http://www.ekathimerini.com/4dcgi/_w_articles_wsite1_1_30/11/2012_472307
Greeks rage against pension calamity
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In the heat of a June night, Eleni Spanopoulou found her audience at an Athens hotel turning ugly. Mutiny and violence hung in the air.
For hours the leader of the Greek journalists' social security fund had been chairing a meeting about disastrous losses on retirement savings caused by the country's economic collapse. "She tried to present herself as the fund's savior and asked (members) to double contributions to 6 percent of salaries," said one of those present that night at the Titania hotel. Spanopoulou, 58, did not succeed.
When she rose to leave around midnight, enraged fund members first swore, then waded in punching, kicking and tearing at her clothes, according to witnesses. A bodyguard managed to bustle her out of the room, but another group caught her just outside the hotel and gave her a second beating. She spent the night in hospital.
It was a brutal sign of the fury many Greeks feel at the way the country's debt crisis has dashed hopes of a comfortable old age. Greece's pension funds - patchily run in the first place, say unionists and some politicians - have been savaged by austerity and the terms of the international bailout keeping the country afloat.
Workers and pensioners suffered losses of about 10 billion euros just in the debt restructuring of March 2012, when the value of some Greek bonds was cut in half. That sum is equal to 4.6 percent of the country's GDP in 2011.
Many savers blame the debacle on the Bank of Greece, the country's central bank, which administers three-quarters of pension funds' surplus cash. Pensioners and politicians accuse it of failing to foresee trouble looming, or even of investing pension fund money in government bonds that it knew to be at high risk of a 'haircut' - having their value reduced.
A Reuters examination of previously unpublished data from the Bank of Greece reveals the bank invested pension fund money in 1.18 billion euros of Greek bonds after the economic crisis began.
Prokopis Pavlopoulos, a lawmaker in the ruling coalition's conservative New Democracy party and former interior minister, said: "From July 2010 it was obvious that a debt restructuring would be inevitable. While foreign banks were unloading their Greek government bonds, no one moved to tell Greek pension funds to do something, that a haircut was coming."
Spanopoulou, while deploring the violence she suffered, said: "The Bank of Greece knew about the haircut on bonds well in advance and should have informed (our) fund."
The losses compound the woes of Greek pensioners, many of whom have seen their income fall; further cuts are expected as part of the latest austerity package voted through parliament in November.
The Bank of Greece rejects the criticism, arguing its room for maneuver was limited. Around the world pension funds routinely invest in government bonds, and the bank says the scale of Greece's economic meltdown was not obvious when most of its pension fund investments were made.
"More than 90 percent of the bonds that eventually suffered a haircut had been bought before 2009," said Mihalis Mihalopoulos, a Bank of Greece official who invests money on behalf of Greek pension funds.
That is not enough to assuage critics, who say the pension fund crisis is one of the most neglected facets of the Greek catastrophe. "At the very least ... pension funds were not warned," lawmaker Pavlopoulos said. "The government ... knew it was heading for a haircut and did nothing for these people, which I find hard to stomach."
How the system works
Having grown up piecemeal over decades, the Greek pension system is highly fragmented with about 200 official bodies running different funds, with different costs and benefits, covering numerous occupations.
Broadly, though, the majority of people rely on schemes with an element of government funding as well as contributions from employers and employees. The state also plays a pivotal role in deciding how such funds invest, and appoints the boards on many of them.
Under a law passed in 1997 and refined in 2007, pension funds have to place 77 percent of any surplus cash in a pool of "common capital" managed by the Bank of Greece. The law requires the common capital to be invested only in Greek government bonds or Treasury bills (T-bills). The remaining 23 percent of funds can be invested in other assets, such as mutual funds, shares and real estate.
The aim of the measures, officials said, was to ensure that most of the money was safely tucked away for a steady return. In the good times, this worked. But it was to have disastrous consequences when the credit crunch that began in 2007 led to a crisis in sovereign debt.
When the incoming government of 2009 revealed Greece's finances were far worse than previously admitted, ministers initially dismissed the idea of reneging on some of the country's debts. But in some circles the prospect rapidly gained ground, according to a former Greek representative to the International Monetary Fund (IMF).
"The IMF ... was more open to securing the sustainability of Greece's debt via a writedown (than the euro zone countries)," said Panagiotis Roumeliotis, a former economy minister and Greece's IMF representative at the time. Foreign investors were not slow to see the danger.
Many scrambled to sell their holdings of Greek debt, but officials managing pension fund money at the Bank of Greece did not. Pavlopoulos claims that while foreign investors dumped more than 100 billion euros of Greek government bonds from 2009 to 2011, the country's pension funds actually raised their holdings by 9 billion euros.
The losses compound the woes of Greek pensioners, many of whom have seen their income fall; further cuts are expected as part of the latest austerity package voted through parliament in November.
The Bank of Greece rejects the criticism, arguing its room for maneuver was limited. Around the world pension funds routinely invest in government bonds, and the bank says the scale of Greece's economic meltdown was not obvious when most of its pension fund investments were made.
"More than 90 percent of the bonds that eventually suffered a haircut had been bought before 2009," said Mihalis Mihalopoulos, a Bank of Greece official who invests money on behalf of Greek pension funds.
That is not enough to assuage critics, who say the pension fund crisis is one of the most neglected facets of the Greek catastrophe. "At the very least ... pension funds were not warned," lawmaker Pavlopoulos said. "The government ... knew it was heading for a haircut and did nothing for these people, which I find hard to stomach."
How the system works
Having grown up piecemeal over decades, the Greek pension system is highly fragmented with about 200 official bodies running different funds, with different costs and benefits, covering numerous occupations.
Broadly, though, the majority of people rely on schemes with an element of government funding as well as contributions from employers and employees. The state also plays a pivotal role in deciding how such funds invest, and appoints the boards on many of them.
Under a law passed in 1997 and refined in 2007, pension funds have to place 77 percent of any surplus cash in a pool of "common capital" managed by the Bank of Greece. The law requires the common capital to be invested only in Greek government bonds or Treasury bills (T-bills). The remaining 23 percent of funds can be invested in other assets, such as mutual funds, shares and real estate.
The aim of the measures, officials said, was to ensure that most of the money was safely tucked away for a steady return. In the good times, this worked. But it was to have disastrous consequences when the credit crunch that began in 2007 led to a crisis in sovereign debt.
When the incoming government of 2009 revealed Greece's finances were far worse than previously admitted, ministers initially dismissed the idea of reneging on some of the country's debts. But in some circles the prospect rapidly gained ground, according to a former Greek representative to the International Monetary Fund (IMF).
"The IMF ... was more open to securing the sustainability of Greece's debt via a writedown (than the euro zone countries)," said Panagiotis Roumeliotis, a former economy minister and Greece's IMF representative at the time. Foreign investors were not slow to see the danger.
Many scrambled to sell their holdings of Greek debt, but officials managing pension fund money at the Bank of Greece did not. Pavlopoulos claims that while foreign investors dumped more than 100 billion euros of Greek government bonds from 2009 to 2011, the country's pension funds actually raised their holdings by 9 billion euros.
The central bank disputes his figures. It says that between January 2009 and May 2011 it invested pension fund money in government bonds with a nominal value of only 1.18 billion euros, after which it stopped. It also said, in a letter to Pavlopoulos, that from the end of 2009 to the end of 2011 pension funds' total holdings of Greek bonds fell by 2.5 billion euros.
Despite those figures, Pavlopoulos remains dissatisfied. "The Bank of Greece did nothing to protect the pension funds," he said.
Amid the wrangling over exactly who bought what when, one thing is clear: when the financial storm struck, the pension funds remained heavily exposed. Bank of Greece figures show that the pension funds still held 19 billion euros of Greek bonds and 1.4 billion euros in T-bills as the country teetered on default in early 2012.
Mihalopoulos, the central bank investment manager, said selling the bonds would not have helped: "Had we liquidated the bond portfolio we would have realized a loss of 8 billion euros as prices had come down sharply."
In the end, however, the pension funds appear to have suffered an even bigger loss. In March, Greece completed the largest-ever sovereign debt restructuring as part of its bailout by the "troika" of euro zone members, IMF and European Central Bank. In a move known as "private sector involvement" or PSI, Greece replaced old bonds with new ones worth 53.5 percent less.
Bank of Greece figures show that by June the pension fund assets it controlled had plummeted to 11.1 billion euros, made up of 8.7 billion in bonds and 2.4 billion in T-bills. In the space of three months pension funds had lost about 10 billion euros.
Former Labour Minister George Koutroumanis told Reuters the losses were unavoidable. "How could we have asked to protect our own pension funds and let all the others take the blow, it could not have worked that way," said Koutroumanis, whose former department is in charge of the pension system. "The billions of euros that pension funds lost because of the PSI was a significant hit. But it has to be weighed against the need to ensure the viability of the country in the euro and the system's continued funding."
That argument does little to stem the anger of those facing impoverishment. Before the PSI, the journalists' pension fund had assets at the central bank worth 115 million euros; after the PSI they were worth 59 million euros, according to Bank of Greece figures.
Employees at ATEbank, a state-run institution that recently had to be rescued, are among others to have suffered. "The (health and supplementary pension) fund of ATEbank's employees is collapsing ... as a result of the PSI, which cost 70 million euros," said Konstantinos Amoutzias, president of the bank's employee union. "We have asked the Bank of Greece since the summer to provide us with data on the investment of our funds and they haven't answered us yet."
A senior Bank of Greece official, who declined to be named, said: "Any fund which has asked for data on transactions and market prices has received it." He added that, for reasons of legal confidentiality, the central bank could not reveal full details, such as the names of the banks from which it had bought government bonds in the secondary market.
Despite those figures, Pavlopoulos remains dissatisfied. "The Bank of Greece did nothing to protect the pension funds," he said.
Amid the wrangling over exactly who bought what when, one thing is clear: when the financial storm struck, the pension funds remained heavily exposed. Bank of Greece figures show that the pension funds still held 19 billion euros of Greek bonds and 1.4 billion euros in T-bills as the country teetered on default in early 2012.
Mihalopoulos, the central bank investment manager, said selling the bonds would not have helped: "Had we liquidated the bond portfolio we would have realized a loss of 8 billion euros as prices had come down sharply."
In the end, however, the pension funds appear to have suffered an even bigger loss. In March, Greece completed the largest-ever sovereign debt restructuring as part of its bailout by the "troika" of euro zone members, IMF and European Central Bank. In a move known as "private sector involvement" or PSI, Greece replaced old bonds with new ones worth 53.5 percent less.
Bank of Greece figures show that by June the pension fund assets it controlled had plummeted to 11.1 billion euros, made up of 8.7 billion in bonds and 2.4 billion in T-bills. In the space of three months pension funds had lost about 10 billion euros.
Former Labour Minister George Koutroumanis told Reuters the losses were unavoidable. "How could we have asked to protect our own pension funds and let all the others take the blow, it could not have worked that way," said Koutroumanis, whose former department is in charge of the pension system. "The billions of euros that pension funds lost because of the PSI was a significant hit. But it has to be weighed against the need to ensure the viability of the country in the euro and the system's continued funding."
That argument does little to stem the anger of those facing impoverishment. Before the PSI, the journalists' pension fund had assets at the central bank worth 115 million euros; after the PSI they were worth 59 million euros, according to Bank of Greece figures.
Employees at ATEbank, a state-run institution that recently had to be rescued, are among others to have suffered. "The (health and supplementary pension) fund of ATEbank's employees is collapsing ... as a result of the PSI, which cost 70 million euros," said Konstantinos Amoutzias, president of the bank's employee union. "We have asked the Bank of Greece since the summer to provide us with data on the investment of our funds and they haven't answered us yet."
A senior Bank of Greece official, who declined to be named, said: "Any fund which has asked for data on transactions and market prices has received it." He added that, for reasons of legal confidentiality, the central bank could not reveal full details, such as the names of the banks from which it had bought government bonds in the secondary market.
Vaso Voyatzoglou, secretary general of insurance at the bank employees' union OTOE, said: "Eventually all pension funds will end up suing the Bank of Greece in order to find out what exactly happened and how they lost their money."
The human cost
Among individuals on the receiving end of the losses is Constantine Siatras, 79, a retired lieutenant-general, who says his income has fallen by 33 percent during the crisis.
"We should not have illusions that our pension fund will recoup what it lost from the haircut on its government bond holdings," he said. "It's very hard to get by as a pensioner the way things are going."
Yet Siatras is one of the lucky ones: he still gets about 1,700 euros a month. Most have to survive on far less. Despite Greece's reputation for profligacy - with reports of public sector workers retiring early on fat pensions - the average pension is about 850 euros a month, according to unions representing 80 percent of pensioners.
Many pensioners have to get by on less, including Yorgos Vagelakos, a 75-year-old former factory worker, and his wife, who live in Keratsini, a working-class district near Athens. "We can barely afford to buy our grandchildren anything, not even a colorful notepad. When they ask us for one, we change the subject and then we cry," Vagelakos said in the tiny yard of his house.
His pension of 650 euros a month supports himself, his wife Anna and, when possible, the family of his 42-year old-son, who is unemployed. "Thankfully my younger son and his wife have a job," he said.
Tax increases and high prices have hit hard. "We have slashed everything by 50 percent. At night we keep the light off to save on our electricity bill. We have become vegetarians from cutting back. We can't take it anymore," Vagelakos said, talking while his wife cooked cauliflower and potatoes for lunch, a meal that would also feed the family of their elder son, who has two children.
"Out of 650 euros, at least 170 go for medicines for me and my wife, another 100 for electricity and 30 euros for water. With the rest we get by as we can." He picked up a bunch of bananas. "We don't eat these, we save them for our four grandchildren."
Faced with the plight of the retired and public anger, officials are now promising to make good some of the pension fund losses. The government has passed a law to enable it to transfer some state-owned assets, such as real-estate, into a new vehicle for the benefit of pension funds.
However, no such body has yet been established. And, as the country's debt crisis persists, the value of its state-owned assets remains uncertain.
The human cost
Among individuals on the receiving end of the losses is Constantine Siatras, 79, a retired lieutenant-general, who says his income has fallen by 33 percent during the crisis.
"We should not have illusions that our pension fund will recoup what it lost from the haircut on its government bond holdings," he said. "It's very hard to get by as a pensioner the way things are going."
Yet Siatras is one of the lucky ones: he still gets about 1,700 euros a month. Most have to survive on far less. Despite Greece's reputation for profligacy - with reports of public sector workers retiring early on fat pensions - the average pension is about 850 euros a month, according to unions representing 80 percent of pensioners.
Many pensioners have to get by on less, including Yorgos Vagelakos, a 75-year-old former factory worker, and his wife, who live in Keratsini, a working-class district near Athens. "We can barely afford to buy our grandchildren anything, not even a colorful notepad. When they ask us for one, we change the subject and then we cry," Vagelakos said in the tiny yard of his house.
His pension of 650 euros a month supports himself, his wife Anna and, when possible, the family of his 42-year old-son, who is unemployed. "Thankfully my younger son and his wife have a job," he said.
Tax increases and high prices have hit hard. "We have slashed everything by 50 percent. At night we keep the light off to save on our electricity bill. We have become vegetarians from cutting back. We can't take it anymore," Vagelakos said, talking while his wife cooked cauliflower and potatoes for lunch, a meal that would also feed the family of their elder son, who has two children.
"Out of 650 euros, at least 170 go for medicines for me and my wife, another 100 for electricity and 30 euros for water. With the rest we get by as we can." He picked up a bunch of bananas. "We don't eat these, we save them for our four grandchildren."
Faced with the plight of the retired and public anger, officials are now promising to make good some of the pension fund losses. The government has passed a law to enable it to transfer some state-owned assets, such as real-estate, into a new vehicle for the benefit of pension funds.
However, no such body has yet been established. And, as the country's debt crisis persists, the value of its state-owned assets remains uncertain.
and....
http://www.ekathimerini.com/4dcgi/_w_articles_wsite2_1_29/11/2012_472244
Debt lightening conditional on reform implementation
Commission draft report says troika will set out rules for Athens
By Sotiris Nikas
The decision to lighten Greece’s debt at this week’s Eurogroup meeting will be conditional on the implementation of terms that the country’s creditors will set out, according to the second draft report of the European Commission.
The paper was drafted a day after the Eurogroup meeting on Monday and while it does not change the fiscal targets listed in the first draft of November 11 or the forecast regarding the course of the Greek economy, it does incorporate the decision for the disbursement of the next tranches.
The draft report makes clear that unless the agreed reforms are implemented, the economy’s rebound will be postponed until after 2014. It further expresses the Commission’s worries about the political balance in Greece that could lead to the failure of the streamlining program.
The main addition to the first draft is the explanation of the interventions for the reduction of the country’s debt. The report stresses that that they will take place gradually and under the condition that planned reforms will take place for the whole of the program’s duration, through 2016, as well as for the years to follow. The details of the conditions will be set out by the representatives of the Commission, the European Central Bank and the International Monetary Fund, known as the troika, which will also determine whether the program is actually being implemented.
and.......
http://www.ekathimerini.com/4dcgi/_w_articles_wsite2_1_29/11/2012_472247
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and from Zero Hedge.........
http://www.zerohedge.com/news/2012-11-30/greek-banks-list-conditions-under-which-they-will-agree-be-bailed-out
Greek Banks List Conditions Under Which They Will Agree To Be Bailed Out
One of the indirect beneficiaries of the German generosity which allowed a token EUR44 billion to be released for Greece, with the bulk of the proceeds used to pay off hedge fund and Western Europe bank creditors, are Greek banks, who will fight for the remaining scraps and use them to plug their massively underwater balance sheets. However, as we reported yesterday, the same Greek banks not only want their cake, but they now have a set of conditions that must be met for them to eat it too.
Because recall that remarking GGB2s from par (where Greek banks certainly have the bulk of the post-reorg impaired debt market) to the debt buyback price will cause massive hits to Greek bank capitalization which explains the tumble in Greek bank stocks in the past few days. As such, said Greek bankers are threatening to scuttle the "voluntary" aspect of the Greek bailout as explained yesterday, unless the Greek government agrees to a set of conditions that will allow them to continue operating even after the forced remarking of Greek debt to post-Greek bailout #3 market.
Imerisia, via Bloomberg, reports these conditions:
- Greek banks at a meeting with Finance Minister Yannis Stournaras late yesterday agreed to participate in the country’s debt buyback plan, Imerisia reports, without citing anyone.
- In compensation, banks ask for full recognition of deferred tax assets in capital calculations, which would reduce capital needs by EU4bn
- Stournaras to present request to troika while saying final decision will rest with EU competition commission
- Following lender concerns, Stournaras also agreed to introduce legislation that give banks legal indemnity from potential shareholder lawsuits
Of course, reading other media, such as Kathimerini, one would be left with a far less optimistic view on the conclusion of the talks, which demands a Greek bank "voluntary" agreement to be crammed down, as otherwise CACs have to be enforced, and the entire third Greek bailout is in danger of being unravelled.
From Kathimerini:
Meeting between Stournaras and bankers hits stalemateThere was no progress in the Thursday meeting between Finance Minister Yannis Stournaras and the Hellenic Bank Association regarding the issues of the bond buyback plan and the sector’s recapitalization.Neither Stournaras nor the association’s head, Giorgos Zannias, made any statements after the meeting. Kathimerini understands that the representatives of the credit sector expressed opposition to the buyback plan, stressing that it would lead to the loss of the banking system’s private character. That in turn would have serious implications for the economy itself and the rebound effort, as it would send a negative message to investors and the markets.
The association’s representatives suggested that bank stakeholders have already suffered huge losses as a result of the original debt haircut (PSI) earlier this year and that the buyback would constitute a disproportionate burden for them.
They went on to present two alternative proposals to the minister, which they argued would reach the target of reducing the country’s debt without the economic exhaustion of stakeholders: The first concerns swapping the Greek state bonds banks hold with European Financial Stability Facility (EFSF) bonds, either directly or through the Hellenic Financial Stability Fund (HFSF); the second is less drastic and provides for a partial participation in the buyback, with the government exempting the PSI losses from tax, which could lead to a benefit of about 3 billion euros for banks.
Stournaras is said to have reiterated the need for the buyback plan to succeed, and reminded bankers that such alternatives have already been rejected by the European Central Bank and the European Commission. However, he did say he would examine the tax proposal.
Of course, since in the end this is merely an exercise in perpetuating the failed Eurozone status quo at a modest incremental cost, expect everyone to fall into place, with an end cost borne out again by German and European taxpayers, with the marginal winners both Greek and European banks. As always. Expect this to continue until such time as Greece runs out of any and all lien-free assets, at which point there will be no wealth that can be "fresh started" by the global banking syndicate, and will then be set free.
and....
http://www.zerohedge.com/news/2012-11-30/german-bundestag-approves-third-greek-bailout-package
German Bundestag Approves Third Greek Bailout Package
With a vote of 473 in favor, 100 against, and 11 abstentions in the German Bundestag, Europe's AAA-club gets the formal green light to pay off hedge fund holders of Greek bonds, and to preserve the solvency of Deutsche Bank, also incorrectly known elsewhere as "the third Greek bailout." As for Greece, we expect a 4th "bailout" within 3-6 months. In fact after today's spectacular collapse in Greek retail sales which plunged 12.1% in October, make that 2-5 months.
and......
http://www.zerohedge.com/news/2012-11-30/europes-recessionary-collapse-beating-even-most-optimistic-expectations
Submitted by Tyler Durden on 11/30/2012 05:37 -0500
and......
http://www.zerohedge.com/news/2012-11-30/europes-recessionary-collapse-beating-even-most-optimistic-expectations
Europe's Recessionary Collapse Beating Even Most Optimistic Expectations
- Bond
- Chicago PMI
- Congressional Budget Office
- Consumer Confidence
- Consumer Prices
- CPI
- Debt Ceiling
- Equity Markets
- Eurozone
- fixed
- Germany
- Greece
- Gross Domestic Product
- headlines
- Initial Jobless Claims
- Italy
- Jim Reid
- Nikkei
- None
- President Obama
- Recession
- recovery
- SocGen
- Stimulus Spending
- Tim Geithner
- Unemployment
There was some confusion as to why yesterday various Eurozone consumer confidence indices posted a surprising jump and beat expectations virtually across the board: turns out Europeans had an advance warning of today's horrendous economic data among which we learned that Eurozone October unemployment just hit a record 11.7%, up 0.1% from September (we are trying to get data if the Eurozone is gaming its unemployment number the way the US does by collapsing its labor participation rate), with Italy unemployment surging to 11.1% from 10.8%, on expectations of a 10.9% print, French consumer spending in October was down 0.2%, compared to an unchanged reading in September, but far more troubling was that German retail sales imploded at a rate of 2.8%, the biggest monthly collapse in 4 years, and worse than even the most bearish forecast. Do we hear "Sandy's fault."
As a reminder, there was a bevy of "optimistic" data released yesterday which was meant to give people the impression that Germany is getting better. It isn't: in fact it is getting dragged ever lower courtesy of the endless bailouts it is engaged in (and with the Bundestag set to vote in the 3rd Greek bailout momentarily, this will merely continue). But at least Mario Draghi earlier said that he believes a eurozone recovery is coming in H2 2013. No it isn't.
Finally, we learned that even more hard core core countries are starting to get dragged into Europe's neverending recession as Denmark Q3 GDP missed expectations of +0.3% wildly barely posting a 0.1% growth. Finally, Sweden threw some cold water on hopes that the ESM can recapitalize banks, after saying that Sweden would block the key permissive condition needed: a EU bank deal. Of course, Germany will continue saying "9."
Naturally, none of this bothers the crack FX trading team at the BIS who has done everything in its power to keep the EURUSD smack on top of 1.3000 so as to not give any impression that anything is out of control.
And a quick look out of Europe brings us to the Japanese endlessly hilarious Keynesian basket case, where the Manufacturing PMI just dropped to 46.5 in November, down from 46.9 in October, on a collapse in Export Orders to 45.1 from 46.7. CPI slowed to -0.4% (that's a negative) Y/Y, but at least the unemployment rate was flat at 4.2%. To paraphrase Chuckie Evans: ease until that hits Minus 5%.
A more complete event recap comes courtesy of DB's Jim Reid:
“No substantive progress”, “a step backward”, and “disappointing” were the words used from both sides of US politics to describe the state of fiscal cliff negotiations yesterday. Yet despite this, the S&P500 still managed to close 0.43% higher - although it did trade briefly in negative territory in the morning session before recovering to close near the day’s highs helped by comments from Democrat Senator Chuck Schumer, who insisted that there indeed had been progress in talks.
Markets may have also taken comfort in the fact that the Democrats had at least offered a deal of sorts to the Republicans yesterday. Tim Geithner reportedly proposed a deal involving $1.6trn of tax increases over 10 years, an immediate $50bn round of stimulus spending and the ability to unilaterally raise the US debt ceiling in return for $400bn of savings from entitlement programs (Washington Post). However the plan was quickly dismissed by Republicans as “not a serious proposal”.
Nevertheless, Asian markets have taken the lead from the stronger US close to trade firmer overnight. The Shanghai Composite is rallying 0.55% after closing lower in the last four consecutive sessions. Meanwhile while the Hang Seng (+0.50%), KOSPI (+0.2%) and ASX200 (+0.63%) are also trading firmer. The Nikkei is outperforming (+0.85%) after the Japanese government approved an additional JPY880bn of stimulus measures. Data showed that Japan’s consumer prices fell 0.4%yoy in October (in line with expectations) which was sufficiently weak to prompt the economy minister to say that he wants to work with the BoJ to end inflation – echoing recent calls from the opposition leader. The USDJPY is up 0.41% overnight off the back of the headlines, while the EURJPY is up 0.53% reaching its highest level in seven months (107.2).
Back in the US and away from the to and fro of ‘cliff speak’, yesterday’s economic data was generally on the better side. Pending home sales for October were up 5.2%mom (vs 1% expected) after the previous month’s number was revised up to 0.4%mom (from 0.3%). Initial jobless claims fell to 393k for the week to Nov 24th, largely reflecting the diminishing impact from Hurricane Sandy which caused a large increase in jobless claims during the first half of the month. The second estimate of Q3 GDP growth was revised up to 2.7% from 2.0% although the detail was a little disappointing with inventory build accounting for the bulk of the upward revision.
Given the decent gains in equities on Thursday, it was interesting to see US 10yr treasury yields continue to grind tighter for the fourth consecutive day (-1.4bp yesterday to close at 1.615%). The US CDX IG credit index slipped below 100 again (99.5bp, or -1.5bp on the day) and spent much of the day trading in a narrow range, failing to react to the “cliff on, cliff off” headlines. In other moves, Brent rallied 1.25% yesterday to close up for the first time in four sessions, while spot gold added 0.3%.
It was a relatively quiet day in Europe with much of the focus on the US. The Ekathimerini reported that a number of local bank executives have informed the Greek finance minister that they do not want their institutions to take part in the bond buyback scheme, potentially decreasing the scheme’s chances of succeeding.
In other headlines, November was the second busiest month on record for US high grade corporate debt issuance according to the IFR with the total amount raised breaching the $120bn mark. The US Congressional Budget Office said that Treasury could hold off on needing to raise the debt ceiling until mid-February or early at the latest. The Treasury has previously estimated that it would hit the debt ceiling by the end of the year.
Turning to the day ahead, in Europe we get an update on the Eurozone’s unemployment, together with German and French consumer spending reports. The Bundestag is expected to vote and approve Greece’s latest aid package. Over in the US, October’s consumer spending report is due, as is the Chicago PMI for November. President Obama hits the road today stopping at a number of manufacturers in Philadelphia to pitch his message on extending tax cuts for middle class families.
What other macro events are on the radar today? SocGen chimes in:
Outlook
Optimism is attempting to take hold as the year-end approaches amid hopes for a favourable resolution to the fiscal cliff, for mid-December financial aid for Greece, and for a smooth turn of the year for Spain. European equity markets are close to 2012 highs, the EUR/USD is close to 1.30 and the 10Y Bonos/Bund spread has tightened from 456bp to 390bp since mid-November.
Careful though, economic indicators published today will highlight that the eurozone situation remains depressed. French household consumption is expected to drop and the unemployment rate in the eurozone is expected to increase. In the US, the industrial sector is showing signs of recovery: the Chicago PMI is expected to go back over 50 in November. Conversely, household consumption is in the spotlight: consumer spending is expected to be nil in October. We also note that the private spending component of Q3 GDP was revised down, from 2.0% to 1.4% yesterday.
Political factors or economic fundamentals: which will dominate between now and year-end? While the former are attempting to gain ground, the latter will limit the potential of any rally. Against this backdrop, we continue to recommend selling the EUR/USD on rebounds. This strategy can also be applied to the EUR/JPY, particularly as the exchange rate is close to over-bought territory, which is not the case for other EUR/G10 exchange rates. On rates, watch the 10Y Bonos/Bund spread: the 18 October low at 370bp is in the crosshairs.
* * *
And now that you have read all of this, forget it all, and focus on any and all conflicting, confusing, and contradictory headlines out of America's political class about the Fiscal Cliff, which is increasingly looking like it will not be fixed until the due date for the debt ceiling deal, some time in March 2013.
and....
http://www.guardian.co.uk/business/2012/nov/30/eurozone-crisis-german-parliament-greece-unemployment
Bundestag approves Greek aid package
The results are in -- and the German parliament has APPROVED the Greek aid package.
A total of 584 MPs voted -- 473 voted in favour, and 100 voted against. Eleven MPs abstained.
(with thanks to my colleague Nadine Schimroszik)
Photograph: Bundestag TV
Greek retail sales slump
While we wait for the results of the Bundestag vote, here's further evidence that Greece's economy is still contracting – Greek retail sales tumbled by 12.1% in September, compared with the previous year.
That follows a 9.3% decline in August, showing that the slump actually picked up pace.
German MPs start voting
Photograph: Bundestag TV
Back in Berlin, voting is underway on the Greek aid deal....
Europe's youth jobless crisis worsens
Young people across Europe continue to suffer the brunt of the crisis, with today's data (see 10am onwards) showing the youth jobless rate climbed again.
In October 2012, the youth unemployment rate in the eurozone hit 23.9%, up from 21.9% a year ago (and 23.3% last month).
There are now 5.678m people under the age of 25 out of work across the EU, with 3.609m in the euro area.
Again, the differences between North and South are remarkable (although not surprising)
The lowest rates were recorded in Germany (8.1%), Austria (8.5%) and the Netherlands (9.8%)/
The higher were in Greece (57.0% for August 2012) and Spain (55.9%).
Stark regional differences in jobless rates, again...
As ever, the eurozone date unemployment data shows the stark differences across the region;
The lowest rates were recorded in Austria (4.3%), Luxembourg
(5.1%), Germany (5.4%) and the Netherlands (5.5%),
(5.1%), Germany (5.4%) and the Netherlands (5.5%),
The highest was recorded in Spain (26.2%), followed by Greece (25.4% - although that relates to August 2012).
This graph, from the eurostat release, shows more:
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