Friday, November 9, 2012

Germany growth to noticeably weaken over the next 6 months , France business confidence remains near two year lows. Greece still on hold as to when it might receive its next trance of aid from the Troika. AS for the 4 billion in bonds due to be redeemed November 16th , the EU is trying to figure out how to avoid a Greek default as Greece cannot meet this redemption without getting the next tranche or at least some portion thereof.

http://www.businessinsider.com/germany-is-getting-worried-that-france-is-dragging-it-down-2012-11

( Germany about to offer France some " advice " )


BERLIN (Reuters) - German Finance Minister Wolfgang Schaeuble has asked a panel of advisers to look into reform proposals for France, concerned that weakness in the euro zone's second largest economy could come back to haunt Germany and the broader currency bloc.
Two officials, speaking on condition of anonymity, told Reuters this week that Schaeuble asked the council of economic advisers to the German government, known as the "wise men", to consider drafting a report on what France should do.
Schaeuble's request denotes growing concern in Berlin and among private economists over the health of the euro zone's second largest economy, which is set to miss a European Union goal for reducing its public deficit next year.

"Concerns are growing given the lack of action of the French government in labor market reforms," Lars Feld, an economist who sits on the panel, told Reuters.
Although Schaeuble raised the prospect of a report on France with members of the council this week, Feld and the finance ministry made clear that the government had not submitted a formal request. The ministry declined comment on "unofficial discussions" of the minister's affairs in general.
The panel of advisers publishes an annual report on the state of the German economy, which it handed over to Chancellor Angela Merkel on Wednesday. It can also draft special reports when it sees economic imbalances developing or at the formal request of the government.
Since being founded 49 years ago, the panel has published no studies on individual countries but Germany, according to its website. Its last expert opinion, the first since 1997, was published in July, following the European Union summit in June.
PRESSURE
French President Francois Hollande, in office for roughly half a year, is under intense pressure to reform an economy that is losing competitiveness relative to its larger neighbor Germany and southern European countries that have enacted far-reaching measures in the euro crisis.
This week, in response to calls by industrialist Louis Gallois for cuts in labor charges to reverse decades of industrial decline, the government announced it would grant 20 billion euros in annual tax credits to companies as a way of lowering labor costs.
Economists said Hollande was sending the correct signal but that it may not be enough. Unlike European peers Italy and Spain, France's borrowing costs have remained low, but investors worry its rock-bottom bond yields do not reflect the fragility of the economy.
A Bank of France survey published on Friday predicted French gross domestic product will shrink 0.1 percent in the last quarter of 2012, pushing France into a technical recession, defined as two consecutive quarters of contraction, as the third quarter is also expected to be negative.

Schaeuble has been a close ally of France and has argued firm ties are key to achieving more European integration, a persistent German demand to solve the problems of the euro zone debt crisis.
In August, he and his French counterpart Pierre Moscovici said they would launch a working group in order to make joint proposals on euro zone issues like fiscal and banking union.
The German "wise men" panel, which also includes a woman, is not obliged to take up Schaeuble's suggestion. One source said if it decided to do a study, it would likely do so in cooperation with a French institute, rather than on its own.
However, the panel has made clear it is concerned about France's economy. In its Wednesday report it touched on France, saying continued stagnation was a growing worry given the recessionary trends in the euro zone as a whole and voiced doubts that savings measures would suffice to consolidate the French budget.
"The biggest problem at the moment in the euro zone is no longer Greece, Spain or Italy, instead it is France, because it has not undertaken anything in order to truly re-establish its competitiveness, and is even heading in the opposite direction," Feld said on Wednesday.
"France needs labor market reforms, it is the country among euro zone countries that works the least each year, so how do you expect any results from that? Things won't work unless more efforts are made."
France and Germany have been at the core of efforts to stop the euro zone crisis spreading from the periphery to the larger economies.
While many have accepted twice bailed-out Greece is a special case, German officials say in private that they are concerned trouble in Spain and Italy could spill over to France unless Hollande takes bold steps. (Additional reporting by Sarah Marsh; Editing by Noah Barkin/Mike Peacock)

and....



http://www.zerohedge.com/news/2012-11-09/overnight-sentiment-no-dead-cat-bounce


Overnight Sentiment: No Dead Cat Bounce

Tyler Durden's picture
Submitted by Tyler Durden on 11/09/2012 07:12 -0500




With expectations that Europe will once again become a flaming powderkeg after the US elections are over running high, Europe has so far not disappointed. And as usual, the focal catalyst of greatest pain remains Greece, which is only now learning what ZH readers knew days ago, namely that the Greek "austerity" vote was merely theater, and that Europe, i.e., Germany, has certainly not decided to release any of the much needed cash that Greece needs not only to run its society but to make a key bond payment on November 16. Confirming this was German finance ministry spokeswoman Marianne Kothe, who said on Friday that Eurozone finance ministers will probably not be able to decide at their upcoming Eurogroup meeting on Monday whether to disburse a badly-needed €31.5 billion loan tranche to Greece, as MNI reported earlier. "Speaking at a regular government press conference here, Kothe reminded that German Finance Minister Wolfgang Schaeuble needs the approval of the German Bundestag, the lower house of parliament, before being able to approve any further aid for Greece. “It will be difficult to achieve this by next Monday,” she said." In other words, the Greek default is suddenly in the hands of the German people, of whom at last check  about 60% wanted Greece gone. There is yet hope for Greece, with a story overnight running that George Soros is ready to commit "serious funds to aid Greece." Surely that generosity too will end well for the Greek people who by now must feel as if they are in the 5th circle of a NWO globalization hell.

In other news, the European economic basket case refuses to go away: reports overnight showed that Industrial Production continues imploding, with France tumbling -2.7%, on expectations of a -1.0% drop (down from 1.5%), the worst plunge since the 2009 crisis, Italy dropping -1.5% and -10.5% Y/Y, and Greece down 7.3% compared to a year earlier. Europe is stuck between a rock of a low EUR indicating redenomination risk and a hard place of a high EUR now guaranteed to crush any economic status quo, let alone growth.
All of this, and the continued negative sentiment from the past 2 day sell off means that US traders walk in to another sea of red, with futures solidly in the red, the EURUSD back to testing 1.27, Asia lower across the board, Europe unhappy, and Spanish 10 Year once again eyed closely: the next resistance level is 6% here, and once this breaks it slowly but surely puts the (long, long overdue) OMT activation in play.
To summarize: no dead cat bounce. At least not yet.

A more comprehensive recap from DB's Jim Reid follows:
There have been quite a few soothing words around markets recently on the likelihood that the fiscal cliff, Greece and Spain will all be resolved in a market friendly manner but the US election seems to have been the excuse for the market to start to want to see a bit more actual proof rather than hope on a number of these issues. On the US, newswires are reporting that President Obama plans to make a statement today about his plan for spurring economic growth and addressing the deficit which is likely to serve as the opening gambit in the President’s fiscal cliff negotiations. Republican House Speaker John Boehner stepped up the rhetoric late yesterday, posting on Twitter that while “Obamacare is the law of the land….(the Republican) goal has been, and will remain, a full repeal”.
The S&P500 yesterday closed at the day’s lows of -1.22% which also wraps up the worst 2-day performance in 2012. The index also finished firmly below the 200-day moving average with all industry sectors finishing in the red. The market was initially buoyed by the better-than-expected US trade numbers for September (-$41.5bn vs -$45bn expected) but this was eventually outweighed by news that McDonald’s monthly global sales contracted for the first time in almost a decade and also not helped by another poor day for Apple’s share price (-3.6%). A Reuters article yesterday noted that Samsung’s Galaxy S3 has displaced Apple’s iPhone as the world’s best selling smartphone last quarter. Apple’s recent slide continues to attract plenty of focus as the company’s market capitalisation has now fallen 23% since the peak struck 8 weeks ago. This decline is worth around $155bn or 3.8x what Greece is hoping to get from its next bailout tranche! Over the same period the overall market and the tech sector are down 6% and 12% lower, respectively.

Gold bugs are having a decent run with the precious metal rallying every day over the past week in what is the longest streak since August. Gold is up 3.3% this week but interestingly still around 2% below pre-QE3 levels. The search for 'safe haven' assets was also behind the strong performance in government bonds yesterday. Indeed the 30yr UST bond yields fell nearly 8bps to a two month low of 2.751%. A solid 30-year auction yesterday clearly helped. On the subject of safe havens, German bonds are also having good run, with 10yr yields finishing lower in 12 out of the last 16 sessions. On the other hand, Spanish 10yr yields have crept up gradually after having risen higher in 7 of the last 9 trading sessions. The Spanish spread to German government bonds is now at its highest in 6  weeks (449bps).
The market wobbles were also not helped by some fairly downbeat European headlines yesterday suggesting that Euro-area finance ministers may delay a decision on approving the next bailout payment for Greece until late November as they await a full report on the country's compliance with the terms of its bailout. It appears that the Troika won’t be ready with a full report on Greece until after the Eurogroup meeting on Monday (12th).

Turning to the ECB, Draghi’s post-meeting press conference was relatively dovish, but stopped short of providing assurance that the ECB will move to ease imminently.
On the OMT, Draghi reiterated that the ball is in Spain's court. Nothing new here but suggests that the current stalemate is likely to continue. On Greece, Draghi identified a route by which the ECB might be willing to play a role in helping Greece through an amended troika programme via the ELA – essentially allowing the GGBs to redeem, funded by t-bill issuance financed by the ELA via the banks. Sounds like a game of musical chairs! The WSJ yesterday reported that the Eurozone is considering cutting interest on Greek bailout loans to EURIBOR+80bps (currently EURIBOR+150bp) and increasing the repayment period.
Back to markets and the US selloff is once again setting the risk-tone for Asian markets with major bourses in the red. The Hang Seng (-0.43%), ASX200 (-0.49%) and Nikkei (-0.75%) are all trading lower although off their intraday lows. The risk tone perhaps found a floor following a relatively benign Chinese inflation print (+1.7% vs 1.9% last month and 1.9% expected). Chinese equities (+0.02%) are up for the first time this week although is still poised to 2.2% lower on the week. As we go to print the rest of China's main monthly data has been published with Retail Sales, Industrial Production and Fixed Asset Investment all slightly above expectations.

Turning to the day ahead, it will be relatively quiet with France and Italy reporting September industrial production. Over the weekend, the Greek government is set to vote on the 2013 budget. In the US, the UofM preliminary consumer sentiment reading is the main print. President Obama is expected to deliver his statement from the East Room of the White House, although no time for the statement has been given.




and......





http://www.telegraph.co.uk/finance/debt-crisis-live/9665134/Debt-crisis-live.html


11.40 A Greek finance ministry official said that the country could sell more debt in order to roll the bonds over. He told Reuters:
QuoteWe are examining the rollover of €5bn in treasury bills because of a delay in the instalment from lenders.
Greece increased the size of its monthly T-bill auction in August after theECB agreed to raise the ceiling on the amount that the Bank of Greece could accept as collateral in exchange for emergency loans.




11.09 A German government spokesman told reporters that parts of the troika report on Greece would be ready by Monday, although they added that Germany’s lower house of parliament would need to approve the tranche before any cash could be disbursed.
10.54 To expand on Matina Stevis' tweet (see 10.30), an EU official has told reporters that European governments will find a way of preventing an "accidental default" by Greece next Friday when €4bn of bonds are due for redemption. According to Bloomberg, the unnamed official declined to mention how they would be able to pull this off.




10.40 Yannis Stournaras, Greece's finance minister, said in a statement that he expected the Eurogroup to issue a statement on Greece after their meeting on Monday.
10.30 A bit more on Greece's cash problem (see 09.57)
10.25 Latvia now has a better credit rating than Spain, according toStandard and Poor's.
The rating agency has raised Latvia's long term credit rating to 'BBB' from 'BBB-' with a "positive" outlook. Spain was downgraded to 'BBB-' last month. In a statement, S&P said:
QuoteThe upgrade reflects our expectation that Latvia's net general government debt will decline on the back of its strong economic recovery and rapidly improving fiscal balances, and also our view that the economy will come to rely less on external debt financing. The positive outlook reflects our view that moderating inflation in Latvia increases the likelihood of it joining the European Economic and Monetary Union (eurozone) in 2014.
The Latvian economy has continued to recover in 2012, growing by 5.9% in the first half led by private consumption and investment. Although overall output remains below pre-recession levels and nearly 16% of the workforce remains unemployed (about half being long term), we view the Latvian economy as one of the more flexible and resilient economies in the EU. At the same time, growth in imports is slowing, offsetting a deceleration in export growth. We expect Latvia's current account deficit to increase only marginally in 2012 to 2.5% of GDP from 2.2% in 2011, but to widen to more than 4.0% of GDP between 2013 and 2015 due to a pick-up in imported capital goods. We anticipate that these current account deficits will be funded mostly by foreign direct investment and EU capital transfers.
Post-recession, the government's fiscal consolidation plan reduced public sector employment by one-sixth, significantly raised taxes, and streamlined the public sector. These measures contributed to reducing the fiscal deficit to an estimated 1.6% of GDP in 2012, from 8%-9% in 2009 and 2010. In the medium term, we expect the government to maintain deficits at the 2012 level.
Latvia joined the EU in 2004. It plans to join the euro in 2014.
10.03 Britain's trade deficit narrowed more than expected in September, official data show.
The UK's goods trade deficit narrowed to £8.4bn in September from £10bn in August, according to the office for National Statistics. Economists polled by Reuters had forecast a deficit of £8.9bn.
Taking into account Britain's services sector, the overall trade deficit narrowed to £2.7bn, from £4.3bn in August.
09.57 The paper also delves deeper into news yesterday that Greece may not receive its next €31.5bn aid tranche until EU leaders see a full report on the country’s reform progress.
Wolfgang Schaeuble, Germany's finance minister, told reporters yesterday that a decision on Greece next week "would be too soon". The Eurogroup of finance ministers will meet on Monday.
Expansion highlights that the country has €5bn of bonds maturing over the next seven days. According to Bloomberg, €1bn of this matures today (see chart below).
Next Friday, €4.06bn is due. The paper says that if the money does not arrive by then, Greece could default on those bonds.
09.35 Rescued Spanish banks could be forced to cut their size by around 50pc under new proposals, according to a Spanish newspaper.
Expansion, which cited unnamed sources, reported that lenders that receive funds from the Fondo de reestructuración ordenada bancaria (FROB) will be forced to give up non-core activities, sell stakes in companies and reduce their number of branches.
In total, lenders' books are expected to be cut by between 40pc and 60pc.
09.10 Germany and France will publish third quarter growth figures next week.
Germany expects GDP to have increased slightly after climbing by 0.3pc in Q2, while the Bank of France forecasts a 0.1pc contraction.
08.59 Meanwhile, Germany's economy ministry has warned that growth over the next six months will be "noticeably weaker". In a statement, it said:
QuoteAs a whole there will be a noticeably weaker economic dynamic in the winter period [...] Nonetheless at the moment we only expect a temporary period of weakness.
08.51 Bad news for Europe's two largest economies.
In France, business confidence remained close to a two-year low in October, as problems with the country's auto industry continued to weigh on sentiment.
Sentiment among manufacturing executives remained unchanged at 92 last month, against a long-run average of 100, the Bank of France said. In a statement, it added:
QuoteIndustrial activity continued to decrease slightly, mainly due to the ongoing decline in the auto industry [...] Order books were still considered insufficient.
French carmaker Peugeot announced it would be cutting 8,000 jobs and closing its Aulnay plant near Paris in 2014 (Photo: AFP).
and regarding Greece........

http://www.guardian.co.uk/business/2012/nov/09/eurozone-crisis-greece-bailout-aid-delay

More from Brussels

EU officials are continuing to brief the press in Brussels (see 9.33am onwards) One just confirmed that the IMF's debt sustainability deadline of 2020 may be pushed back two years to 2022.
And the confirmation that Greece won't get its bailout tranche unless its debt development is deemed sustainable means that Brussels has caved into IMF demands. Ian Traynor explains:
Until a few weeks ago eurozone negotiators were seeking to "decouple" the two issues, but have now accepted the linkage at IMF insistence.
Several eurozone governments were also demanding a linkage, aware that their parliaments would pull support otherwise.

Greek industrial production drops again

The latest Greek industrial output data, just released, confirms that the country's economy continues to spiral down.
Industrial production in Greece tumbled by 7.3% in September, compared with a year earlier. It had risen unexpectedly in August (+2.7%).
The more the Greek economy shrinks, the harder it becomes to achieve debt sustainability.
As analyst Nick Panayotopoulos put it this morning:

No disbursement without sustainability

But Brussels top brass are also insisting this morning that Greece willnot get its next aid payment until a deal to address its debt sustainability is agreed.
A senior eurozone official just declared that no disbursement is possible until Greece's debt is deemed sustainable (Ian Traynor reports)
Updated 
Interesting! EU officials have been discussing the crisis, and the Greek aid payment, at a press conference in Brussels.
The key line is that they are insisting that Greece will not default in a week's time.
The €5bn of short-term bonds which matures next Friday are held by the European Central Bank, so in theory it could simply agree to roll the debt over (and indeed, this is what many people in the City expect).
So essentially, the ball is in the ECB's court...
Updated 

Eurozone officials predict Greek delays

The newswires are now buzzing with eurozone officials saying the decision on Greece's aid deal will be delayed until later this month:
• REUTERS: SENIOR EU OFFICIAL SAYS UNLIKELY THAT EURO ZONE MINISTERS CAN TAKE FINAL DECISION ON UNFREEZING AID FOR GREECE ON MON, SECOND MEETING PROBABLY NEEDED









Analysis from ian Traynor

Our Europe editor, Ian Traynor, confirms that there is a "renewed flare-up of tension over Greece", due to the acute differences between the IMF on one side, and the eurozone and the European Central Bank.
Ian confirms that Eurogroup finance ministers look unlikely to agree to disburse the €31.5bn euros that Greece needs this month to stave off bankruptcy when they meet on Monday:
The Greeks are expected to get the money, but perhaps not till the end of the month, according to senior sources in Brussels.
As I mentioned at 8.29am, the IMF and the Europeans are at odds over how to relieve the pressure on Greece and fill a funding gap of up to €30bn arising from extending the terms of the bailout package by two years to 2016.
They are even more in dispute over how to respond to the ever worsening debt trajectory, with the IMF's target of debt sustainability at 120% of GDP by 2020 now known to be unattainable, says Ian.
He continues:
What to do about this? The IMF has sought to link the two issues of debt sustainability and the disbursement. The Europeans, always more up for a political fix, have been trying to "decouple" the two issues. It seems the IMF has won this argument, with eurozone officials now saying there can be no agreement on how to proceed until everything is decided in an overall package.
To make matters worse, there is a deepening argument between the IMF and the Europeans over the merits of austerity and whether the policies being pursued are the right ones. 
The IMF has been pressing the Europeans to accept an official writedown of Greek debt, OSI, but this is strongly resisted by the Germans and the ECB in Frankfurt. A lowest common denominator consensus has formed around lowering the cost of the bailout loans to Athens and lengthening their maturities. This will help but is unlikely to be enough.
As ever, the delays in decision-taking will be ascribed to the non-arrival of the report from the troika of European Commission, ECB, and IMF "men in black" on Greece. That report will miraculously appear at the politically opportune moment.9.03am GMT








http://economistsview.typepad.com/timduy/2012/11/missing-the-bigger-picture-in-greece.html

Thursday, November 08, 2012

Missing the Bigger Picture in Greece

Eurozone leaders face a new round of brinkmanship over Greece’s €174bn bailout after international lenders failed to bridge differences on how to reduce Athens’ burgeoning debt levels, pushing the country perilously close to defaulting on a €5bn debt payment due next week.
The sticking point:
The IMF remains more pessimistic about Greece’s ability to return to economic growth, the amount it will collect in its €50bn privatisation programme, and how much money is needed to recapitalise the country’s teetering banking system.
As a result, Brussels and Washington are 5-10 percentage points apart on where Greece’s debt will stand by 2020, the target date in the rescue programme for returning Athens to sustainable debt levels.
Further complicating negotiations, officials said the IMF is insisting Greek debt levels are reduced to 120 per cent of gross domestic product by 2020, while the European Commission is urging an easing of the target to about 125 per cent by 2022.
If past experience is any guide, the IMF is correct to be skeptical.  But the bigger picture here is that the Troika has repeatedly failed to hit this target of 120 percent, and this time will be no different.  120, 125, or 135 percent is more about political posturing than economic reality.  With any of these targets, the ongoing waves of austerity are doing nothing more than pushing Greece deeper into a death spiral.   
Five years of recession and counting.  Unemployment above 25%.  Still too many sticks, not enough carrots.  And remember, the 120 percent target itself does not guarantee safety.  It is largely an artifact of wanting to justify the level of Italian debt.  From Reuters:
The 120 percent figure was fixed on because Italy had debts of 120 percent of GDP at the time and was managing okay. But Italy is a very different case to Greece, with high domestic ownership of its debt, and its situation is now less stable.
I understand this is considered political dynamite in Europe, but I still think it will be virtually impossible to fix Greece without a direct transfer of resources. A large, official debt forgiveness program.  I suspect the alternative - a failed state on Europe's borders - will be more costly in the long-run.


http://www.ekathimerini.com/4dcgi/_w_articles_wsite2_1_09/11/2012_469246




Austrian FinMin opposes new haircut for Greece


Finance Minister Maria Fekter opposes further marking down the value of Greek debt to help Athens get its finances in order, according to an official summary of her testimony to lawmakers released on Friday.
The eurozone is struggling to agree a formula to make Greek debt sustainable, with Germany and the International Monetary Fund at odds over the need for governments and the European Central Bank to take a «haircut» on Greek bonds they hold to make the numbers add up.
In Thursday's testimony to parliament's budget committee Fekter said the ECB and national governments resisted the IMF proposal «because a haircut would hit public creditors and thus taxpayers."
"She also opposed another debt cut in Greece,» the summary said.
The budget committee passed Austria's draft 75 billion euro 2013 spending plan on to the full lower house with minor amendments. The budget envisions a deficit of 2.3 percent of gross domestic product and state debt peaking at 75.4 percent of GDP next year.
The committee also tweaked the government's 2013-2016 financing plan to see sharply lower debt servicing costs next year given record low interest rates, allowing more spending on support for research, young entrepreneurs and foreign aid.
On the spending side it saw additional state aid needed for nationalised banks Hypo Alpe Adria and KA Finanz as well as the planned capital increase for the European Investment Bank, according to the summary.
Austria will run bigger public deficits than hoped this year and in 2013 as the economy performs less well than expected and aid for its struggling banks eats into state finances, the finance ministry had said last month.


http://www.ekathimerini.com/4dcgi/_w_articles_wsite1_1_09/11/2012_469247


Eurogroup unlikely to take final decision on Greece on Monday



Eurozone finance ministers are unlikely to take a final decision to release the next tranche of emergency loans to Athens at a meeting on Monday as there is no clarity yet how to make Greece's huge public debt sustainable, a senior EU official said.

"Is there an expectation of a final decision on Monday? There is a very, very high degree of probability of a second round of discussions to finalise everything,» the official said on Friday.
The official said eurozone ministers were aware that Greece needed money to redeem several billion euros worth of treasury bills maturing on Nov. 16 and were taking that into account in their discussions.
But he said the debt sustainability report by international lenders - the International monetary Fund, the European Commission and the European Central Bank, called the troika - was not ready yet and was necessary for a decision on unfreezing the programme.
"The debt sustainability analysis is an integral part of the compliance report of the troika and only once there is agreement that the evolution of debt to GDP ratio over a given time period is sustainable, then and only then can we say that we are prepared to disburse,» the official said.


http://www.ekathimerini.com/4dcgi/_w_articles_wsite2_1_09/11/2012_469229


Credit Agricole posts $3.6 billion loss after Greek sale


Credit Agricole SA, France’s third- largest bank, posted a quarterly loss that exceeded analysts’ estimates on costs tied to the sale of its Greek unit.
The third-quarter net loss was 2.85 billion euros, the bank, based outside Paris, said in an e-mailed statement on Friday. The loss was wider than the 1.88 billion-euro average estimate of seven analysts surveyed by Bloomberg.
Credit Agricole, led by Chief Executive Officer Jean-Paul Chifflet, agreed last month to sell its Emporiki Bank unit to Greece’s Alpha Bank under terms cutting the French bank’s net income by 1.96 billion euros. Credit Agricole is ending a six- year investment in Europe’s most indebted country as concerns linger Greece might exit the euro area.
“This reflects the past and especially their troubles in Greece,” Romain Burnand, who helps manage 900 million euros at Moneta Asset Management in Paris, said before the earnings release. “Now you need to look at their retail bank’s capacity to resist a more difficult economic situation in France.”
Leaving aside the costs related to the Emporiki sale and additional non-recurring charges, Credit Agricole had a profit of 716 million euros in the quarter, the company said. Profit from the French regional banks fell 3.5 percent while earnings at the LCL branch network declined 11 percent.
The bank also booked an accounting charge of 647 million euros tied to the theoretical cost of buying back its own debt as market prices fluctuate. Credit Agricole recorded a 572 million-euro writedown mostly on its Italian consumer-credit business, a 181 million-euro loss linked to its sale of CA Cheuvreux, and a 193 million-euro accounting charge on its stake in Spain’s Bankinter SA.
Credit Agricole is selling Athens-based Emporiki for a token price of 1 euro, it said Oct. 17. The French bank will inject more funds into Emporiki, bringing the total capital boost since July to 2.85 billion euros, and buy 150 million euros of convertible bonds issued by Alpha Bank. Credit Agricole and Athens-based Alpha aim to complete the transaction by the end of this year.
Credit Agricole is also shutting its riskiest investment-banking businesses. The bank has stopped most of its equity derivatives and it has no proprietary trading activity, according to a Sept. 26 presentation. The lender is selling its brokerage CLSA to China’s Citic Securities Co. in a transaction valued at $1.25 billion.

Credit Agricole started trimming its balance sheet last year and in December scrapped its 2014 earnings targets. Credit Agricole Group, the entity regulators and rating firms look at for compliance with international rules, expects to reach a core capital ratio of more than 10 percent by the end of 2013 under Basel III rules, the bank reiterated on Friday.
While Credit Agricole’s funding to Emporiki made it the foreign lender with the most to lose should Greece exit the euro, the planned sale of the unit to Alpha will create the southern European country’s second-largest bank by loans.
Credit Agricole, like larger French competitors BNP Paribas SA and Societe Generale SA, cut investment-banking jobs and assets as Europe’s debt crisis last year curbed their access to short-term dollar funding, regulators imposed stricter capital rules and French President Francois Hollande considers legislation by year’s end to isolate the banks’ most speculative activities.
Societe Generale, France’s second-largest bank by market value, on Friday posted an 86 percent decline in third-quarter profit as losses on asset sales and a charge on its own debt outweighed an investment-banking rebound. BNP Paribas on Nov. 7 said quarterly profit more than doubled, helped by higher trading revenue.
Credit Agricole’s corporate and investment bank had a 302 million-euro third-quarter net loss, hurt by own-debt charges and the cost of selling CA Cheuvreux. Excluding one-time items, the division’s like-for-like profit fell 15 percent to 325 million euros, the bank said.
Securities firms have posted gains in revenue since European Central Bank President Mario Draghi’s July pledge to do “whatever it takes” to defend the euro sparked a rally in bond markets. French banks, the biggest foreign holders of private and public debt in the troubled economies of Greece, Ireland, Italy, Portugal and Spain, are benefiting from the ECB’s moves as the crisis enters its fourth year.
Credit Agricole has risen 36 percent in Paris trading this year. BNP Paribas, France’s largest bank, gained 32 percent and Societe Generale rose 45 percent in the period.
Greece, heading for a sixth year of recession, is overhauling its banking system after lenders booked losses on government-bond holdings in the biggest sovereign-debt restructuring in history. The country obtained a 130 billion- euro bailout in March from the European Union and the International Monetary Fund that earmarked 50 billion euros for recapitalizing the banks.
Credit Agricole’s net funding to Emporiki was 2.1 billion euros at the end of September, and the latest capital injection and purchase of convertible bonds will “immediately” lower that by 700 million euros, the bank said Oct. 17. Credit Agricole already provided about 2.3 billion euros in capital to Emporiki in July following a request from the Bank of Greece.
The French bank, founded in 1894 as a lender to farmers, invested 2.2 billion euros in 2006 to buy a majority stake in Emporiki, the least profitable of Greece’s top five banks at the time. Since then, Emporiki has been unprofitable every year except 2007, with accumulated losses for Credit Agricole of about 5.7 billion euros through the end of June.

Alpha Bank will add 17.4 billion euros of Emporiki loans as part of the deal, and the combined entity will have about 61 billion euros of loans and 737 branches. The combined bank had pro-forma capital of 4.1 billion euros as of March, Alpha Bank said last month.
Greek Prime Minister Antonis Samaras this week secured support in Parliament to approve austerity measures needed to unlock bailout funds, in a tense vote that weakened his majority after the expulsion of seven dissenting lawmakers.

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