Commentary on the economic , geopolitical and simply fascinating things going on. Served occasionally with a side of snark.
Wednesday, January 9, 2013
German Industrial Production output misses expectations . Greece industrial production also misses badly - off 2.9 percent in November , reversing a 3.5 percent rise in October. Ireland blasts Brussels over bailout deal terms. Cyprus bailout now delayed until March or after their elections. News from Greece of the day.....Swiss National Bank plays river boat gambler as youth unemployment is a huge flashing red light for Europe....
No Cyprus aid deal before February election, says German newspaper
Cyprus can only expect a bailout in early March after its presidential election next month, German newspaper Handelsblatt reported on Wednesday, citing sources close to negotiations.
Cyprus holds presidential elections on February 17 and 24 and the paper said eurozone finance ministers want to wait to work with the successor of outgoing communist President Dimitris Christofias, who is not seeking re-election.
"The incumbent Christofias categorically rejects the sale of state companies. Without privatization revenues the country cannot be reformed,» the paper quoted sources in Brussels as saying.
The head of eurozone finance ministers, Jean-Claude Juncker, said last month the ministers would discuss at their next meeting on January 21 a deal for Cyprus, one of the smallest economies in the 17-nation common currency area.
Cyprus sought financial aid - which could be up to 17.5 billion euros, equal to its entire gross domestic product - from the European Union and IMF last June. Its economic woes stem from its banks' heavy exposure to crisis-racked Greece.
Further complicating the outlook for the island, a senior member of Germany's main opposition Social Democrats (SPD) was quoted on Wednesday as saying his party would not support financial aid for Cyprus.
"As matters stand, I cannot imagine that German taxpayers save Cypriot banks whose business model is based on facilitating tax evasion,» SPD chairman Sigmar Gabriel told the Sueddeutsche Zeitung daily.
German media has in the past criticized Cyprus's status as a popular tax haven for wealthy Russians and expressed unease about bailing out the country's banks. Cyprus says it is in full conformity with international rules against money laundering.
The centre-left SPD, which hopes to oust conservative Chancellor Angela Merkel in German elections due in September, has taken a hard line against tax evasion, including by wealthy Germans who squirrel away cash in Swiss bank accounts.
Merkel would need SPD votes to secure German parliamentary backing for a Cypriot bailout.
"If Mrs Merkel wants SPD support for a Cyprus bailout package she will need good reasons. At present I do not see them,» said Gabriel, whose party is lagging well behind Merkel's Christian Democrats in opinion polls.
Sueddeutsche Zeitung quoted German government sources as saying Merkel would only seek parliamentary backing for a Cypriot bailout if Nicosia embraces «radical reforms».
Merkel is due to take part in a gathering of European Union conservative parties in Cyprus on Friday.
Journalist Vaxevanis claims to have USB stick that is key evidence in Lagarde list probe
Journalist Kostas Vaxevanis, who gained international prominence last year after publishing in his Hot Doc magazine the Lagarde list of Greeks with accounts at HSBC in Geneva, claims that he has the USB stick to which the names were transferred from the original CD supplied by French authorities.
Vaxevanis told followers on Twitter on Wednesday night that he had submitted the memory stick for analysis, which shows «when and how» the list was transferred from the CD to the device.
The journalist also claimed that he had been trying to give the USB stick to financial prosecutor Grigoris Peponis for the last four days but the official had «not shown interest."
Ex-finance minister Giorgos Papaconstantinou admits transferring the data to a USB but denies deleting information relating to three accounts held by his relatives.
Earlier on Wednesday, it emerged that checks on a memory stick held by prosecutors that was handed to them by Papaconstantinou's successor, the current PASOK leader Evangelos Venizelos, in October showed it had been created in July 2011.
This was after Papaconstantinou left office and before Venizelos was given the device by the head of the Financial Crimes Squad (SDOE) Yiannis Diotis, who is to face prosecutors on Monday.
Independent Greeks, Golden Dawn submit proposal for Lagarde List probe
A total of 37 lawmakers on Wednesday signed a proposal submitted to Parliament regarding setting up a parliamentary committee to inquire on the issue of the so-called Lagarde List, a list containing the names of Greeks with deposit accounts at a Geneva branch of HSBC.
Co-signing the proposal were 18 Independent Greeks and 18 Golden Dawn deputies, along with independent MP Nikos Nikolopoulos. The proposal stated that former Finance Minister Giorgos Papaconstantinou, former Finance Minister and current PASOK chief Evangelos Venizelos, as well as former Prime Ministers George Papandreou and Lucas Papademos, should all be included in the probe.
Meanwhile, the three-party coalition government – comprising New Democracy, PASOK and Democratic Left – has suggested that only Papaconstantinou should be investigated, while opposition SYRIZA has submitted its own request for both Papaconstantinou and Venizelos to be investigated by a parliamentary committee.
A Parliamentary vote is expected in the next few days.
Morgan Stanley says country’s economy will contract for a seventh consecutive year, by 1 percent
According to a forecast released on Tuesday by Morgan Stanley, Greece’s economy will not rebound in 2014 but instead faces one more year of recession amounting to 1 percent.
This runs counter to the positive outlook created by the improving economic climate and expectations for the country as described in a European Commission report issued in December, as well the government’s plans for growth next year.
As Greece enters its sixth year of recession, Finance Minister Yannis Stournaras has said that the economy’s rebound will begin at the end of the year. His view has been echoed by many international firms and authorities who expect the country to bottom out this year. However Morgan Stanley, credited with successful forecasts in cases such as the eruption of the crisis in the US in 2008, is more pessimistic.
It predicts that there will be a more radical official sector involvement (OSI) in a future Greek debt restructuring, as last month’s decisions for a milder OSI combined with the bond buyback have only given official creditors the chance to disburse their funds for Greece. The US bank notes in its report that the weight of the debt remains very heavy but the new OSI will depend on the elections timetable in Europe (Germany is set to go to the polls in September).
Morgan Stanley expects that the pressure of austerity in Greece will begin to decline this year, which might also see a primary surplus. The GDP contraction will come to 4.5 percent, it says, matching the forecasts by the Greek government and the European Commission. Yet the bank also identifies political risks that may cause problems, saying that political and social support for the government will be key to the success of the streamlining plan.
In December the Commission had put the economic climate index for Greece at 84.1 points, a level unseen in almost three years, since January 2010. The country remains well below the long-term European average of 100 points, but it is much closer to the eurozone average of 87 points. Commenting on this result, Reuters said that although there is still a long way to go for Greece, it may now be on the right track.
and the Swiss National Bank really has acted like a hedge fund........
Think the Fed (with its balance sheet amounting to over 20% of US GDP), or the ECB (at 30% of GDP) is bad? Then take a look at the balance sheet of the Swiss National Bank, whose assets now amount to some 75% of Swiss GDP and which has now "literally bet the bank" in the words of the WSJ not once, not twice, but three times in a bid to keep the Swiss Franc - that default flight to safety haven - low, and engaging in what is semi-stealth currency warfare by buying other sovereigns' currencies for over two years now, although he hardly expect the US Treasury toeven consider it for inclusion on its list of currency manipulators - after all, "everyone is doing it".
The nation's central bank is printing and selling as many Swiss francs as needed to keep its currency from climbing against the euro, wagering an amount approaching Switzerland's total national output, and, in the process, turning from button-down conservative to the globe's biggest risk-taker.
Switzerland's virtue is the root of its problem: broad confidence in the Swiss currency and economy has investors hungry for francs to escape euros, the currency of its shaky European neighbors. Such demand makes francs more expensive and, in turn, drives up the price of Swiss exports.
In the past three years, the Swiss National Bank SNBN.EB -0.20% has printed francs to buy euros and other currencies in a swelling portfolio of foreign assets four times what it was at the beginning of 2010.
Nearly every major central bank is buying nontraditional assets to resurrect domestic economies in the wake of the worst global recession in 75 years. The U.S. Federal Reserve is buying mortgages; the European Central Bank is making unusually long loans to banks; and the Bank of Japan is buying real-estate investment funds.
All risk losing money, but Switzerland's exposure stands out in character and scale: Its central bank is buying assets from other countries and its holdings of currencies, bonds, stocks and gold—nearly 500 billion Swiss francs, about $541 billion—are nearly the size of the nation's gross domestic product. In contrast, the Fed's buying of bonds and mortgages amounts to about 20% of U.S. national output, and the European Central Bank's holdings stand at 30% of total GDP.
In September 2011, the SNB set a goal of keeping its currency from rising beyond 1.20 francs to the euro, a threshold that SNB Chairman Thomas Jordan has said the bank would fight to maintain "with the utmost determination."
Given its golden reputation, the franc became a magnet for investors fleeing the beleaguered euro, pushing the currency to levels that threatened to cripple Switzerland's export-driven economy.
Although Switzerland is best known for chocolates, watches, banking and Alpine resorts, midsize specialized companies form the backbone of a manufacturing industry that accounts for one-fifth of Swiss GDP. Exports produce half the GDP, with the euro zone by far its largest customer.
Readers already know that when it comes to Europe, the scariest chart, from a political, economic, financial and social perspective, is that showing youth unemployment - youth, which engaged in idle, non-productive activity is a powder keg for both future economic instability and social upheaval. The monthly update is presented below. This time, we are happy to also present the "scariest heatmap" that goes with it, showing the geographic breakdown of unemployment in the critical 15-24 age groups. Those looking for geopolitical hotspots in the coming months and years, look no further than the dark shaded areas.
Europe's youth unemployment rate pushed higher once again to a record-breaking 24.4% - where Greece was in Dec 2008. What is crushingly awful is the 57.6% youth unemployment in Greece and 56.5% in Spain that leaves a social fire burning in the belly of the nations. Italy also saw a major move to record highs above 37% youth unemployment and France is now above 27% also... recovery?
German industrial output, the big economic news of the day, has just been published - and it's not as strong as economists had expected.
Industrial output in the eurozone's largest economy inched up by 0.2%, with increased demand for equipment, or capital goods (+1.4%) making up for a drop in orders for consumer goods (-2.2%).
Analysts had expected a 1% month-on-month increase.
On an annual basis, German industrial output in October and November was 3% lower than a year ago - showing the impact of the crisis.
Disappointing economic news from Greece - industrial production fell by 2.9% in November, compared to the previous year. That's a reversal from October, when there was an encouraging 3.5% year-on-year rise.
He accused the European Central Bank of "imposing" unfairly tough conditions on Ireland, even though the country was arguably 'taking one for the team' by taking its toxic bank debts onto the public books.
#euro theme emerging from irish govt - it's not fair. we saved europe's banks by assuming irish private bank debt
Last week, Rabbitte was in hot water after seeming to say that Ireland should just refuse to repay the promissory notes (this year's bill is due in March).
#euro ecb diktat imposed on ireland, dublin complains. funny way to strike a deal by march...
Cypriot rescue delayed amid German opposition - reports
Cyprus's bailout is in trouble, according to two German newspapers this morning.
Handelsblatt is reporting that eurozone finance ministers are refusing to sign off the deal until elections have taken place next month, at which point the communist president, Demetris Christofias, will have departed.
One source told Handelsblatt:
The incumbent Christofias categorically rejects the sale of state companies. Without privatisation revenues the country cannot be reformed.
Cyprus's President Demetris Christofias. Photograph: Olivier Hoslet/EPA
Negotiations over Cyprus's aid package, which could total €17.5bn, have been grinding on for months. Christofias's reluctance to agree to deep economic reforms are one hurdle. Another, though, is the fact that much of the money will be used to recapitalise Cypriot banks - who are heavy with funds from Russia. Germany is concerned that much of the money comes from criminal sources.
Germany's Social Democratic party now says it cannot support a Cyprus rescue deal until this is addressed. SPD chairman Sigmar Gabriel told Sueddeutsche Zeitung that:
As matters stand, I cannot imagine that German taxpayers save Cypriot banks whose business model is based on facilitating tax evasion.
Submitted by Tyler Durden on 01/09/2013 08:15 -0500
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