc of GDP this year, with a target of 4.2pc in 2013.
As reported by Greek state TV earlier (see 11.25), the economy is expected to contract by 3.8pc next year, with unemployment at 24.7pc (up slightly from the current level of 24.4pc).
The finance ministry source also told Reuters that public debt will grow to 179.3pc of GDP next year. This is nearly 10 percentage points higher than its 2012 forecast of 169.5pc.
13.38 Luis de Guindos said that banks that receive bail-out funds must limit salaries. He added that Spain was still analysing the benefits of a full bail-out package.
13.29 While I've been bleating on, Spain's economy minister has been holding a joint press conference in Madrid with Olli Rehn, EU commissioner for economic and monetary affairs.
Mr Rehn praised Spain's reform efforts and repeated that the €60bn EU cash injection for the country's battered lenders would be administered in November.
He said that Spain is now in the driving seat and has full confidence that the country would take the necessary steps to reform.
13.17 2.) This leaves Plan B for countries such as Spain and Italy: internal adjustment. And we know how effective that is:
Figure 2 shows that Greece and Ireland, the countries with the biggest adjustment so far, i.e. biggest decline in unit labour costs and current account deficits, have experienced the highest economic (lost output) and social costs (increase in unemployment).
The risks of internal devaluation are evident in Greece: social resistance and a self-reinforcing economic decline. Our past analysis showed that fiscal efforts that exceed 3.5% of GDP over two years are more likely to become counterproductive with the country ending up chasing its own tail. Spain’s fiscal effort is likely to exceed 7% in 2012/2013 based on this week’s budget announcement raising the risk of a self reinforcing economic decline in Spain.
The other message from Figure 2 is that Italy’s adjustment has barely begun.
13.06 The implications of this are two-fold:
1.) Greek-style haircuts/debt write-offs for countries such as Spain andItaly won't do much to help these countries:
When the Greek PSI took place, the debt of Greece was around €350bn, €259bn of which in bonds. Of these bonds around €52bn was held by the ECB/Eurosystem. Of the €207bn in private hands, around €130bn was held by non-domestic investors. The rest was mostly held by domestic banks and state pension funds which had to be recapitalized following the PSI. Around €5bn of bonds held by private non-domestic investors escaped PSI as they were foreign law bonds. Therefore, the Greek PSI provided a net debt relief to Greece of around 53.5% x €125bn = €67bn, or 33% of GDP. Applying the same haircut and assumptions (i.e. only general government bonds are subjected to haircuts), the net debt relief to Spain from haircuts on non-domestic holders would be only €66bn or 6% of GDP and for Italy €265bn or 17% of GDP.
In other words, this cost/benefit analysis suggests that a Greek-style PSI would be rather unattractive for Italy and worthless for Spain.
12.55 Analysts at JP Morgan have been taking a closer look at euro area bond markets and how weaker countries are relying more than ever on their own banks to prop them up. More from Nikolaos Panigirtzoglouand his team:
Recent data by the ECB shows that the domestication of Euro area bond markets continued in Q2. Figure 1 shows that the share of non-domestic bonds among banks’ holdings of Euro area bonds continued its downtrend. Core banks have sold around €400bn of bonds of other Euro area countries (i.e. non-domestic) since 2009, largely a reflection of core banks fleeing from the periphery. The main counterpart of this flow was peripheral banks which bought almost €500bn of domestic non-bank bonds over the same period. Peripheral banks made space for domestic bonds by selling more than €100bn of nondomestic bonds since 2009.
Figure 1 show that the domestication of Euro area bond markets has been steeper for peripheral banks, whose share of non-domestic bonds fell to 13% this year, a level last seen in early 2000, at the beginning of the monetary union. The equivalent share for core banks was 30%, the same level as in 2002. Italy and Spain, which have the largest bond markets among peripheral nations, have been driving these trends. Indeed by looking at data from the Spanish Treasury and the Italian central bank, the picture we get is that non-domestic investors' share of the Spanish and Italian government bond markets has been falling steadily over the past years. Monthly data from the Spanish Treasury show that this share fell to below 25% in June. More specifically, non-residents held €163bn of Spanish government bonds excluding T-bills as of June 2012 vs. a total stock of €504bn. Of this €163bn, our fixed income colleagues attribute €37bn to the ECB’s SMP, leaving €123bn for private sector non-residents. For comparison, the share of private sector non-residents was 40% in June 2011 and 45% at the end of 2010.
12.42 France's "very austere" budget is still not enough to get its deficit down to below 3pc of GDP, according to economists at Citigroup.
12.26 European stock markets are up today, despite the gloomy data.
The FTSE 100 in London is up 1.1pc at 5,805.05, while the CAC 40 in Paris has climbed 1.5pc at 3,405.18, and Frankfurt's DAX 30 is up 1.3pc at 7,309.31.
The IBEX 35 in Madrid has risen 0.9pc to 7,776.40, while the FTSE Mib in Milan is up 1.7pc at 15,346.70.
12.06 The EU has announced that it will reallocate €10bn of structural funds in order to tackle youth unemployment.
The reallocation is part of the EU's "Youth Opportunities Initiative"which saw pilot programmes set up in the eight EU member states with the highest levels of youth joblessness: Greece, Spain, Portugal, Italy,Lithuania, Slovakia, Ireland and Latvia.
The programmes identified initiatives that would help young people find jobs.
Today's announcement includes €7.3bn of financing already targeted for reallocation. The EU claimed in May that the move would benefit at least 460,000 young people and 56.000 small businesses.
Following today's unemployment data, Jonathan Todd, EU spokesman for employment and social affairs, told reporters that it was “unacceptable” to have 25 million Europeans out of work.
11.25 Greece's economy will contract by 3.8pc next year, according to a draft budget seen by state-run channel Net TV.
Net TV, which did not specify its sources, also said that the economy would contract by 6.1pc this year.
Compare this with official forecasts by the European Commission, which believes (and I had to check twice to ensure my glasses were cleaned properly) that Greece's economy will flatline next year.
European debt inspectors (the troika) will meet with finance ministerYannis Stournaras in Athens this afternoon, and with Antonis Samaras, the country's PM, later this evening.
11.06 Marcus Ashworth, head of fixed income at Espirito Santo, explains why a downgrade could mean more pain for Spain:
Moody's probably can't delay action much longer - and it simply stretches credulity how they can maintain an investment grade rating when they have had Spain on Baa3 (-ve review) over the summer on review. And it is most unlikely to be a one-notch move or to be left on stable.
Trouble is the index rules (thanks to ITC for this) have changed somewhat as the Barclays Euro Govt term indices now follow the same procedures as the (old Lehman) Barclays Global Aggregate indices - namely that no longer based on the lower of S+P or Moody's.
So this means even when Moody's goes first into junk that there will be forced selling - unlike for instance what happened with Portugal end Jan. S+P are on BBB+ (-ve outlook), Fitch are BBB. Street ests are that 13% or E66bln would be affected if Spain were to drop out of all the major Govt bond indices - I would counsel that seems too little despite the fact SPGBs are now held much more by domestic Banks and it is collateral for Bank bailouts now too - as it cannot factor in those who may want to..ahem..go short.
However, the effect from this first mover Moody's will be mitigated but it not being the final death tool - and that it surely has been telegraphed far and wide.
10.59 The Moody's jury is still out on Spain. There were rumours that the rating agency was ready to downgrade the country to junk status on Friday. That didn't happen.
- The clarification of the remaining open questions regarding the size and terms of the banking support package.
- The ultimate size of the government's liability following the results of the independent valuations and audits of all the Spanish banks, which are expected on 31 July.
- Any further initiative at the euro-area level, in particular those relating to steps towards a fiscal and banking union.
- The impact of the banking support package on Spain's ability to restore market confidence in the banking sector and by extension in the government bond market.
Moody's has most of this information now, so we can expect a verdict soon.
10.32 Rating agency Fitch has repeated that it may not downgrade Spainif the country asks for a full bail-out, but added that the country must "demonstrate it can move forward" by bringing its deficit down.
David Riley, managing director of Fitch Ratings, told Bloomberg TV:
We have signalled we would not downgrade Spain if they were to ask for support [but it must] demonstrate it can move forward, both in terms of the banking sector, we had the results of the stress tests, but also bringing the deficit down. The budget plan released last week - there are still question marks over that.
10.16 Youth unemployment in Greece hit 55.4pc in August. In Spain, the rate is now 52.9pc.
10.04 More than 25 million people are unemployed across Europe, official data show - and more than 18 million of them live in the eurozone.
The unemployment rate stood at 11.4pc in August, according to Eurostat. July's reading was revised up to 11.4pc, from 11.3pc, meaning the rate is unchanged from the previous month.
09.40 There were some bright spots. Ireland was the only nation to report stronger growth in September, according to Markit, although theNetherlands also edged back into expansion territory.
The final PMI for the eurozone rose to 46.1 in September, from 45.1 in August. This still means the sector is contracting.
09.18 Even Europe's strongest economy is wobbling.
Germany's PMI rose to 47.4 in September, from 44.7 in August, as employment levels stabilised, and manufacturers saw a slower fall in new business orders. However, Markit added:
German manufacturers remained cautious in terms of their purchasing activity and inventory levels during September. Stocks of finished goods fell at the most marked pace since March 2011, and pre-production inventories dropped for the thirteenth successive month. Input buying meanwhile dropped sharply in September, thereby extending the current downturn in purchasing to eight months. Subdued demand for raw materials contributed to another improvement in vendor performance. The current period of shortening lead-times from vendors is the most marked since 2008/09.
09.13 In Greece, job cuts continued for a 53rd consecutive month, although September's reading also ticked up to 42.2, from August’s reading of 42.1, while in Italy, where the PMI also rose to 45.7 in September, from 43.6 in August, employment fell for the fifteenth time in 16 months.
09.02 Elsewhere in Europe, it's still bad, but not as bad as last month.
In Spain, the decline was described as "substantial" though the benchmark reading rose slightly to 44.5 in September from 44 in August. That still represents a contraction.
Markit also said that "the rate of job shedding quickened to the fastest in 33 months".
08.56 In its monthly report, Markit said:
Underlying the latest weak PMI figure was a steep reduction in the volume of new orders received by French manufacturers during September. The rate of contraction in new work accelerated to the sharpest for three-and-a-half years, with panellists commenting on a tough economic climate and clients postponing orders. Although data suggested that the main weakness in demand was from the domestic market, export sales also contracted at an accelerated pace.
08.51 Three letters dominate this morning's news: P.M.I.
The latest manufacturing surveys out of Europe suggest that the sector is still contracting. In France, it's particularly bad, with activity plunging to a 41-month low in September.
Markit's headline purchasing managers' index (PMI) fell to 42.7 last month, from 46 in August. This is the lowest reading since April 2009, and well below the 50 level that divides growth from contraction.
08.45 Good morning and welcome back to our live coverage of the eurozone debt crisis.
No comments:
Post a Comment