Thursday, February 7, 2013

Overnight sentiment and news and views pertaining to europe - Spain and Grreece in focus as well as Bank of England and ECB rate decisions.....

http://www.zerohedge.com/news/2013-02-07/soros-fears-rebellion-warns-euro-could-destroy-eu


Soros Fears 'Rebellion', Warns "The Euro Could Destroy The EU"

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Submitted by Tyler Durden on 02/07/2013 10:29 -0500



From a discussion of the Dutch political system being in the pocket of Big Oil to warning that German policy stipulations and the Euro itself could "potentially destroy the European Union," amid rebellion, George Soros has drastically reduced all Euro-related exposure from his portfolio - only a few weeks after his cautious optimism that Europe is 'revived' in Davos. As Open Europe blognotes, Soros fears that "there is a real danger that the [Euro] solution to the financial problem creates a really profound political problem." The interview below with Dutch TV shows Soros grave concerns that the Southern nations are "being pushed unwittingly... into a long lasting depression," as Germany's austerity program is "counter-productive - cannot actually succeed." Just as we recently noted the similarities between the European Union and the Soviet Union, so Soros believes the 'Euro' itself is "bound to break up the European Union." It may take generations, he notes, as a terrible tragedy of "lost political freedom and economic prosperity."
From Davos - two weeks ago...optimism that the banking system had been revived but even then he was concerned...
...the european banking system, the interbank market, has revived so there's a general sense of let's say almost euphoria that the crisis is over. I think that is somewhat premature. because the fundamental internal inconsistencies in the dis-tim have not been addressed, and actually, therefore, you face political dangers.

The Euro is transforming the European Union into something very different from the original conception which was a voluntary association of equal states, and instead of that, the financial created a two-class system where the euro, the creditors and debtors and the creditors are in charge. Thepolitical situation I think is going to get worse.


http://www.zerohedge.com/news/2013-02-07/forget-europes-periphery-core-collapsing



Forget Europe's Periphery, The Core Is Collapsing

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Submitted by Tyler Durden on 02/07/2013 10:17 -0500



A glance at headlines over the past few months and there is little mention of anything but Europe's periphery struggling but market performance implying that a turnaround is about to occur. Most of this is based on a belief that the core is doing 'well' and that the periphery is gradually becoming more competitive. However, as if elections were not enough to worry Frau Merkel, it turns out, as Diapason's Sean Corrigan notes, Germany's Industrial Production, stymied by a surging EUR, has just suffered its third biggest quarterly decline on record - plunging back to 2007 levels. Furthermore, France's Industrial Production is back at levels first seen in 1997 - also plunging (perhaps explaining Hollande's recent exclamations at EUR strength); as the core is starting to soften significantly.




http://www.zerohedge.com/news/2013-02-07/eurusd-plunges-draghi-fears-deflation-risks



EURUSD Plunges As Draghi Fears Deflation Risks

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Submitted by Tyler Durden on 02/07/2013 09:15 -0500



Doing his best not to get dragged into the currency war conversation, ECB head Mario Draghi is, however, concerned at the impact of a stronger EUR on inflation (or to be more accurate dis-inflation). Noting not only that there remain downside risks to the economic outlook, as we highlighted previously (an 11% rise in trade-weighted EUR since July), his comments (that have smashed the EURUSD down 120pips so far) appear to be addressing a surging EUR.

    • *DRAGHI SAYS EURO AREA GROWTH RISK CONTINUES TO BE ON `DOWNSIDE'
    • *DRAGHI: REAL, NOMINAL EXCHANGE RATE NEAR LONG-TERM AVERAGE
    • *DRAGHI SAYS ECB WILL MONITOR EURO LEVEL FOR INFLATION RISKS
    • *DRAGHI STATEMENT SAYS EURO APPRECIATION RAISES INFLATION RISK (or Deflation)
     


    and.....


    http://www.zerohedge.com/news/2013-02-07/greek-tax-hikes-backfire-tax-revenues-plunge-16


    Greek Tax Hikes Backfire As Tax Revenues Plunge 16%

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    Submitted by Tyler Durden on 02/07/2013 08:08 -0500




    There was some hope that Greece, which for the past few months was desperately trying to show it has a primary surplus when in fact it was merely shoving unpaid bills under the rug, was at least getting its runaway deficit situation under control. This, despite what many sensible people pointed out was the return of nearly daily strikes, which meant zero government revenue as zero taxes could be levied on zero wages. Turns out the sensible people were again right, and the Greek and European propaganda machine has failed once more as the Greek Finance Ministry just reported that despite big tax hikes demanded as part of austerity measures by international lenders, tax revenues fell precipitously in January, with the Greek Finance Ministry reporting a 16 percent decrease from a year earlier, and a loss of 775 million euros, or $1.05 billion in one month.

    This means that the government took in only €4.05 billion ($5.47 billion) in tax revenues in January, far short of its target of €4.36 billion ($5.89 billion), a $420 million shortfall in one month, which also came during an annual holiday sales period for shops who are bleeding customers and shutting down by the thousands.
    It is all downhill from here as the feedback loop of more spending cuts is activated to offset declining revenues, leading to even less revenue, and culminating with the complete collapse of Greek society.
    If Greece fails to meet revenue targets it will trigger a correction clause at the end of each quarter of the year, setting off automatic spending cuts except for pensions and salaries. That could further harm already-depleted government services.

    Finance Ministry officials attributed the decline in tax revenues to the drop in consumption, as revenues from Value Added Tax (VAT) shrank by 15 percent, while those from the special consumption taxes were also lower. Greeks hammered by big pay cuts, tax hikes and slashed pensions have cut back spending even on essential items, with supermarket sales falling 500 million euros, ($6763 million) in 2012.

    The numbers could have been worse as the government gained revenues from doubled property taxes and big hikes in income taxes that have hit most Greeks except for tax cheats who continue to largely escape sacrifice or prosecution.
    This may well be the last straw for a "fixed" Greek crisis - "the only options left for the government is to collect from tax evaders and improve tax collections, although tax hikeshave led to many more Greeks trying to hide their income, statistics showed." Of course, nobody could have predicted that too.
    The Troika and other EU countries offered to help Greece collect taxes but little interest has been shown by the government. The new General Secretary for State Revenues, Haris Theoharis, plans to meet directors of the 36 biggest tax offices in the country to study ways of collecting expired debts, according to proposals by the country’s creditors and the European Commission’s Task Force for Greece.

    Does this mean that paying hedge funds at 50 cents on the dollar on their worthless Greek bonds was not the best idea?
    But, but the spin was that if only all Greek debt was converted into zero coupon perpetuals all would be well?
    Or maybe they were just referring to Deutsche Bank. As for the Greek population, where everyone is simply doing what they can to survive, which certainly does not mean paying taxes to the government, it is every man, woman and child for themselves.
    Finally, one can only hope that the US will learn something from what this terminal collapse of a socialist utopia looks like. Sadly, it won't.




    and.....








    http://www.zerohedge.com/news/2013-02-07/sentiment-mixed-jittery-europe-looks-forward-draghi


    Sentiment Mixed As A Jittery Europe Looks Forward To Draghi

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    Submitted by Tyler Durden on 02/07/2013 07:12 -0500



    It has been another quiet overnight session, with macro data decidedly mixed and "adjusted", because while the key German December Industrial Production number came in sequentially at 0.3% on expectations of a 0.2% rise, it fell more than expected on an unadjusted Y/Y basis, dropping 1.1%, on expectations of just a 0.5% drop. On the other hand, Spain's industrial output not unexpectedly stagnated for a 16th consecutive month, plunging by 6.9% in December in line with expectations, and sliding by a whopping 8.5% Y/Y. In bond auction news, Spain sold some €4.61 billion in 2015, 2018 and 2029 bonds, all pricing with yields substantially higher than recent January auctions, which in turn sent the Spanish 10 Year to 2 month highs of 5.52% after the auction, however it has since regained most of the losses.
    Elsewhere, Mark Carney - the new BOE head - was speaking in parliament, saying that central banks should be flexible in meeting inflation targets and that any change to monetary regimes should not be made lightly. "It’s entirely possible, in fact probable, that the the current stance of policy is consistent with the economy achieving escape velocity" he added. And speaking of the BOE, it came out moments ago with its latest rate decision which as was expected by all, was unchanged at 0.5%, and no addition to its GBP375 billion QE. We expect that to change in 3-4 months when Goldman's Carney is fully embedded into the Bank.
    In under an hour it will be the ECB's turn to announce that despite the recent surge in the EURUSD, nothing will change in the ECB's outlook as Draghi really has no options: since the natural trendline of the EURUSD absent ECB intervention is much lower, should the central bank actively manage the currency to a level where it would otherwise promptly be, contracting exports outside the Eurozone would be the last of Draghi's worries as redenomination risk comes surging back.
    But perhaps the most important driver of risk, for the second day in a row now, has been the simple fact that Europe has opened. As the chart below shows, the 3 am Eastern, or 9 am European open ramp in the EURUSD is now the major driver of prevailing EURUSD, and thus ES levels. As it turns out no actual fundamentals are needed to move the EURUSD, but a simple on/off switch of the overall market.
    Snapshot summary of where Europe is currently:
    • Spanish 10Y yield down 1bp to 5.43%
    • Italian 10Y yield down 3bps to 4.56%
    • U.K. 10Y yield up 3bps to 2.13%
    • German 10Y yield up 2bps to 1.65%
    • Bund future down 0.15% to 142.33
    • BTP future down 0.09% to 110.71
    • EUR/USD up 0.33% to $1.3568
    • Dollar Index down 0.2% to 79.56
    • Sterling spot up 0.4% to $1.5724
    • 1Y euro cross currency basis swap little changed at -20bps
    • Stoxx 600 up 0.33% to 285.46
    A more comprehensive recap of events as usual from DB's Jim Reid:
    Yesterday the DAX dipped 1.09% and is now down -0.41% YTD. The CAC moved down to flat on the year yesterday, marginally ahead of the Spanish IBEX (-1.36% YTD) which has been down in 2013 for a few days now. Spanish 10- year yields are also 18bp higher for the year and the Italian equivalent yesterday also went above its 2013 starting point.
    In European Credit iTraxx Main is flattish YTD, Senior Financials are 15bps wider and although Xover is tighter YTD after a very strong post fiscal cliff early Jan rally, it’s now 37bp off the tights. Non-financial Euro Cash HY is now also wider in spread terms in 2013. Elsewhere in fixed income 10 year Treasuries are 21bp higher on the year and many parts of the EM universe has been struggling in both FI and equities.
    So 2013 feels stronger probably because the high-profile US market is leading the way but elsewhere the picture is more mixed. As we discussed in our outlook and here in recent days, we think February will be a tougher environment as the Italian elections near. The fear was always that the pro-reform parties would not be well clear by the time the poll black-out starts on Saturday. Well, these fears were amplified yesterday as polls showed that Berlusconi has cut the lead of centre-left frontrunner Pier Luigi Bersani to just 3.7%, or within the poll’s margin of error of 4%. The same poll had Bersani leading by 14% on January 2nd. Watch out for the latest polls released over the next couple of days.
    We should be clear that it’s still most likely that the election will present markets with a pro-reform outcome but we think it’s unlikely the markets will want to be too long risk before there is firmer evidence of such an outcome.
    So there was broad weakness across yesterday’s session with the Stoxx600 closing 0.36% lower led by weakness in the CAC (-1.40%) and DAX (-1.09%). It was an up-and-down day in credit markets marked by wide trading ranges in Europe Main and Xover but both ended the day relatively unchanged at 1-2bp wider. Across the Atlantic, both the Dow and the S&P 500 staged an afternoon rally to close +0.05%. In terms of earnings, the consistent theme of US earnings outperformance continued yesterday with 79% of 24 S&P 500 companies beating EPS and 83% of them outperforming revenue estimates. This compared with just 62% EPS beats and 46% revenue beats for Stoxx600 constituents yesterday.
    Now moving on to previewing today’s ECB and BoE meetings, there are no economists polled on Bloomberg that are expecting any changes in rates or policy from either central bank. With that in mind, perhaps the more interesting  element will come from the central bank chiefs themselves. President Draghi’s press conference at 1:30pm London time will be closely watched in light of the softer ECB Bank Lending Survey released last week. Draghi may also comment on  the recent concerns around the euro’s strength and the impact of recent LTRO repayments from European banks.
    In the UK, BoE governor-in-waiting Mark Carney will take questions from the Treasury Select Committee at 9:45am ahead of the BoE announcement at midday. The Committee has said it will be questioning Carney about the efficacy of monetary policy tools and whether the existing framework is appropriate for the UK after a prolonged period of anaemic  growth.
    Turning to Asian markets, most equity bourses are trading with a risk off tone led by losses on the Nikkei (--0.89%) and Hang Seng (-0.37%) while the ASX200 (+0.3%) closed with a gain. Ahead of the Chinese New Year break, newswires are reporting that the PBoC has injected a record $138bn into the banking system via reverse repos this week. The Shanghai Composite (-1.3%) is poised for its first fall in almost two weeks though after the PBoC’s fourth quarter monetary policy report published on Wednesday which hinted at the central bank’s concern that inflation risks will increase this year. The report also said that joint policy easing by other nations may push up commodity prices. Local press also reported that China may slow approval for new homes in some cities in the first half of the year. Elsewhere, the USDJPY (-0.2%) is consolidating around the 93.5 level. Japanese PM Abe defended his  economic policy by saying that his push for monetary easing is about overcoming deflation rather than competitive currency devaluation. Japan’s finance minister also defended the government’s policy saying that only Germany is criticising Japan on recent yen moves.
    Looking at the day’s calendar, industrial production numbers for December are due from Spain and Germany. In the US, weekly jobless claims and consumer credit numbers are the main items of the data docket. Events wise the two-day EU Leaders Summit kicks off in Brussels today but all eyes will be on Draghi and Carney today.

    and.....

    http://elpais.com/elpais/2013/02/07/inenglish/1360239618_385331.html

    Slush fund scandal pushes up Treasury’s borrowing costs

    Debt-management agency exceeds issue target at bond tender

    Risk premium approaching 400-mark

     /  Madrid 7 FEB 2013 - 13:20 CET
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    The Spanish Treasury on Thursday managed to sell more debt than it had initially planned, but was forced to pay more to do so for the first time this year in the wake of the ruling Popular Party slush fund scandal that has rocked the government of Prime Minister Mariano Rajoy.
    The debt-management arm of the Economy Ministry sold 4.61 billion euros in two-, five- and 16-year bonds when it had been looking to issue as much as 4.5 billion.
    It sold 1.947 billion euros in bonds maturing in 2015 at a cut-off rate of 2.889 percent, up from 2.587 percent in January. That was the highest yield for paper of this maturity since October. It issued a further 2.069 billion euros in five-year paper as the marginal yield climbed to 4.169 percent from 3.808 percent a month ago.
    In the final leg of Thursday’s tender, the Treasury placed 593 million euros in bonds maturing in 2029 at 5.822 percent.
    The Treasury has so far this year issued 21.993 billion euros in debt out of a planned 215-230 billion for the year.
    Spain’s risk premium rose sharply on Monday after the international press had latched on to the alleged secret accounts of former PP treasurer Luis Bárcenas, first published in EL PAÍS and which allegedly show donations from companies that exceed legal limits and bonus payments in cash to party officials.

    International interest

    The spread between the yield on the Spanish benchmark 10-year government bond and the German equivalent opened at around 387 basis points on Thursday, but had eased to around 375 basis points by midday.
    The mud thrown up by the Bárcenas case has also been a timely reminder to investors that Spain remains in recession and is likely to have missed its deficit-reduction target for last year as outstanding public debt continues to mount and the banking sector remains in throes of an extensive cleanup.

    http://www.ekathimerini.com/4dcgi/_w_articles_wsite2_1_07/02/2013_482387


    Greek household incomes down average 38 pct from cuts, survey shows

    More than 90 percent of Greek households say their incomes have fallen since the start of the crisis, the average drop being 38 percent, according to a survey by Marc SA.
    More than 82 percent say their total incomes amount to 25,000 euros ($33,900) or less as austerity measures have led to wage cuts and higher employment.
    Sixty-six percent of respondents say total income doesn’t exceed 18,000 euros, and only 2.5 percent say they make more than 40,000 euros, according to the study for the Small Enterprises’ Institute of the Hellenic Confederation of Professionals, Craftsmen and Merchants.
    Incomes have fallen as Greece has adopted austerity measures, including wage and pension cuts, in exchange for financing under two bailouts from the European Union and the International Monetary Fund since May 2010. In November, Greece’s parliament approved tax increases and spending cuts demanded by creditors for the release of funds required to keep the country solvent.
    Of 40 percent who say they can’t meet their financial obligations on time, 61 percent say delays relate to taxes.
    Gross domestic product has shrunk by a fifth since Greece went into recession in 2008, while more than a quarter of the workforce is unemployed. Retail sales dropped 16.6 percent in November from a year earlier.
    Clothing, eating at restaurants and gifts are the categories in which most households say they have cut spending “significantly,” followed by heating, travel and recreational activities such as going to cafes, bars and the cinema. People have cut education and health spending less.
    The survey of 1,207 households was conducted between Dec. 10 and Dec. 19. [Bloomberg]


    and.....

    http://www.ekathimerini.com/4dcgi/_w_articles_wsite2_1_06/02/2013_482337



    Revenue shortfall in January calls for emergency action


     The drop in consumption has brought about a considerable 15 percent decline in revenues from value-added tax, to say nothing of the drop in takings from special consumption taxes.
    By Prokopis Hatzinikolaou
    Alarm bells are ringing at the Finance Ministry following January’s serious shortfall in state revenues. The government will need to find ways of bolstering the public takings as last month they were 7 percent lower than the target set in the budget, according to provisional figures by the ministry.
    January saw the cashing in of just 4.05 billion euros against a targeted 4.36 billion euros. The message from this front is particularly worrying as any divergence from the section of the streamlining program that concerns the reduction of the deficit automatically triggers the correction clauses at the end of each quarter. They pertain to a symmetrical decline in primary expenditure with the exception of salaries and pensions.
    Compared with January 2012, revenues shrank by 775 million euros last month, or a significant 16 percent. Ministry officials attribute the decline to the drop in consumption, as revenues from value-added tax contracted by 15 percent, while those from the special consumption taxes were also lower.
    The overall picture would have been far worse had it not been for property taxes and the remaining installments of income tax payment for 2012. Ministry data show that direct tax revenues increased by about 9 to 10 percent in January compared with a year earlier.
    Given the recession, the ministry has no other means left to rectify the situation but to try to contain tax evasion and improve tax collection. However, to date nothing has changed in the tax collection mechanism ands, according to ministry officials, everyone is anticipating action by the new general secretary for state revenues, Haris Theoharis.
    In the coming days Theoharis will meet with the directors of the 36 biggest tax offices in the country to studt ways of collecting expired debts according to the proposals by the country’s creditors and the European Commission’s Task Force for Greece. Expired debts have topped 56 billion euros, after the addition of new debts last year adding up to 13 billion.
    The same officials note that the Financial Crimes Squad (SDOE) is currently in disarray, doing little else than checking anonymous allegations of nonpayment of taxes.

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