http://www.businessinsider.com/goldman-why-this-debt-ceiling-fight-could-be-even-more-of-a-nightmare-than-the-last-one-2013-1
Goldman's Alec Phillips warns that the upcoming fight over lifting the debt ceiling could be harder than the 2012 fight, which was brutal and confidence crushing.
and.......
http://www.businessinsider.com/ladies-and-gentleman-heres-the-date-of-your-next-fiscal-cliff-2013-1
What will be interesting timing-wise is when the Treasury says we will hit the hard debt ceiling.
Goldman: Why This Debt Ceiling Fight Could Be Even More Of A Nightmare Than The Last One
Phillips writes:
Unfortunately, the upcoming increase may be more difficult to enact than the increase in 2011. Few spending cuts had been enacted before the previous increase, which left lawmakers with several areas of the budget from which to pull potential savings. Congress eventually settled on $2.1 trillion in spending cuts, essentially all coming from a reduction in spending appropriated by Congress (about $900bn from caps on "discretionary" spending, and $1.2 trillion from "sequestration"). While hardly non-controversial, these cuts did not affect specific programs but instead capped overall spending, thus reducing political opposition. The fiscal agreement Congress just passed increases revenues by about $600bn over 10 years (compared with a full extension of expiring income tax cuts), and while this second round of savings was much more controversial than the first, a majority of the public supported the tax increase, which was targeted on high incomes.
More specifically. Suppose the Congress wants to raise the debt ceiling by $1 trillion, then that means an addition $1 trillion in cuts must be found.
But this is not easy. For one thing, no party has identified where they would find another $1 trillion in cuts to discretionary spending. Furthermore, if the cuts are going to come from entitlements, then Obama would demand that there also be new taxes, which the GOP won't accept. And beyond that, Obama has already said he won't negotiate cuts for a debt ceiling hike this time.
Says Phillips:
These factors imply that the next debt limit increase will be at least as difficult to enact as the last one was, and that there is a clear possibility of breaching the limit and causing more significant disruptions to government financing. Phillips is not alone in worrying.
Phillip Klein at the Washington Examiner says the same thing in a column tonight, that the debt ceiling could be harder this time around. His logic is similar to Goldman's: There just aren't obvious avenues to cuts:
This time, however, it will be more difficult for Republicans to get Democrats to agree to spending cuts. In the summer of 2011, both parties were essentially placing bets on the outcome of the 2012 election. With Obama re-elected and Democrats still controlling the Senate, Democrats believe they are in a stronger position.
The 2011 debt-limit deal reduced projected spending by about $917 billion. There isn't much desire among victorious Democrats to cut discretionary spending further, and there is deep resistance to cutting mandatory spending by reforming the big entitlement programs -- Medicare, Medicaid and Social Security.
Congress is also running out of gimmicks. Scrambling to come up with further spending cuts during the 2011 debt-limit fight, lawmakers created a bipartisan, bicameral 12-member "super committee" tasked with finding at least $1.2 trillion in deficit reduction. In theory, the members would be motivated to act, or else face automatic cuts to defense and nondefense spending at the start of 2013. They failed to come up with a solution, but this week's fiscal cliff deal delayed the automatic cuts -- or sequester -- for another two months.
We wrote a few days ago that it was quickly becoming clear why The Boehner Rule (the principle that any debt ceiling hike has to correspond with a dollar-for-dollar cut in spending) is so ridiculous and unsustainable.
There just aren't obvious areas that anyone could possibly agree to find $1 trillion cuts every year. It's already significantly harder than it was just in 2011.
By the way: Goldman estimates that March 1 will be the day the US hits the hard debt ceiling. That's also the same day, coincidentally (?) that the sequester is supposed to kick in. Circle it on your calendars.
and.......
http://www.businessinsider.com/ladies-and-gentleman-heres-the-date-of-your-next-fiscal-cliff-2013-1
Ladies And Gentlemen: Here's The Date Of Your Next Fiscal Cliff
Assuming the House agrees to what the Senate voted on last night, then the Bush-era tax cuts will be made permanent for almost all Americans. Only those with incomes of $400K and up will see an income tax increase.
But the other half of the Fiscal Cliff, the sequester (the mandatory spending cuts agreed to in the debt ceiling fight) has only been delayed, giving DC more time to fight over it.
That means we've already scheduled a new Fiscal Cliff, and the bill agreed to last night has the date: March 1, 2013 (exactly two months from today). This is from page 154 of the bill (HT: @jesse_livermore)
What will be interesting timing-wise is when the Treasury says we will hit the hard debt ceiling.
The next two months will be non-stop debt ceiling/sequester, and it will all come to a head in late February/early March.
And as the US drama comes to a head , expect Greece ( insolvent banks - watch current bailout blow up again ) , Cyprus ( late January time frame for bailout - watch this get slow walked to the end of Febuary , especially if Cyprus doesn't want to play austerity ball ) and Spain ( austerity , austerity , austerity ) to flare around the same time frame....
http://www.thenews.com.pk/Todays-News-3-151986-Bailout-candidate-Cyprus-slams-Eurozone-austerity-pill
Wednesday, January 02, 2013
From Print Edition
From Print Edition
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NICOSIA: Cyprus President Demetris Christofias hit out on Monday against the harsh austerity measures being meted out against struggling Eurozone members as the Mediterranean island faces a bleak New Year.
The communist head of state, who tried repeatedly to avoid the inevitable punishing terms of an EU bailout by seeking credit from Russia, said that the policies imposed by the bloc’s richer members had been counter-productive.
“It must be admitted that policies implemented on a pan-European level have not succeeded in providing a solution to the economic problems created by the crisis,” Christofias said in a televised New Year’s message.
“On the contrary, they have recycled and worsened economic and social injustice,” he added.
Resort island Cyprus has already pushed through tough austerity measures to meet the demands of Eurozone creditors for more than a billion euros in cuts and savings. The four-year adjustment programme represents 7.25 percent of gross domestic product.
Parliament has approved public sector salary cuts, a freeze on index-linked wages until 2016, extended emergency salary contributions in the public and private sectors, and increases in duty on cigarettes, alcohol and petrol.
But euro group finance ministers are not expected to take a final decision until January 21 on a draft agreement with international lenders for a bailout reportedly totalling 17.5 billion euros ($23.1 billion).
Christofias said the picture painted by many European countries in trouble does “not honour” the European Union.
“The future of a United Europe cannot be poverty, deprivation, unemployment and homelessness.”
Christofias said the EU’s “one-sided” approach has failed to achieve growth in those recession-hit countries it has tried to help.
“A different approach is needed which will emphasise development, social cohesion and true solidarity within the Union. It is with sadness that we observe the absence of such policies.”
Nicosia requested a bailout in June when its two largest Greek-exposed banks asked for assistance after failing to meet EU capital buffer criteria.
It has been negotiating the terms with the so-called troika of the European Central Bank, the European Union and the International Monetary Fund.
The money needed by Cyprus has been widely reported to total 17.5 billion euros ($23.1 billion) — 10 billion euros for the banks, 6.0 billion euros for maturing state debt and 1.5 billion euros for public finances.
The country’s entire GDP in 2011 was 17.97 billion euros and, according to 2013 budget projections, it is expected to shrink 2.4 percent this year.
Christofias conceded he had hoped to secure a loan from elsewhere rather than enter the EU’s support mechanism because it would involve “painful sacrifice”.
“Even before the initial agreement with the troika, we made great efforts to find funding from other sources, precisely because we at least, were under no illusion about the problems we were going to face.”
Cyprus had hoped to secure a 5.0 billion euro loan from Russia, on top of 2.5 billion euros it already borrowed last year, but agreement never came.
Christofias was making his last address to the nation as he will not be standing for re-election in February, becoming the first Cyprus president not to do so.
He always said he would step down if he failed to make progress towards ending the island’s nearly four-decade division.
In his speech, he charged that stalemated UN-backed reunification talks had been undermined by Turkey, which occupied the island’s northern third in 1974 following a Greek Cypriot coup seeking union with Greece.
http://www.ekathimerini.com/4dcgi/_w_articles_wsite2_1_02/01/2013_476702
Bad loans increase by 50 percent in 2012
By Yiannis Papadoyiannis
Nonperforming loans soared in 2012, with bank officials estimating the rise at some 50 percent on an annual basis.
Officials say that NPLs came close to 24 percent of all loans at the end of December, from 16 percent in December 2011, while all bad loans come to a considerable 55 billion euros. This means that the sum of NPLs exceeds the total of the funds set aside for the recapitalization of the local credit system, which amount to 50 billion.
Nevertheless, there has been a notable improvement in economic conditions that is reflected in the significant slowdown in the rate of creation of new bad loans.
However, unless the growth of new NPLs is contained, banks may need yet another recapitalization process at the end of 2013, the same sources say.
http://www.guardian.co.uk/world/2013/jan/01/spain-pain-austerity-deepens
Spain: the pain of austerity deepens
Unemployment in Spain already stands at 26%. Crowds scavenge the streets at night for food. And life is about to get tougher still
A family prepares to sleep on the street in Madrid. Oxfam says that by 2022, 38% of the Spanish population could be in poverty. Photograph: Susana Vera/Reuters
Forget, for a moment, the Greek tragedy. The tale of social woe set to play out in Spain this year is both bigger and more important to the world. For the drama of rescuing the euro, or letting it sink, will be played out on Spanish soil.
That is not to say Spaniards will have it worse than Greeks, thoughEurostat figures show only Bulgaria and Romania now have a higher percentage of people deemed at risk of poverty. Spain's economy will shrink, once more, by 1.5% – a dramatic enough figure, though one most Greeks would happily settle for. But Spain represents a quantitative leap in Europe's ongoing tale of misery. Its economy is five times bigger than Greece's – accounting for 12% of the eurozone. And there are almosttwice as many Spaniards as there are people in bailed-out Portugal, Ireland and Greece together.
As Spain enters another year of recession, Europe's politicians offer only one remedy. It must swallow more of the harsh medicine of austerity. But will it survive the cure? And will the spiral of decline really come to a halt towards the end of the year, as Prime Minister Mariano Rajoy promises?
Already the country's social fabric is tearing. Family networks keep the working class going as unemployment hits 26%. Fewer than half of those aged under 25 find work. Anecdotes of misery abound. Grandmothers with memories of the "hungry" 1950s cook up large pots of lentils to feed unemployed grandchildren. At night, small crowds gather outside supermarkets in poorer neighbourhoods of Madrid, seeking thrown-out produce. In middle-class neighbourhoods ghostly figures wander the streets rummaging through bins by night.
Middle-class friends face new dilemmas. How do you look after a now terminally ill 90-year-old aunt and her son with mental health problems, asks one, when both have lived off her €600-a-month pension? Another has given her spare room to a 57-year-old graphic designer friend who cannot find work and does not qualify for dole payments. How long will he stay? A doctor – and single mother – admits that she worked before Christmas with flu because she could not afford to take (unpaid) sick days. "I tried not to breathe over my patients," she says.
Anecdotal evidence of Spaniards' suffering is backed by hard figures. When crisis struck in 2008, families began to save madly. Four years later savings rates are tumbling again – too many families are having trouble getting to the end of the month. Average household disposable income has already dropped, in real terms, by almost 10% since 2008. In poorer regions such as the Canary Islands, Andalucia and Extremadura, almost a third of the population is below the at-risk-of-poverty line,according to the National Statistics Institute. In a damning report, Oxfam says that previous crises in Latin America and Asia point to serious long-term damage if austerity measures remain in place. "Poverty and social exclusion may increase drastically," it says. "By 2022, some 18 million Spaniards, or 38% of the population, could be in poverty."
Rajoy's year-old conservative government no longer calls the shots, if it ever did. In 2012 it tried to obey Brussels and Berlin, raising taxes and chopping spending on health, education, social services and almost everything else. Pensioners and civil servants became poorer. Yet early figures suggest that, by the time money borrowed to bail-out banks is included, the deficit remained above 8%. In 2013 Rajoy promises to do better. And that means even more cuts.
With a quarter of this year's budget to go on servicing debt, Spain itself now needs a bailout. In 2013 it looks set to test the new "soft" bailouts now on offer from eurozone partners. That will be a make-or-break moment in the euro crisis. If it works and helps set Spain on the road to recovery, the euro is safe. If it does not, there are few solutions left. A soft bailout will be less painful than those inflicted on Greece, Portugal and Ireland – because it comes with a European Central Bank (ECB) promise to buy Spanish bonds in order to keep borrowing costs down. But it will still come with one chief condition – more austerity.
Restricted by the euro straitjacket and unable to devalue its currency, Spain is on the slow, painful path of internal devaluation. That means Spaniards must become poorer – accepting lower wages, lower pensions and worse public services. That way, they are told, their economy can become more competitive, making cheaper goods to consume itself or sell to the rest of the world. "We can only get out of this crisis by working more and, unfortunately, earning less," said former employers' federation leader Gerardo DÃaz Ferrán two years ago. He was not, of course, talking about himself. DÃaz Ferrán's own companies have since gone bust and the workers sacked. But prosecutors claimed DÃaz Ferrán stole money from his companies first – ensuring himself a high-end lifestyle that included a Rolls-Royce and two luxury apartments overlooking New York's Central Park. In 2013, Spaniards will undoubtedly find out more about the former leader of Spain's most powerful business lobby – a man who allegedly paid no income tax in 2009 or 2010. But his grim recipe for the future still holds.
Spaniards are more likely to fret about jobs, incomes and the shrinking value of what they own. Last year, some 800,000 people lost their jobs. In 2013, unemployment will rise further as another half a million or more jobs are lost. A new labour law offers workers in companies with falling revenues either wage cuts, sackings or both. And house prices will continue to tumble in a country where 80% own their homes. Prices dropped 15% last year – the biggest fall since a housing bubble burst in 2008. The stock of houses up for sale is growing thanks to foreclosures. A rash of suicides among those about to lose their homes saw new legislation introduced to protect the most vulnerable at the end of last year.
"Things are improving in Spain," Mario Draghi, the powerful ECB boss, said before Christmas – according to Spanish translations of his words. "2012 was a year of painful gains. And 2013 should also be one." The pain, at least, is guaranteed.
And of course , one can only wonder whether Syria or Iran powder kegs finally ignite by way of direct Western intervention around March 1 or before..... signs are there that one or the other will.....
Syrian rebels claim capacity to produce chemical weapons
DEBKAfile January 3, 2013, 8:37 AM (GMT+02:00)
The Free Syrian Army has all the components for producing chemical weapons and the knowhow to use them if necessary, said the political adviser of the FSA, Bassam Al-Dada to the Turkey's state-run Anatolia news agency. “If we ever use them, we will only hit the regime's bases and centers,” Al-Dada said, stressing that the Syrian opposition would only use chemical weapons if the ruling regime did so first. Their expertise came from army officers with technical knowledge who had defected from the government side, he said.
Where are Obama and Netanyahu's nuclear clocks?DEBKAfile Special Report December 26, 2012, 10:00 PM (GMT+02:00)
Iran's nuclear clock is ticking. Is anyone listening?
Israeli Prime Minister Binyamin Netanyahu and his deputy, Strategic Affairs Minister Moshe Yaalon, suddenly woke up Tuesday, Dec. 25, when at the launch of their Likud-Beitenu election campaign, they were asked what had happened to the dire Iranian nuclear threat. “It will soon be back in the headlines,” they said. “Not a day goes by without it receiving our attention,” said sources close to the prime minister. “The nuclear clock is still ticking” - and it is fact that National Security Adviser Yaacov Amidror has made several recent trips to Washington to discuss the issue with American colleagues. “Now we are waiting for Barack Obama to form his new government,” Yaalon remarked.
But Obama and his government will only be sworn in on January 21, and the next day Israel itself goes to the polls. On past performance, an incoming Israel prime minister takes weeks, if not months, to assemble a new government. Iran has therefore been given the gift of at least three months to play with before either administration is ready for strategic decision-making with regard to preemptive action against its nuclear program. Ayatollah Ali Khamenei can therefore rest easy until the late spring of 2013.
Dennis Ross, Obama’s former adviser on Iran, who is well versed in White House thinking and has good access to the Prime Minister’s Office in Jerusalem, said in an interview Monday that, for the moment, the Iranians “are not convinced we are prepared to use force.” Speaking to the Jackson Diehl of the Washington Post, Ross said he believed 2013 would be the critical year.
DEBKAfile connects this remark to a comment President Obama made while campaigning for reelection: He spoke of Iran attaining “breakout capacity” next year - a development which must be prevented, because it means, “we would not be able to intervene in time to stop their nuclear program.” For breakout capacity, Iran would have to acquire the materials – highly-enriched uranium and components for a weapon - and the knowhow to build nuclear weapons quickly if it is so decided. A decision could be too fast for US intelligence, or presumably Israel, to catch in time to take action. It was this eventuality which Obama said must be prevented.
The current situation poses two problems. Although the US president has often expressed his determination to prevent Iran obtaining a nuclear weapon, he has never explained how he would achieve this, or promised to use force if nothing else availed. The other problem is that, according to DEBKAfile’s intelligence and Iranian sources, Tehran has already reached “breakout capacity.”
This phrase has therefore become a convenient slogan for delayed action, another red line to be missed, like the ones set by Netanyahu in his cartoon presentation to the UN Assembly last September, such as 20-percent enriched uranium.
Khamenei has rejected the stipulations the United States laid down in the secret direct negotiations held earlier this month for settling the controversy over Iran’s nuclear program. And there are no signs he is worried about repercussions. The only true words about the current stalemate were heard from Dennis Ross, that the Iranians “are not convinced we are prepared to use force.” The rest is spin. |
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