http://www.ekathimerini.com/4dcgi/_w_articles_wsite1_1_13/11/2012_469688

Eurogroup OKs Greek extension but puts off loan tranche, debt verdict for a week

Monday’s Eurogroup ended with eurozone finance ministers agreeing to extend Greece’s fiscal adjustment period by two years but deciding to put off until next week final decisions on the disbursement of the next Greek bailout tranche and the method to make the country’s debt sustainable.
The ministers are due to meet again on Tuesday, November 20 to wrap up the loose ends regarding the Greek program.
Eurogroup chief Jean-Claude Juncker and European Monetary and Economic Affairs Commissioner Olli Rehn praised the Greek government for passing the latest package of fiscal and structural reforms but International Monetary Fund managing director Christine Lagarde suggested that some “chapters” remain to be settled.
“The Eurogroup welcomes efforts by Greek authorities to bring program back on track,” said Juncker. “The Eurogroup acknowledges the considerable efforts of the Greek citizens.”
“All those who openly dismiss the potential of the Greek program to return fiscal sustainability should dwell on the improvement in the country’s structural budget balance,” said Rehn.
“Also, the perception that there has been no progress on structural reforms is wrong and unfair,” he added.
Juncker said that a number of ideas had been discussed regarding how to cover Greece’s financing gap over the next few years, as well as making its debt sustainable but that none were chosen or overuled. He said these decisions would be made next week.

The Luxembourg prime minister, however, said that rather than setting a target of Greek debt being at 120 percent of GDP in 2020, the deadline may be extended by two years to 2022.

Lagarde said the Fund had “different views” on the timetable but that everything was still up for discussion.

“All avenues available to reduce Greek debt are being explored and will continue to be explored in the coming days,” she said.

The troika's debt sustainability report will see Greek debt at 144 percent of GDP in 2020, and 134 percent in 2022 if there are no efforts to reduce it over the next few years, Reuters reported.

Juncker said it was his “personal opinion” that official sector involvement (OSI), the writing down of Greek debt held by the ECB and eurozone countries, would not be one of the options for restructuring chosen by the Eurogroup.

Rehn, meanwhile, insisted that there would be no problems on Friday, when Greece has to rollover 5 billion euros of debt. It is planning to do so by issuing T-bills and Rehn said Greek banks would be in a position to buy them even if they are cut off from the Eurosystem.

and.....

http://www.ekathimerini.com/4dcgi/_w_articles_wsite1_1_12/11/2012_469657

Parliament staff rush to get pensions

Dozens of Parliament employees have rushed to apply for early retirement in an apparent bid to cling to their privileges after Prime Minister Antonis Samaras indicated that the exclusion of House employees from wage and pension cuts would be revoked.

On Wednesday, as MPs prepared to vote on a four-year austerity and reform package, Finance Minister Yannis Stournaras withdrew a bill aimed at revoking the privileged wage and pension status enjoyed by parliamentary staff after House employees threatened to strike, putting the smooth procedure of the vote at risk.

Stournaras’s pledge to bring the bill back to Parliament was echoed by Samaras on Sunday night in a speech before the budget vote. “Is it logical for Parliament employees to receive a lump sum upon retirement that is eight times as large as that of other civil servants?” he said. “We should establish real rights for all, not scandalous privileges.”

According to sources, 18 high-level parliamentary employees applied for retirement on Monday alone, bringing the total since Wednesday’s vote to 45.

An amendment dictating that the pensions of parliamentary staff should be level with those of other civil servants was passed in the House in 2010 but has yet to be enforced.

Meanwhile, 14 young Greeks who passed the examinations set by the Supreme Council for Personnel Selection (ASEP) to qualify for a post in Parliament a year-and-a-half ago are still waiting to start. “We want to work,” one of the successful candidates told Kathimerini. “We were successful in qualifying for a position and now we are being ignored.”

and.....

http://www.ekathimerini.com/4dcgi/_w_articles_wsite1_1_12/11/2012_469655

Local staff sit-ins protest list demands

Municipal workers occupied local authority offices in Athens and other cities on Monday to protest the troika’s demands to provide central government with a list of employees to be suspended ahead of early retirement or transferred to other parts of the civil service.
The action, coordinated by the Panhellenic union of local authority workers (POE-OTA), was also aimed at hampering the compilation of the lists the country’s creditors want local authorities to send to the Interior Ministry, with the offices of mayors and municipal clerks among those that were occupied.
The Central Union of Municipalities and Communities of Greece (KEDKE) on Monday expressed its “total opposition” to the suspension of local authority workers, noting that this would leave municipalities unable to fulfill their duties. Several municipal councils, including that of the northern port of Thessaloniki, held votes to highlight their opposition to the measure.
Thessaloniki Mayor Yiannis Boutaris said he backed his council but opposed calls by other mayors for mass resignations as a way of protest. “I’m not resigning. I’m telling you from now. You will have to put up with me until the end,” he said.

http://www.guardian.co.uk/business/2012/nov/12/eurozone-crisis-greece-bailout-funds-budget

( late day highlights..... )

Closing Summary

With eurozone ministers hard at it in Brussels, the news flow appears to have dried up.

There could be a Eurogroup press conference late tonight (depending on progress), but I think it's time for a closing summary of the last 12 hours in the crisis:

• There is still deadlock over Greece's financial programme, and its next aid payment. The International Monetary Fund and European officials remain divided over the country's debt levels, and its path to debt sustainability. The row means Greece's Troika of lenders have still been unable to deliver a final report into the Greek economy. (see 12.51pm)

• Eurozone leaders are attempting to hammer out a deal on Greece tonight. We have early photos at 7.37pm. The word from Brussels, though, is that another meeting will be needed to before a final decision is reached on whether Athens gets the €31.5bn aid tranche that has been delayed for months.

• The Troika has accepted that Greece should be given another two years to hit its targets. A draft Memorandum of Understanding shows that Athens would be given until 2016 to achieve a primary surplus of 4.5% - not 2014 as previously mandated. The MoU also outlines wide-ranging labour reforms and spending cuts – which appear to be line with the measures agreed in recent days. See 5pm for a flavour of the MoU.

A separate Troika report has apparently concluded that Greece's funding gap over the next few years could reach €32bn (see 2.59pm).

• There have been protests in Portugal as German chancellor Angela Merkel paid a brief visit. A puppet and a photo were burned in separate protests (see 7.07pm). Earlier, Merkel told a press conference that Germany stood alongside Portugal, and promised additional help to tackle its youth unemployment crisis (see 4.12pm)

• Fresh from winning approval for Greece's 2013 budget last night, prime minister Antonis Samaras has insisted that Greece has a brighter future. The PM told reporters that Greece has a vision for its rebirth (see 6.52pm)

• The latest Japanese GDP added to fears over the global economy.GDP fell by 0.9% in the last quarter, indicating that the world's third-largest economy is heading into recession (see 8.55am).

We'll be back tomorrow morning for further rolling coverage of the crisis - and it should be another lively day.

Meetings will continue in Brussels, involving all EU finance ministers. We also get new UK inflation data, a rather important Greek debt auction, anda meeting between David Cameron and Mario Monti in Rome.

Thanks, and goodnight!

and....

http://www.zerohedge.com/news/2012-11-12/greek-banks-slump-spanish-bonds-dump-juncker-fist-pump

Greek Banks Slump, Spanish Bonds Dump, Juncker 'Fist Pump'

Submitted by Tyler Durden on 11/12/2012 11:48 -0500

Bond

Reality

Despite the protestation from Juncker that all-is-well and that the Troika report is positive, Europe is not happy. Bonds and stocks across most of the region's continue to weaken. The sacrosanct 2Y Spanish bond yield has leaked back to one-month highs, 10Y Spanish bond spreads are holding above 450bps (as the yield presses back towards 6%), Greek stocks broadly have given back almost 40% of their recent much-aggrandized dead-cat-bounce (remember our Eastman Kodak analogy), as Greek banking stocks are hammered on the day as recaps (as expected) are much worse than it seems hope-filled investors expected...EURUSD is sliding back towards its swap-spread implied reality. Europe's macro data is breaking lower and while some note US' decoupling, we reiterate (below) this is a lag, not a decoupling.

Greek bank stocks slumping once again...

And Sovereign bond spreads are bleeding wider...

As the EURUSD slides lower towards its swap-spread-implied fair value...

and the reality that nothingt decouples, it is a lead-lag relationship...

and........

http://www.zerohedge.com/contributed/2012-11-11/unintended-consequences-bailouts-greece-gets-slammed

Wolf Richter www.testosteronepit.com www.amazon.com/author/wolfrichter

Bailouts, particularly those by central banks, have become known for their so-called “unintended consequences”—howeverintended they might have been. And now, unintended consequences strike again. The ECB’s massive purchases of decomposing Greek debt—an under-the-radar bailout of banks and insurance companies that were holding it—are making the favorite solution to the Greek crisis, namely another deep haircut, legally impossible, said Bundesbank President Jens Weidmann.

Weidmann, an outspoken opponent of the ECB’s bond purchasing programs who has likened them to a pact with the devil [Monetary Schizophrenia in Germany], has seen the writing on the wall. “Apparently,” he said during an interview, “the political world has decided to continue financing Greece.”

In theory, the next bailout payment of €31.5 billion is contingent on the big report that the Troika—the ever so successful bailout and austerity gang from the ECB, the IMF, and the EU—is putting together. They’ve been working on it since June. No money would be transferred to Greece unless the report would show that Greece is implementing to the last iota the agreed-upon reform program.

In practice, Weidmann questioned the independence of the report. Politicians have been dripping with admiration for Greece’s progress and have been expressing their intention to restart the aid flow, though the report isn’t even finished. And he wondered how you could objectively evaluate Greece’s performance in implementing the reform program, “when you’re too afraid of the consequences of a negative judgment?”

Political careers might be at stake, even in Germany, as Greece would be cut loose from the bailout pipeline, if the judgment were “negative.” The country would default and possibly walk away from the Eurozone. It would be messy. And it would happen before next year’s election in Germany. Unthinkable.

But Weidmann, in staying clear of political ramifications, worried about the Euro System—the ECB and the national central banks—that has become “one of the largest creditors” of Greece during the crisis. One of the solutions to the Greek debacle that has recently been pitched in all corners calls for another haircut, but this time on public-sector creditors, namely the Euro System. It would be a much deeper default. But it would grant debt relief to Greece.

Impossible. Weidmann objected to the comparison between the private-sector holders of Greek debt who were arm-twisted earlier this year into accepting a haircut. Banks and insurance companies had originally bought that debt to make a profit, he said, and they had to bear the risks associated with it. But the Euro System bought Greek debt during the crisis in its role as helper. “So the comparison is limping,” he explained.

That was just his warm-up for the unintended consequences of the attempted bailout via bond purchases: “The central banks must not cancel Greece’s debt,” he said, because that would be a “direct transfer and would be equal to the prohibited monetary funding of the government.”

In other words, if the private sector were still holding this debt, the solution would be another bout of arm-twisting, and another haircut. Greece would have gotten rid of most of its debt. That, Weidmann said, is no longer possible. By extension, it would apply to all other crisis states: once the ECB buys their debt to bail them out, any debt relief through a public-sector haircut is out of the question. Watch out, Spain, he seemed to say. You can’t get rid of your debt once the ECB is holding it.

But a haircut wouldn’t resolve the problems anyway, he said. “What good does it do to forgive Athens its debt if in ten years the country is back at the same point where it is today?” No, he said, Greece would have to fundamentally reform itself and become competitive.

The Eurozone has bigger problems than Greece: it seeped out that the German Finance Minister Wolfgang Schäuble broached an unprecedented topic with Germany’s Council of Economic Experts. Could they produce a reform concept for the troubled French economy? It revealed a threat that terrorizes the German government. Read..... Germany’s Fear And Desperation Leak Out.

and....

http://www.zerohedge.com/news/2012-11-12/overnight-sentiment-asian-bad-news-trifecta-launches-traditional-overnight-melt

Overnight Sentiment: Asian Bad News Trifecta Launches Traditional Overnight Melt Up

Submitted by Tyler Durden on 11/12/2012 07:04 -0500

The overnight session has so far been marked with one after another economic debacle out of Asia. First Japan announced that its Q3 GDP fell an annualized 3.5% in Q3, more than the 3.4% expected, the worst decline since last year's earthquake. The drivers were sliding exports and a collapse in consumer spending. The announcement brought on a barrage of platitudes by various Japanese officials who are shocked,shocked, that 32 years of Keynesian miracles have resulted in this horrifying outcome. Of course, everyone knows 33 years is the charm for Keynesian miracles. So much for the boosts from Japan's QE 8 aad QE 9: bring on QE 10. The pundits appear surprised now that Japan is back in a solid recession, which to us is quite surprising as well - does this mean that Japan ever exited the depression? Then China came out with an announcement that its credit growth plunged in October with Chinese banks extended CNY 505bn new yuan loans in October, down from CNY 623bn in September and less than the CNY 590 expected. The trifecta of bad news was rounded off by India, whose Industrial Production joined the rest of the world in global recession, when it dropped 0.4% in September on expectations of a 2.8% rise, even as Consumer prices rose 9.75% Y/Y - the global stagflation wave has arrived... For all those wondering why futures have managed to eek out a modest overnight ramp.

The balance of the news continues to follow every twist and turn in the endless Greek "will it be bailed out, won't it" saga, which today enters yet another irrelevant phase with the latest Eurogroup summit where nothing is expected to be resolved (everyone is still waiting for the Troika report). The final outcome will likely be the much delayed funding of the €31.5 billion tranche, but only after Germany pretends to kick and scream loudly and obstinately, only to comply behind the scenes. After all remember: the Greek "bailout" is really just a bailout of Deutsche Bank.

Finally, with Veteran's day in the US meaning only equities are open, expect another volumeless day, where due to the elimination of buffering checks and balances from bonds, equities can proceed with another major headfake ramp, only to be outdone one the rational traders return.

What to look forward to from Socgen:

Markets dealt with an abundance of political and event risk last week. However, the overhang from the US election and the perennial uncertainty over Greece will continue to cast a shadow over currencies and other markets this week with the yawning gap between EUR/USD spot and risk reversals set to experience a further squeeze. In G10 fx, for the JPY and AUD to share the top spot last week was a very rare occurrence indeed and begs the question whether these are now the dynamics that will determine where currencies trade over the closing stages of 2012. Who dares to say that the AUD is immune to risk aversion? The ECB, BoE and RBA all kept their benchmark rates unchanged last week which in theory should have favoured the EUR, GBP and AUD. In practice only the last of the three benefited and with the inflation data in China giving the PBoC room to ease, the AUD looks well placed to keep defying the more bearish consensus predictions. However, one could wonder how long the de-corrrelation from stocks can continue if the S&P does extend below the 200d ma.

Greece will stay under the spotlight given the expiry of an estimated EUR5bn of T-bills on Friday. The EU has pledged to tide Greece over but details are sketchy. From the standpoint where Athens passed another austerity bill last week, how does the EU argue that conditions do not yet warrant a release of the next bailout tranche? We will hear the answers directly from the Eurogroup today, but the plan to delay will not go down well with the public on the streets.

No key data at all to consider today, but we will hear from ECB member Knot and both France and Germany have bill auctions in the pipeline

We conclude, traditionally, with Jim Reid's nightly roundup:

Europe and Greece will likely be the immediate focus for markets this week but the latest fiscal cliff news will continue to be the main macro driver as the lame duck session starts early this week. In today’s EMR we will preview this week’s major events and data, update our usual earnings season performance table and also highlight a story that might just highlight a slow potential route towards future fuller government debt monetisation.

Starting with Europe, the passing of Greece’s 2013 budget vote was the main development overnight. The budget, which predicts a 5.2% fiscal deficit next year and also a 6th consecutive year of GDP contraction, received 167 votes in the 300-seat parliament. Approving the budget was a prerequisite to receiving Greece’s next tranche of funding but it does seem that a final decision to unlock those bailout funds might just take a little longer as recently hinted by German Finance Minister Schaeuble. Indeed it is unlikely that we’ll get definitive answers on this (as well as Cyprus’ aid agreement) at the two-day EU finance ministers meeting starting today. Our economists think that the December 3rd meeting now looks to be the likely point where decisions will be made. Nevertheless we will watch out for sound bites from the meeting today which starts at 4pm London time. For the record there are also other political meetings going on today. Monti will meet Hollande in Paris at 4pm London time. Merkel will meet the Portuguese PM and President today with a brief joint press event expected after the talks.

Staying on Greece, an upcoming EU5bn T-bill maturity this Friday (16th November) may start to attract some focus. To cover this upcoming maturity, the FT noted that Greece has announced plans to raise funds via a T-bill auction tomorrow. However, the FT noted that Greek banks can only buy about €3.5bn collateral acceptable to the ECB. This is because the ECB has not given permission for Greece to maintain a temporary €17bn ceiling for T-bill issuance due to be reduced this month to €12bn. To plug the shortfall, the FT wrote that Greece may seek to use funds from a €3bn reserve for bank recapitalisation held by the Hellenic Financial Stability Fund.

Given the amount of political and economic capital already extended to Greece, it’s highly unlikely that they’ll be left to default on a EU5bn T-bill this week. A solution is likely to be found. It helps that the two votes this past week have cleared Parliament. On the 2013 budget that was approved overnight, GDP is forecast to contract by -6.5% and -4.5% in 2012 and 2013 respectively while the Government debt to GDP ratio is expected to finish 2012 at 176% before rising to 189% next year. These numbers and Greece’s fiscal slippage have both been previewed by the media beforehand but it is clear that the debt-sustainability paper tabled at the EU summit back in February when Greece’s second bailout programme was approved now looks too optimistic. We recall that the ‘confidential’ debtsustainability paper projected a “baseline” scenario where Greece’s economy stops shrinking in 2013 and returns to +2.3% growth in 2014. In the “baseline” scenario, the debt/GDP ratio was expected to peak at 168% in 2013 before gradually falling to 129% in 2020. In a downside scenario the forecasted debt/GDP was to reach 162% and 171% in 2012 and 2013 before peaking at 178% in 2015 while GDP was projected to shrink by -4.8% this year and -1.0% in 2013. So we seem to be operating outside the worst case.

Away from the peripheral and turning our eyes to the UK, the Government last week agreed with the Bank of England to transfer to the Exchequer the excess cash held in the Bank’s Quantitative Easing (QE) facility. As a brief background, since 2009 the BoE has operated QE by buying gilts and holding them in a dedicated facility called the Asset Purchase Facility (APF). These gilts attract regular coupon payments from the Exchequer. With the purchases of the APF having reached £375 billion, this Facility has now accumulated a large cash balance. From now on this excess cash will be transferred to the Exchequer on a regular basis. Whilst this brings the UK’s practices in line with those of other major central banks like the Fed Reserve and the Bank of Japan it perhaps highlights a slow potential route towards future fuller monetisation.

Turning to markets the overnight session is mostly weaker as we type. Hong Kong (+0.1%) equities are faring better relative to bourses in China (-0.2%), Japan (-0.8%) and South Korea (-0.2%). Japan’s Q3 GDP (-3.5% v -3.4% annualised) came in largely in line with expectations while China’s trade balance ($31.99bn v $27.30bn) came in better than expected over the weekend largely driven by increases in exports to ASEAN. New Yuan loans data (505.2bn v 590.0bn) fell short of expectations though. Gold is paring back Friday’s trading declines as the precious metal is up modestly at $1735/oz overnight. The UST 10-year yield is unchanged at 1.606% while S&P 500 futures (+0.1%) are off the overnight lows as we go to print.

In other events this week we may see a rather quiet start to markets with Veterans Day affecting the US bond markets (although equity markets will trade as usual). Discussions between the Democrats and Republicans on the impending fiscal cliff also begin with Congress reconvening for the “lame duck” session today and tomorrow. Bernanke’s speech on the housing/mortgage market on Thursday in Atlanta is also noteworthy. Data flow will be light at the start of the week. On Wednesday, October PPI and retail sales are the main US releases along with the FOMC minutes. On Thursday we have CPI data together with the New York and Philly Fed surveys before Friday’s industrial production data. On the other side of the Atlantic, the data highlight will be the Eurozone/German/French/Italian/Spanish flash Q3 GDP estimates on Thursday. Ahead of that, we have the German ZEW survey on Tuesday and Eurozone IP on Wednesday. In the UK, CPI (Tues), unemployment (Wed) and retail sales (Thurs) are the main prints. Company reporting wise we have 63 Stoxx600 companies lined up including a number of Italian banks. On the political front, EU finance ministers meeting aside we also have Spain’s economy minister and Greek FM Stournaras speaking at the European Parliament’s economic affairs committee on the topic of “Exchange of views and economic dialogue” on Monday and Tuesday respectively. Merkel will also visit Portugal today and tomorrow. Major anti-austerity protests are scheduled in Spain, Portugal and Greece for midweek. In Asia the week-long National Party Congress in China concludes on Wednesday after which we should get more clarity on the make-up of the Politburo and key policy directions.

and....

http://globaleconomicanalysis.blogspot.com/2012/11/japan-plunges-into-deep-recession-gdp.html

Japan Plunges Into Deep Recession; GDP Shrinks 3.5% Annualized; Japan Current Account Turns Negative First Time in 30 Years; Watch the Yen

The global economy took another turn for the worse as Japan plunged into recession following two consecutive quarters of growth.

Please consider Japan’s economy shrinks annualized 3.5%.

Japan’s economy shrank an annualised 3.5 per cent between July and September, the steepest decline since the earthquake-hit first quarter of 2011, as exporters suffered big falls in shipments to key markets such as China and Europe.

Prime Minister Yoshihiko Noda described the gross domestic product figures as “severe”, while Seiji Maehara, economy minister, said Japan had possibly entered a “recessionary phase”.

In a speech on Monday, Masaaki Shirakawa, Bank of Japan governor, said there was “no question that the [central bank] should exert every effort to enhance its easing effects as much as possible”. He said domestic demand was “unlikely to increase at a pace that will outperform the weakness in exports”.

The Japanese government’s monthly survey of “economy watchers” – which includes barbers, hoteliers, car dealers and others who deal with consumers – has recorded six falls in a row since April. Last month the index stood at a level little better than that of April 2011, in the immediate aftermath of the quake.

Japanese manufacturers from Nissan to Shiseido have reported steep falls in sales of their products in China, following a wave of demonstrations against Tokyo’s nationalisation of some of the islands in mid-September.

Japan’s top seven automakers have cut their projections for Chinese sales by a fifth, for the fiscal year to March, according to calculations by the Nikkei newspaper.

Japan Trade Deficit Largest in History

As Japan spirals out of control, please recall Japan trade deficit hits record as relations with China poisoned.

Japan registered its biggest-ever trade deficit for a half of a fiscal year, in a sign that the sovereign debt crisis in Europe and the strained relationship with China over a territorial dispute have eroded Japanese exports, government data showed today.

For the first half of fiscal 2012 through September, Japan logged about USD 40.6 billion (3,219 billion yen) in goods trade deficit, up 90.1 percent from a year earlier and the biggest since the Finance Ministry began recording in 1979.

In September alone, the deficit stood at 558.6 billion yen, the third straight month of red ink and the largest for the month of September, the ministry said in a preliminary report, augmenting fears that violent anti-Japan rallies and boycotting of Japanese products in China have weighed on the exports to the biggest trading partner.

Exports to China fell 8.2 percent to 5,921.1 billion yen in the first half and slid 14.1 percent to 953.8 billion yen in September, sharper than the 9.9 percent fall in August. It was the fourth consecutive month of deficit as various products, ranging from auto and auto parts to steel and semiconductors, declined notably.

The balance showed Japan suffered the biggest September deficit with China of 329.5 billion yen, as imports gained 3.8 percent to 1,283.3 billion yen.

Resentment in China has accelerated since the Japanese government decided last month to nationalize part of an island group in the East China Sea, also claimed by Beijing and Taiwan.

Japan Current Account Turns Negative

The trick for Japan is how to finance its national debt, now at a majorly unsustainable 235% of GDP.

Japan was able to do so for years on account of its current account surplus, of which trade is typically the largest component.

You can now kiss that surplus goodbye because Japan Current Account Turns Negative

The world's third-largest economy has run a surplus in its current account, a measure of trade in goods, services and investments, for several decades—meaning it's earning more from exports and investments abroad than it spends at home. In fact, Japan the world's biggest creditor nation.

The surplus has been in the spotlight recently, since Japan also has the developed world's biggest debt load, now nearing a quadrillion yen ($12.5 trillion)—more than double its gross domestic product. As long as the current account surplus remains, economists say, Japan is in little danger of a Greek-style crisis, since its debt is largely being funded by household savings.

While that remains the case, Japan reported Thursday that the seasonally adjusted current-account was in deficit in September—for the first time in more than 30 years. The sudden surprise drop has some economists warning that Japan's ability to generate wealth is eroding faster than expected, and its fiscal situation could be more fragile than many had thought.

The Finance Ministry says Japan won't slip into a structural current-account deficit very easily, since deficits in the trade of goods and services will be offset by huge surpluses in what the country earns on investments in overseas assets such as U.S. Treasury bonds.

But the Japan Center for Economic Research argues a structural deficit in could be as close 2017, noting fuel-import levels are likely to stay high if most nuclear plants stay off.

The Japan Research Institute, another think tank, says a structural deficit could start in 2022 if crude oil prices keep rising. Hideki Matsumura, an economist with the institute, said it could come earlier if the current strong-yen trend, which hurts Japan's ability to sell overseas, continues.

"Many countries are catching up with Japan in the manufacturing field," he said. "If they can produce similar products for a cost 20% to 30% less than Japanese do, Japan will soon find no demand for its products."

Bug in Search of Windshield

As my friend John Mauldin suggests, Japan is a bug in search of a windshield. I highly doubt Japan can make it 2022 or even 2017 before it runs into serious issues.

Actually, Japan has extremely serious issues already, it's just that the market is ignoring them for now. If interest rates rise by a mere 2% or so, interest on the national debt will consume 100% of Japanese tax revenue.

Global imbalances are mounting. I suspect within the next couple of years (if not 2013) Japan will resort to the printing press to finance interest on its national debt and the Japanese central bank will start a major currency way with all its trading partners to force down the value of the yen.

Mike "Mish" Shedlock

and......

http://www.telegraph.co.uk/finance/debt-crisis-live/9671011/Debt-crisis-Troika-report-on-Greece-complete-but-no-tranche-decision-today-live.html

12.15 A Greek website, eKathimerini.com, is reporting that Greece has beat its budget and primary deficit targets in the first 10 months of this year. It reports:

According to the preliminary data available for the execution of the State Budget for the ten months January - October 2012, the State Budget deficit amounted to €12.29bn, compared to a target of €13.57bn.

The primary deficit also beat its target, coming in at €1.17bn against the projected €2.44bn.

"Both the state budget deficit and primary deficit perform a significant improvement compared to the first ten months period of previous year, by €8.79bn and €4.68bn, respectively," the Finance Ministry said in a statement.

"Thus, state budget balance is reduced by 41.7pc compared to the same period last year."

State Budget expenditures for the first ten months of 2012 also showed an improvement on the target that had been set, amounting to €54.02bn, which was €904m euros less than had been forecast.

11.59 Over to Italy where prosecutos have filed charges against ratings agencies Standard & Poor's and Fitch for market manipulation over downgrades of Italy's credit rating that helped fuel the euro debt crisis.

Prosecutor Michele Ruggiero, confirmed charges have been filed against seven people, five of whom worked at S&P's, while two worked at Fitch at the time of the alleged crime.

The charges have to be confirmed by a judge for any trial to go ahead - a process which could take months under the Italian judicial system.

The ratings agencies have cooperated with the inquiry but insist their economic evaluations were independent and based on objective factors.

Italian prosecutors also investigated Moody's rating agency but filed no charges.

11.44 Over the weekend the EU budget talks collapsed.

Eight hours of negotiations in Brussels ended in walkouts after MEPs refused to drop demands for an extra £13.8 billion in European Union spending for this year and 2013.

The deadlock was over demands by the European Commission for a £7.3 billion spending increase by the end of this year to meet a funding shortfall, figures that are disputed by Britain and other governments.

At the same time, the European Parliament wants to reinstate over £6.5 billion in funding that had been cut by governments from next year's budget to reflect national austerity programmes.

Well now the Telegraph's Brussels correspondent Bruno Waterfieldhas reported that part of the proposed roll over of €1.4bn from 2012 to next years' funds is "under investigation".

He adds this from an unnamed diplomat:

11.29 Eurogoup leader Jean-Claude Juncker has confirmed that the Troika report on Greece is completed, according to reports.

He said the basic tone of the report was positive but added that there will be no final decision on the next tranche of Greece's bailout today when the eurozone finance ministers meet in Brussels.

11.13 Apparently that Troika report is now out.

11.11 It does seem increasingly unlikely that Greece's international lenders are going to release that tranche payment today.

A German finance ministry spokeswoman said that while Greece has made considerable progress in approving an austerity budget but there are many financing questions yet to be answered.

"I think it's rather unrealistic to expect a final decision today as in Germany the Bundestag (lower house of parliament) has to agree to it in advance," Marianne Kothe told a regular news conference, adding that eurozone finance ministers were unlikely to reach a decision on Monday on further funding.

"Everyone is working under a lot of pressure to resolve questions which are still open."

10.45 Over to Greece. The country's debt management has said it is confident that it will be able to sell €5bn of one-month and three-month treasuries bills tomorrow to to roll over the maturing issue in Friday, thereby avoiding the country defaulting on its debt.

An official told Reuters:

We are very confident the issue will be rolled over without any problem.

We have liaised with the ECB regarding the ceiling on the outstanding stock of T-bills and there is no problem.

Banks, which traditionally buy the bulk of the T-bill issues, can fund them by putting them up as collateral in the Greek central bank's so-called ELA (emergency liquidity assistance) window.

Greece's outstanding stock of T-bills is currently at €18bn, above a €12bn target that was set in March, the official said.

09.30 Global business confidence has fallen to its lowest level in three years as sentiment slides in the US, Japan, eurozone, China and India, according to Markit's Global Business Outlook survey.

The survey of 11,000 companies worldwide shows that optimism dropped in October to its lowest since global data were first available in October 2009.

Although the percentage of companies expecting their business activity to rise over the next 12 months outnumbered those anticipating a decline, at +30% it is the smallest positive net balance in the three-year series history.

The latest reading is down from +37% in June and well below February’s level of +44%, representing a scaling back of growth expectations amid a weakening global economic backdrop.

However there was good news for the UK, where confidence rose. Growth of business activity over the next 12 months is expected at +41% of companies, up from +38% in June. The improvement is set to be broadbased across the manufacturing and service sectors, with a number of companies seeing emerging markets as the main driver of expansion.

08.22 First to start with Greece which last night saw its lawmakers approve the country's austerity budget, an essential step in Greece's efforts to persuade its international creditors to unblock a vital rescue loan installment without which the country will go bankrupt.

The budget passed comfortably, by a 167-128 vote in the 300-member Parliament.

It came just five days after a separate bill of deep spending cuts and tax hikes for the next two years passed through with a narrow majority following severe disagreements among the three parties in the governing coalition.

Prime Minister Antonis Samaras pledged that the spending cuts will be the last Greeks have to endure.

"Just four days ago, we voted the most sweeping reforms ever in Greece," he said. "The sacrifices (in the earlier bill and the budget) will be the last. Provided, of course, we implement all we have legislated. "

"Greece has done what it was asked to do and now is the time for the creditors to make good on their commitments," he stressed.

Catharsis Ours

Monday, November 12, 2012

Closing Summary

Greek Banks Slump, Spanish Bonds Dump, Juncker 'Fist Pump'

Overnight Sentiment: Asian Bad News Trifecta Launches Traditional Overnight Melt Up

Japan Plunges Into Deep Recession; GDP Shrinks 3.5% Annualized; Japan Current Account Turns Negative First Time in 30 Years; Watch the Yen

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