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http://www.zerohedge.com/news/2012-10-26/greek-deadline-sunday-evening
Greek Deadline - Sunday Evening
Tim Geithner's carefully scripted plan to avoid European "reality" until the US election is unraveling. While previously Greece was not supposed to be an issue until after November 6, the recent escalation with the Greek FinMin openly lying about a Troika interim bailout outcome (which may or may not happen, but only following yet anotherMoU which would see Greece fully transitioning to a German vassal state in exchange for what is now seen as a €30 billion shortfall over the next 4 years, and which would send Syriza soaring in the polls in the process ensuring that a Grexit is merely a matter of time) has forced a retaliation. According to the Greek press, the Troika now demands that Greece resolve its objections to labor reforms (which asreported earlier have forced the ruling coalition to split) by Sunday night, or else...
The implication, it appears, is that absent a compromise, the next Troika tranche of €31.5 billion is not coming, and Greece is out. And while the market is sanguine about this outcome, we are once again at the bargaining table, where nobody knows just who has the upper hand in Mutually Assured and quite Destructive bailout negotiations: Greece or Germany. From Kathimerini: "The government is facing a Sunday deadline for a full agreement on the package of measures that will see it cash in the next bailout tranche of 31.5 billion euros. The three-day extension it got in order to get maximum backing within the three-party coalition will be necessary as minor partner Democratic Left insists on an improvement in the terms concerning labor reforms that it staunchly opposes." Will Greece come through in the clutch? And if not, just what happens with the EURUSD on Sunday night as Greece calls the Troika's bluff? Deja vu shades of early summer, and plunging European risk come to mind...
More:
and.....The Euro Working Group (EWG) of eurozone finance ministry officials will convene again on Monday to discuss whatever conclusions Athens has come to and prepare the blueprint that the Eurogroup of euro area finance ministers may discuss on Wednesday through a video conference that sources from Brussels say is likely to take place in order to discuss Greece.The prime minister appears determined to have the measures passed immediately through Parliament, either in one or in two draft laws, ordering on Thursday the preparation of the bills required.At the same time there are also disagreements within PASOK, the other minor coalition partner, as a number of deputies are threatening to vote against a Finance Ministry measure regarding privatizations.
http://www.ekathimerini.com/4dcgi/_w_articles_wsite2_1_26/10/2012_467497
IMF concedes Greece will miss debt target
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Excerpts from the International Monetary Fund (IMF) report were presented to the Eurogroup Working Group (EWG) - junior finance ministers and treasury officials who prepare meetings of eurozone finance ministers.
"It is clear that Greece is off track and there is no chance they will cut the debt to 120 percent of GDP in 2020 as envisaged. It will be rather 136 percent, and this would be under a positive scenario of a primary budget surplus, a return to economic growth, and privatisation,» a euro zone official, who insisted on anonymity, said.
"New prior actions will be needed, on top of the existing 89,» the official said, referring to a list of already agreed reforms that need to be in place before any new tranches of eurozone and IMF emergency loans to Greece can be paid.
Apart from the debt projections, representatives of the IMF, the European Commission and the European Central Bank – known as the troika - have been calculating how much more money Athens will need if it is given until 2016 rather than 2014 to reach a primary surplus of 4.5 percent, as agreed in February.
A primary surplus or deficit is the budget balance before the government services its debt. In Greece's case, it would mean government tax revenues exceeding spending, meaning Athens is beginning to get on top of its budget-deficit problems.
The two extra years would give the fast-contracting Greek economy some welcome respite, allowing it to return to growth sooner and therefore increasing the chances the country would eventually be able to make its debt sustainable.
"Additional financing needs for Greece are now seen at around 30 billion euros,» the official said after the EWG meting.
Estimates from various officials since July varied from 13 billion to 30 billion and on Thursday another official estimated the financing needs at 16-20 billion euros.
The critical question is where the additional money would come from. «The IMF is pushing for OSI (Official Sector Involvement) in Greece, Germany is strictly against. And they are not the only ones,» the eurozone official said.
The IMF has long advocated that the eurozone should restructure the loans that eurozone governments extended to Greece, in what is called OSI, to reduce the debt servicing costs for Athens.
The restructuring could take the form of a further reduction of the interest rate on existing loans to Greece and an extension of their maturities, but while that would reduce financing costs, alone it would not fill the funding gap.
Another option is to bring forward some payments from the IMF that would be granted to Greece at a later date, thereby bridging its immediate funding gap, but again that is not be fully sufficient.
Also under consideration to reduce the Greek debt pile, and its servicing cost, is a debt buy back, taking advantage of the deep discount Greek debt is currently trading at.
But more direct funding for Greece from eurozone member-states looks inevitable. Any new money would have to come from the eurozone's permanent bailout fund, the European Stability Mechanism, and is likely to face opposition from countries such as Finland, the Netherlands and Germany.
The eurozone official said that further assistance from the ECB, in the form of new liquidity support to Greek banks, would be needed. Greece will be further discussed at the next EWG meeting on Monday.
Apart from the funding issue, talks on granting Athens the two-year extension on its primary surplus target are hindered by the opposition of some parties in the ruling Greek coalition on labor market reforms, seen as necessary by the troika.
Greek Finance Minister Yannis Stournaras told parliament on Wednesday that Greece had already been granted the two-year extension, but several top eurozone officials, including European Central Bank President Mario Draghi and German Finance Minister Wolfgang Schaeuble, said they were not aware of that.
If an agreement with Athens is reached in time, a decision on the extra money could be taken at the next meeting of eurozone finance ministers in Brussels on November 12.
Despite disagreements over how it will be done, it has become clear in recent days that a two-year extension will be granted and therefore some way will be found to finance it.
[Reuters]
and.....
One Quarter Of All Spanish Workers Without A Job: Female Unemployment In Ceuta Region Hits 57%
One in four Spaniards are now officially out of work - well over double the euro-area's average 11.4% rate. This is the highest rate of unemployment since the Franco dictatorship ended in the mid-1970s as 5.8 million now stand idle. Perhaps more stunning is the fact that eight of the bailout-nation's regions have higher unemployment rates than the national average with Cueta at a stunning 41.03%(with women's unemployment rate in that region an almost incomprehensible 56.92%)!! The YoY increase of almost 800,000 people unemployed leaves 1.74 million households with no members employed. As one would expect, loan delinquencies are also surging as Caixabank just almost doubled its pool of bad loans in the third quarter. While Rajoy fiddles...
Spain's Unemployment Rate Hits 25.02% - the highest since the 1970s!
and across the regions (far right hand column) - the rate is even higher in many cases!
with women's unemployment (far right column) reaching a stunning 56.92% in Cueta region!
13.19 Greece must unite if it is to overcome the country's crisis, according to the country's prime minister.
Antonis Samaras told a crowd in Thessaloniki:
 Only one enemy can beat us, and that is discord [...] I promise you that... in less than ten years... Greece will be better and much stronger than today, as long as we stay united.
Referring to Greece's bankruptcy in 1893, he added:
Despite bankruptcy and international control, Greece rose again and managed to turn its weakness into strength.
12.59 Bankia executives have been ordered by Brussels to pay back their 2011 bonuses.
The European Commission said that the bonuses, which were paid just weeks before the bank sought a government bail-out, should not have been awarded in the first place.
Today, Bankia agreed.
We have received the instruction via the Bank of Spain and, effectively, those people will have to return their bonuses.
Last night, Spanish daily El Pais reported that the EU had ordered 72 executives to pay back their bonuses. Former Bankia ChairmanRodrigo Rato (pictured, below) had already declined his bonus.
12.11 And what is the most likely outcome? Open Europe says:
As our discussion of the options above shows, Greece and the eurozone are stuck between options which are easy but deliver minimal savings and those which are almost politically, economically and legally impossible but could deliver the amounts needed.
We expect a short term stop gap programme to be created with a mixture of option 1 and 2. This is likely to be the most painful for Greece but the easiest for the creditors to swallow. Unfortunately, this will add to Greece’s debt burden rather than reduce it, meaning a longer term decision will need to be made over the less palatable options. In any case, even if a mechanism of funding this extension is found, Greek debt still looks unsustainable, meaning questions over a Greek exit will continue to hang over the eurozone.
11.59 Now for the important question: How, and more importantly, who, will pay for all of this? Open Europe outlines six options:
1.) Reduce the amount of interest Greece pays on its bail-out loans - potential saving €2bn - €3bn.
2.) Greece lives hand to mouth by issuing short term debt, while finding further budget cuts - potential saving €15bn. 3.) Give Greece more time to pay back the loans - potential saving €9.1bn (in the short term). 4.) Ask the ECB to forego profits on its Greek bonds - potential saving €1.15 - €2.3bn. 5.) A bond buyback - potential saving €45.65bn overall, €17.15bn after the two year extension is paid for.6.) Another haircut - potential saving €26bn - €52bn
11.49 Two more years of "extend and pretend" in Greece will cost almost €30bn, according to Open Europe.
The think tank said that giving Greece two more years to implement tough budget cuts would cost €14.04bn in delays alone. Expected privatisation revenues would be €12bn lower than expected, while government arrears would add €2.5bn to the bill.
Total? €28.5bn
11.38 More on Ireland's hopes of using the ESM to rebuild the balance sheets of its battered banks.
According to a German government spokesman, if the country wants more cash, it will need to head to Brussels with its begging bowl once again.
Norbert Barthle told Irish radio that the application by Dublin to use theEuropean Stability Mechanism would require new bail-out conditions. He said:
...it would be difficult to change this [EFSF - or temporary bail-out fund] programme into an ESM programme [...] I think it would be necessary to ask for a new programme. A new programme, a new conditionality.
11.19 He also told Reuters that Italian banks were undergoing "a very severe adjustment". Mr Praet added:
It is key that the public finances in Italy are put on the right track. This has been recognised and addressed by the present government.
The world's oldest bank, Monte dei Paschi di Siena, saw its credit rating cut to 'junk' by Moody's this month on worries that the bank will need another state cash injection.
11.05 So, will it need a bail-out? Well, according to the ECB's chief economist, the ball is in Spain's court.
Speaking in Milan this morning, Peter Praet said that it was not a question of Spain needing a bail-out, but one of "adjustment". He said:
The Spanish authorities have to take the decision. We are ready operationally [...] The ball is in the camp of the authorities.
11.11 Fiona Govan brings us more on today's Spanish jobs data:
 The number of Spanish households in which every member is out of work climbed to 1.74 million, roughly one tenth of all Spanish families.
The rise in the number of jobless comes as Spain sinks deeper into recession, with output expected to decline for the third consecutive quarter.
It comes as Spain struggles with deep austerity measures that have forced many out onto the street in protest.
Unions have called a general strike for November 14, the second since Mariano Rajoy’s conservative government came to power in December.
The Popular Party government has launched a vast austerity programme to save €150bn between 2012 and 2014, introducing stringent public sector cuts and hiking taxes.
Government forecasts the economy to shrink by 1.5pc this year and for the recession to continue into 2013, although many analysts believe this to be optimistic.
10.58 Angela Merkel will meet IMF managing director Christine Lagardeon October 30, according to a German government spokesman.
Yesterday, the IMF urged European leaders to follow through on its pledge to ease Ireland's debt burden through direct recapilisation of its banks. However, Germany, the Netherlands and Finland said at a meeting in September that the eurozone's permanent bail-out fund should only be used to solve new problems, not clean up old ones.
Here's what trader Steve Collins makes of it all:
10.48 Commenting on the auction, Nicholas Spiro at Spiro Sovereign Strategy, said:
Given the modest size of the sale and the much more favourable market backdrop for Italian and Spanish debt, today's was a fairly uneventful auction. Italy continues to get all its debt out the door at lower yields. Italian paper is still benefiting from the more credible ECB-backed fiscal backstop and investors' willingness to distinguish more clearly between Spain and Italy. [...]
Italy is starting to become a tale of two halves: a much more resilient debt market and an economy which in deep recession with scant prospect of meaningful growth. However, while the latter is likely to persist for a considerable period of time, the former hinges, to a large extent, on what happens in Spain.
10.45 Italy has got a debt auction away this morning. The country sold €3bn of two-year debt at average yields of 2.397pc. This compares with 2.532pc at a previous auction in September, and is the lowest rate since March.
Demand was steady, with 1.65 bidders for every bond on offer.
10.38 Spanish exclave Ceuta, located on the north coast of Africa, has an unemployment rate of 41.03pc, while AndalucÃa, Spain's most populous region, has a jobless rate of 35.4pc.
10.35 Here's a closer look at today's data from Spain's statistics office. The graphic below shows a clear north-south divide when it comes to unemployment rates in Spain.
09.57 Unemployment among Spain's youth might have eased marginally during the third quarter, but the figure still makes for depressing reading.
AFP reports that among workers aged 16-24, the jobless rate towered at 52.34pc in the third quarter, slightly down from 53.27pc in the previous three months.
09.26 Italian manufacturing business morale is on the wane, as reported at 09.12, and it seems French consumer morale is deteriorating too. A survey by INSEE published today shows that French consumer confidence fell in October to its lowest level in nine months as record unemployment weighed further on household morale.
The INSEE official statistics office said its consumer confidence index fell to 84 points from 85 in September, the lowest level since February.
Reuters reports that the result, well below the long-term average of 100, was in line with economist expectations.
09.17 Silvo Peruzzo, an economist at Nomura, pointed out that Spain's unemployment rate could worsen given that there are yet more austerity measures in the offing. Via Reuters, he said:
There is debate over the optimistic growth outlook for next year by the government, which is given little credibility. Weaker growth than expected, coupled with austerity, could easily see unemployment hit 26pc next year.
09.12 Data out today show that Italian manufacturing business moraleunexpectedly fell this month due to a worsening outlook for order levels.
ISTAT's manufacturing business confidence index fell to 87.6 in October after rising to 88.3 in September.
The data suggests that Italy's economy is still struggling to emerge from a deep recession that began in the middle of last year.
09.05 Economist Shaun Richards tweets that the Spanish unemployment figures illustrate the human cost of the eurozone crisis:
08.05 More bad news for Spain. The country's unemployment rate rose to a new record high of 25pc in the third quarter, official data showed on Friday, as the recession deepens.
Reuters reports that the rate was just below economist expectations for a rise to 25.1pc, and up on the 24.6pc rate seen in the previous quarter.
Eurostat, the EU's statistics office, already puts the Spanishunemployment rate at 25.1pc.
 The Ibex has opened lower, falling 0.7pc to 7,721.90, as yields on 10-year government bonds edge up to 5.6pc. Borrowing cost have been rising after hits 5.2462pc on October 19. |
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