http://www.zerohedge.com/news/2012-12-11/austrian-civil-servant-blows-440-million-taxpayer-funds-risky-derivatives

Austrian Civil Servant Blows $440 Million In Taxpayer Funds On Risky Derivatives

Submitted by Tyler Durden on 12/11/2012 14:24 -0500

It is oddly ironic that on the day the US bailout of AIG is complete, and with a "profit" at that, the spin goes, even if the spin ignores that the "profit" was only purchased at the expense of trillions in sovereign debt issuance and near immediate monetization by the Fed, which has onboarded a mindbogling amount of duration risk (from under $500MM in DV01 in 2008 to over $2.5 billion currently, but nobody will discuss this issue as few if any grasp just how much risk exposure the Fed has shifted away from entities such as AIG), that we learn just how far the abuse of virtually free taxpayer funds goes. Only instead of some US government apparatchiks blowing through billions in some concrete government building in downtown D.C., we go to the birthplace of Mozart, in Salzburg, Austria to learn that a "civil servant gambled hundreds of millions of euros of taxpayers' money on high-risk derivatives."

While this is merely one incident in a faraway land, what it does show is that in an environment in which cheap money is handed out loosely by the government (of which the US government is most guilty) the opportunity cost for prudent, fiducariy responsibility is very low, and it is only a matter of time before the new normal moral hazard rears its ugly head, as one after another more such incidents will come to light. And just like housing could never go down in the credit bubble years, so the Fed is perceived as infallible in the current latest, greatest and luckily final, peak bubble. Just like housing, the Fed is infallible until it fails.

From Reuters:

Salzburg officials said last week they had sacked a finance director after determining she used doctored documents and false signatures to hide a trail of losses from deals that started more than a decade ago, causing a book loss of 340 million euros ($439 million).

The incident has sparked calls for fresh elections in Salzburg state and for regional financing rules to be reformed. Austrian states have 8.2 billion euros of debt, or 8.1 percent of the country's public debt.

"It can't go on that one keeps getting cheap money from the BFA and then starts gambling with it," Fekter told journalists, adding that the states could save 150 million euros per year by using the BFA for all their financing needs.

Foreign currency speculation and trading in derivatives without having underlying assets would be banned, and valuation of assets on the books would have to be updated every year.

Fekter said: "We will make the standards compulsory for everyone. How the states then implement the standards will of course remain a matter of regional autonomy."

The head of the BFA, Martha Oberndorfer, said she would welcome stricter governance and the BFA would give a more detailed statement later.

Uh, why was she fired: she should bepromoted to running a derivatives desk at one of the TBTF banks (oh yes, remember how the TBTFs were supposed to be made smaller, nimbler and no longer systemically important - just like AIG - following Dodd-Frank? Oops...), and when she blows up and said bank is bailed out by the government, the government can proceed to issue another several trillion, with the fungible proceeds used to fund the bank's "profit" on the bailout, and the spin can go on that another bank was rescued at a profit to taxpayers.

Joking aside, was the punishment enough? Or will those who want to gamble with free taxpayer money merely find it elsewhere? And how long will the global sovereign regime tolerate such moral hazard which now is backstopped not by shareholders, but by all taxpayers? It appears that the answer, when the myth of the welfare state ending is the alternative, is a surprising "far longer than most had expected." Surprising, too, the ability and length of time people are willing to delude themsleves, and stick their head in the sand of complete denial.

http://www.ekathimerini.com/4dcgi/_w_articles_wsite1_1_11/12/2012_474003

Greece completes buyback, looks to next loan tranche

Greece completed its bond buyback program on Tuesday, accepting tenders for 31.8 billion euros’ worth of government paper and clearing the way for the disbursement of the country’s next, long-awaited bailout tranche.

The extended deadline for bondholders to take part expired at 2 p.m. Greek time, by when the target had been met, largely due to an added contribution from local banks. However, several unresolved issues remain.

Greece is borrowing 10 billion euros to execute the buyback, with the aim of reducing its public debt by 21.1 billion euros. The average offer to buy back the bonds 33.8 percent of the principal amount, which means that Greece needs to spend 11.2 billion euros in total. It is not clear where the extra 1.2 billion euros will come from.

Greece’s lenders had estimated that the country’s debt would be reduced by 11 percent but in fact the difference will be less than 10, so eurozone finance ministers discussed during a teleconference on Tuesday night how to reduce it from 126.6 percent of GDP to 124 percent, which the International Monetary Fund had set as a benchmark in order to continue participating in the Greek program.

The issue will be discussed further at Thursday’s Eurogroup meeting in Brussels.

There was no official statement as Athens is expected to make an official announcement about the scheme on Wednesday morning, but a European official told Bloomberg that eurozone finance ministers concluded there were no insurmountable obstacles to the next loan installment, which is worth 34.4 billion euros.

Finance Minister Yannis Stournaras is also due to present Greece’s new tax code at the Eurogroup. The government had been due to submit the legislation to Parliament ahead of the talks but Kathimerini understands that the IMF has raised objections to some aspects.

The three sticking points are the tax brackets for salaried employees and pensioners, when farmers will have to keep proper accounts and how income from capital will be taxed. Stournaras is expected to discuss the issues with his eurozone counterparts on Thursday.

and.....

http://www.ekathimerini.com/4dcgi/_w_articles_wsite2_1_12/12/2012_474008

PPC asks for power rates to rise by 25 pct

Electricity rates are set for a major hike next year, as Public Power Corporation, which effectively holds a monopoly in electricity supply, has asked the Regulatory Authority for Energy (RAE) to approve increases ranging between 14.5 and 48.7 percent for 2013, RAE confirmed on Tuesday.
The average increase for low-voltage consumers, which includes the vast majority of households, small industries and commercial shops, amounts to 24.9 percent and is expected to burden electricity bills in three stages up to July 2013.
According to the proposal that PPC has submitted to RAE, the first hike on January 1 will amount to 10.8 percent, the second on May 1 to another 6.3 percent, and the third on July 1 by a further 6.1 percent.
RAE will examine the proposal and submit its own to the Environment and Energy Ministry in the next few days.

http://ransquawk.com/headlines/greek-2023-bond-yield-trades-at-lows-last-seen-in-sep-11-at-13-31-with-the-price-above-the-top-end-buy-back-price-of-40-1-trades-43-35-last-11-12-2012

Greek 2023 bond yield trades at lows last seen in Sep'11 at 13.31%, with the price above the top-end buy-back price of 40.1; trades 43.35 last

Update details:

- Recent sources have noted that Greece is set to meet its EUR 30bln target in debt buyback.
- Eurozone finance ministers will discuss the deal in a teleconference later this afternoon.

and...

http://www.ekathimerini.com/4dcgi/_w_articles_wsite1_1_11/12/2012_473874

Greek banks set to top up bids to meet buyback target

Greek banks are expected to have covered a shortfall in initial bids by the time Athens closes an extended offer on Tuesday to buy back bonds as part of an effort to cut debt and secure aid for its flagging economy.

Athens gave bondholders until 1200 GMT on Tuesday to tender Greek debt after the amount offered by Friday's initial deadline fell short of the targeted 30 billion euros.

The cut-price buyback's success is crucial to putting Greece's debt back on a sustainable footing, which in turn allows lenders to disburse aid to Athens.

Greek banks, who had only tendered about 60 percent of their roughly 17 billion euros in sovereign debt holdings by Friday, are expected to offer more to ensure the buyback hits its targets, senior banking executives told Reuters.

"All banks will support the buyback, topping up their offers," said one banker at a major Greek bank, who declined to be named. "The target of 30 billion euros will be reached and may be exceeded."

A total of 26.5 billion euros was tendered at an average price of 33.4 percent of face value by the close of play on Friday, a senior euro zone official told Reuters.

Eurozone finance ministers are also expected to discuss the outcome of the bond buyback in a teleconference late on Tuesday afternoon, after the extended deadline expires.

Greek lenders had initially been reluctant to put up their entire holdings fearing losses over the long term, but now have little choice but to do more since most of the aid unlocked by a successful buyback will go to boosting the lenders themselves.

A second banker also said Greek lenders would have tendered most of their bondholdings by Tuesday's deadline, which could push the bids Athens receives over the 30 billion euros target.

"Banks will tender a significant amount of their bondholdings in the buyback," that banker said. "They will end up with small amounts left over in their portfolios. The total amount offered in the buyback invitation may reach 31-32 billion euros."

The buyback scheme calls for Greece to buy back debt worth 30 billion euros with 10 billion euros from foreign lenders at prices well below their nominal value, cutting debt by a net 20 billion euros. That would account for half of a broader debt relief package lenders agreed for Athens last month.

If the debt tendered exceeded the 30 billion euro target, the debt agency may end up accepting the additional amount, said a Greek government official who declined to be named.

"They will decide after the books are closed," the official said.

Athens had set a price range for the buyback at a premium to market prices at the time. The range varied from a minimum of 30.2 to 38.1 percent and a maximum of 32.2 to 40.1 percent of the principal, depending on the maturities of the 20 series of outstanding bonds.

Hedge funds, which bought the debt at rock-bottom prices when it was feared the country would exit the euro, are estimated to hold a large part of Greek debt and the offer was seen as likely to earn them a tidy profit. [Reuters]

http://www.ekathimerini.com/4dcgi/_w_articles_wsite1_1_11/12/2012_473831

Eurogroup to hold teleconference to discuss Greek bond buyback

Euro area finance ministers will be discussing later on Tuesday a scheme launched by Greece to buy back sovereign bonds that's crucial to unlocking aid from the International Monetary Fund and the European Union.
The Eurogroup will be holding a teleconference «in the late afternoon,» according to sources, after the close of the extended deadline for investors.
Greece was near its target in the buyback with the amount offered close to 30 billion euros, an official at the Greek Finance Ministry told Bloomberg on Sunday, referring to the face value of the securities.
Euro area finance ministers will be discussing the outcome of the scheme and are expected to decide on whether to release a 34.4 billion euro tranche of bailout funding for Greece.

http://www.ekathimerini.com/4dcgi/_w_articles_wsite1_1_11/12/2012_473890

Water company owed 850 million euros by state, municipalities

The president of the Athens Water Supply and Sewerage Company (EYDAP) on Tuesday said that the state-owned company is owed 850 million euros in unpaid bills from state agencies and local authorities.

"We can't be cutting off the water supply to simple folk over a 100-euro unpaid bill and at the same time have to pay as much as 3 million euros a month in late fees from large debts toward the company," EYDAP's president, Stelios Stavridis, told the Athens-Macedonia News Agency.

Specifically, Stavridis said that local authorities owe a total of 225 million euros, which comes to 350 million euros with late fees, while ministries and other public authorities have run up a bill of 500 million euros.

The bulk of the debt from municipalities, Stavridis said, comes from local authorities that do not have their own network and levy the cost of water from municipal taxes without then paying over the money to EYDAP. This is a practice that has been going on for years, said Stavridis, who was appointed chief executive officer of Greece's biggest water utility in late October.

"The matter is killing EYDAP," Stavridis said. "From now on, anyone who doesn't pay will have their supply cut off."

Stavridis added that EYDAP has no immediate intention of raising its rates.

http://www.ekathimerini.com/4dcgi/_w_articles_wsite2_1_11/12/2012_473861

Greece sells 4.38 bln eur T-bills, says debt agency

Greece sold 4.38 billion euros ($5.67 billion) of one- and six-month treasury bills on Tuesday to roll over maturing issues that come due December 14, its debt agency (PDMA) said.
PDMA sold 2.762 billion euros of one-month T-bills priced to yield 3.99 percent and 1.625 billion of six-month paper at 4.38 percent, three basis points below a previous sale in November.
The six-month auction's bid-cover ratio was 1.54, down from 1.7 in the November 6 sale.
Greek banks traditionally buy the bulk of T-bill issues, meaning funding costs do not fully reflect the strains from the country's debt crisis. Banks can deposit the bills as collateral with Greece's central bank to receive funding. [Reuters]

http://www.guardian.co.uk/business/2012/dec/11/eurozone-crisis-live-greek-debt-buyback-deadline

Greece beats debt buyback target

And Greece has beaten its buyback target, according to NET TV. Greek bankers told Reuters that total offers in the buyback reached €31.5bn. We'll have reaction to that from our correspondent in Athens, Helena Smith, shortly.

As expected (see 11.56am), Greek banks had to step in to make up the difference between the €26.5bn that had been reached on Friday and the €30bn target.

This operation will mean Greece can now receive a new tranche of funding from the IMF and the EU and will lower the cost of debt for the country. All in all, good news.

File photo of fireworks over the hill of Athens' ancient Acropolis, from 2004. Photograph: ORESTIS PANAGIOTOU/EPA

1.32pm GMT

Greek pharmacists protest

Meanwhile, Greek pharmacists are protesting in Athens against the ministry's threat to fully liberalize their sector and demanding the payment of debts owed by the National Organization for Healthcare Provision.

Pharmacists are refusing to give medicines on credit to insured customers with the National Organization for Healthcare Provision until all debts have been settled.

Striking pharmacists gather outside the Health Ministry in Athens. Photograph: LOUISA GOULIAMAKI/AFP/Getty Images

12.03pm GMT

Why it is hard to buy back Greek bonds

So the deadline for Greece's cut-price debt buyback is fast approaching and Athens is expected to have met its target of 'retiring' €30bn worth of bonds.

Greece plans to buy back the debt for €10bn, at about a third of face value, paying with money the country has borrowed from Europe’s bailout fund.

To recap, Reuters reported last night that a total of €26.5bn was tendered at an average price of 33.4% of face value by the close of play on Friday, citing a senior eurozone official.

Senior banking executives told the agency that Greek banks, who had only tendered about 60% percent of their roughly €17bn in sovereign debt holdings by Friday, are expected to offer more to ensure the buyback hits its targets. One banker at a major Greek bank said:

All banks will support the buyback, topping up their offers. The target of 30 billion euros will be reached and may be exceeded.

But Ben Vickers at Bloomberg suggests some of the biggest winners could be investors who hold onto their Greek bonds. He writes:

At each step it looks increasingly likely that Greece will remain in the euro and eventually pay off its debts — so, although not all agree, those who hang on may get a much higher proportion of the bonds’ face value back.

Hans Humes, president of the New York-based Greylock Capital Management LLC, said his hedge fund would be tendering only part of its Greek debt because it’s “going to be a very good investment.” The yield on Greek debt holdings, he said, “is extremely high and exceeds anything else in Europe.”

“The rational investor will hold out,” Nomura Holdings Inc.’s Dimitris Drakopoulos and Lefteris Farmakis wrote in a report on Nov. 30.

The Greek government never explained why it had to extend the deadline for the buyback to today. It would be ironic that the extension was due to foreign investors’ reluctance to sell Greek bonds, believing greater returns are to be had in coming years — therefore forcing Greek banks and pension funds to tender more of their own holdings.

11.56am GMT

Over to Greece, again, where our correspondent Helena Smith says the crisis in Italy has sparked widespread fears about the debt-stricken country’s plight. Helena writes:

Greek officials have been watching the ructions in Italy anxiously. With the country yet to receive a euro from the €44.6bn bumper packet of rescue loans put on hold since June, the prospect of trouble in the eurozone’s third biggest economy has been met with barely concealed fright.

“If Italy were to be forced to ask for money from the ESM it would be very difficult for institutions of the European Union to cope with the crisis,” said the former government spokesman and prominent political commentator Pandelis Kapsis. “It is creating uncertainty and if there isn’t a political solution, the possibility of Italy being forced to ask for rescue funds [as a result of market pressure] will become very real.”

With Europe’s €500bn new bailout mechanism widely regarded as being far from adequate to cope with propping up Italy and Spain in addition to Greece, Portugal and Ireland, officials worry that competition for the funds will rise dramatically. “That will undoubtedly be very difficult for us,” Kapsis told me.

Using the occasion of the Nobel peace prize ceremony, the Greek prime minister, Antonis Samaras, highlighted growing fears that without an urgent injection of liquidity, the country’s cash-strapped market could see unemployment (already at a European record of 26%) skyrocket. “And that could trigger extremist phenomena, politically, that would impact the rest of Europe,” the conservative leader told fellow EU heads of state at last night’s celebratory dinner in Oslo.

Anxiety is being driven not only by the prospect of the potential aid pool drying up. Officials also worry that the turmoil in Italy
could be the death knell for potential investors just as the debt-stricken nation launches its ambitious privatisation programme.

“The uncertainty could put off investors being lured to Europe’s entire southern periphery,” said politica

analyst Dimitris Tsiodras.

Ireland won't pay €3bn IOUs to Anglo Irish - minister

Meanwhile, back in Ireland, Irish communications minister Pat Rabitte has stood by his assertion that the government will not pay back the €3bn of IOUs to Anglo Irish Bank, which is due in March. Our Ireland correspondent Henry McDonald reports:

Rabbitte has said he stands by remarks made this weekend that the Irish government would not pay the IOU's owned on the now nationalised Anglo Irish Bank.

The Labour Party minister said the coalition would not pay the next instalment of the so-called promissory notes to investors and bond holders.

Rabbitte said: “[The Government] didn’t pay the promissory note this year and as far as I’m concerned we’re not going to pay it next year. It’s as simple as that,” he said.

“We can’t pay. This was an IOU entered into by the previous government when the Anglo Irish Bank collapsed and the notion of us paying it next March doesn’t arise.”

But Taoiseach Enda Kenny struck a much more cautious tone when asked about Rabitte's remarks.

The next payment is due in March next year. Our focus is on having a deal done before then — on re-engineering and restructuring before then so it won’t have to be paid.

I assume he is referring to the politics of this, and this is where our focus has been — with the Department of Finance, the ECB, and officials at European level — to have a decision on restructuring and reengineering the promissory notes before March.

We'll have more on that story, as it happens. Thanks to KhakiSuit for the query.

10.02am GMT

Irish joblessness double European average

Gloomy news from Ireland, where a fifth of all households are jobless. Henry McDonald, Ireland correspondent, reports:

A fifth of all households in Ireland are jobless with the rate double the average across Europe, a new report released in Dublin reveals today.

The Republic's Economic and Social Research Institute has found that 22% of Irish citizens are living in a jobless household.

It reports that there has been a huge leap in jobless households from 15% in 2007 to 22% in 2010 as the recession began to bite in Ireland. It says the high rate was partly due to the level of unemployment, but jobless adults in Ireland were more likely to live with children.

And the risk of living in a jobless household was higher for people with low levels of education, in lone-parent households and in households where an adult had a disability.

Commenting on the findings, Ireland's minister for social protection Joan Burton said: "I am particularly concerned about the situation of children living in jobless households.

"There are grave social and economic risks in letting almost a quarter of Irish children grow up in jobless households.

"These risks include child poverty, limited educational achievements and ultimately, the intergenerational transmission of unemployment and poverty.

9.45am GMT

Eurozone finance ministers to discuss Greek debt buyback

Over in Greece there are reports that the group of eurozone finance ministers – known as the Eurogroup – are set to hold a teleconference this afternoon, after the debt buyback deadline. ekathimerini reports:

Euro area finance ministers will be discussing later on Tuesday a scheme launched by Greece to buy back sovereign bonds that's crucial to unlocking aid from the International Monetary Fund and the European Union.

The Eurogroup will be holding a teleconference «in the late afternoon,» according to sources, after the close of the extended deadline for investors.

9.04am GMT

Monti wants to influence ideas in whatever role

Some quotes from Monti's interview on state television RAI.

Politics is above all a question of culture, that is, trying to give direction to people's ideas. I think I did it when I was a professor, I'm trying to do it in this brief period when I'm prime minister, I'm sure that whatever hat I'm wearing in future, I will continue to do it. As for the rest...

He leaves the sentence unfinished. He also said the government has made very great progress in a short time in tackling the crisis. He says Italy has to continue with economic reforms.

Italian prime minister Mario Monti looking serious in Oslo yesterday. Photograph: Alexander Widding/ZUMA Press/Corbis

8.56am GMT

Updated at 10.13am GMT

Berlusconi slams Monti for being

More news from Italy, where Silvio Berlusconi has accused Mario Monti of being "too German", as he gears up for a bitter election campaign.

Speaking on his own Canale 5 television, the former prime minister criticised Monti for pursuing economic policies dictated by Germany that had dragged Italy into recession.

The Monti government has followed the Germano-centric poliicies which Europe has tried to impose on other states and it has created a crisis situation which is much worse than where we were when we were in government.

Berlusconi with Francesca Pascale – said to be his girlfriend – in Milan earlier on Sunday. Photograph: STEFANO PORTA/EPA

8.39am GMT

Monti in talks to run for Italian PM (FT)

First a look at the papers and the FT is reporting that Mario Monti is in talks with centrist groups urging him to stand in Italy’s electionsearly next year. Guy Dinmore, Richard Milne and Giulia Segreti write:

Amid revived concern in Brussels and among investors that Italy could forsake its recent reforms, centrist politicians were in talks with him encouraging him to stand as a candidate. He was said to be in discussions with Luca Cordero di Montezemolo, the head of Ferrari who launched a political movement last month, and Pier Ferdinando Casini, leader of the centrist Catholic UDC party.

Centrist politicians said they expected Mr Monti to give his answer within a week. If he decided to run as their candidate he would make a formal declaration after parliament approves the 2013 budget law, possibly in the week before Christmas.

As my colleague Graeme Wearden reported yesterday, Monti ducked a question on whether he might run as a candidate. He told reporters he was "not considering this particular issue at this stage", which is a very political answer for a man supposed to be an economist rather than a politician.

8.08am GMT

10.48am GMT

Catharsis Ours

Tuesday, December 11, 2012