http://www.zerohedge.com/news/2013-04-15/alternative-germany-party-buoyed-every-swastika-streets-athens
Submitted by Tyler Durden on 04/15/2013 19:56 -0400
http://www.zerohedge.com/news/2013-04-15/portugal-back-penalty-box
Submitted by Tyler Durden on 04/15/2013 22:15 -0400
Just a reminder of how Portugals hole might be filled.....382 tons , 90 percent of reserves ! Spain and Ireland will see their gold seized in the next go round - but will Italy play ball with the Troika and turn over their 2,452 tons ?
http://www.testosteronepit.com/home/2013/4/13/austrias-last-stand-against-eu-assault-on-bank-secrecy.html
Submitted by Tyler Durden on 04/14/2013 19:24 -0400
Submitted by Tyler Durden on 04/14/2013 17:09 -0400
http://www.cyprus-mail.com/bills/new-eac-asks-customers-pay-bills-or-get-electricity-cut/20130415
http://www.ekathimerini.com/4dcgi/_w_articles_wsite1_1_15/04/2013_493934
'Alternative For Germany' Party Buoyed By "Every Swastika On The Streets Of Athens"
A month ago we discussed the rising anti-Euro sentiment in the core of Europe and the "Alternative for Germany" party appears to be growing in strength. As the NYTimes reports, this is a party driven a collection of elites (not a groundswell from the streets) tired of Merkel's "flagrant breach of democratic, legal, and economic principles." While we warned that the forthcoming 'wealth tax' will raise the ire of the southern-European elites (and thus increase the likelihood of a euro breakup), it appears this small-but-growing party in Germany is pushing in the same direction, as one member noted, "we keep giving out more and more money when we have so many problems at home." Polls show as many as 1-in-4 would consider voting for the new party, and "they don't need more than 5% to make things very tight for [Merkel]." The increasing tension in Europe (and rising anti-Germany sentiment) is helping raise membership as "every swastika on the streets of Athens" reduces Merkel's support, and, as members note, "if the euro fails, Europe will not fail," amid nostalgia for the former German Mark.
With less than six months to go before parliamentary elections in Germany, a new political party that is calling for an end to the European currency union is gaining strength.The party, Alternative for Germany, held its first formal party congress on Sunday at a Berlin hotel. It has emerged as a wild card ahead of the September elections and poses a potential threat to Chancellor Angela Merkel’s re-election prospects....“We want to put an end to the flagrant breach of democratic, legal and economic principlesthat we have seen in the past three years, because Chancellor Merkel’s government said there is no alternative,” Mr. Lucke told more than 1,500 supporters on Sunday. “Now it is here, the Alternative for Germany.”Mr. Lucke says the euro is dividing Europe rather than uniting it, as the single currency was meant to do....“They don’t need to get 5 percent to make things very tight for the chancellor,” said Wolfgang Nowak, a fellow at the North Rhine-Westphalia School of Governance in Duisburg. “And every swastika on the street in Athens helps this new party.”...“We keep giving out more and more money when we have so many problems here at home,”said Ms. Tigges-Friedrichs, who runs two hotels and a cafe in Bad Pyrmont....Polls show that a large number of voters, as many as one in four, would consider voting for the party. But that might not translate into actual votes. And several other surveys have shown that the nostalgia for the former German currency, the mark, is beginning to ebb.Discontent has its limits. While Germans dislike the notional price tag for the many commitments and guarantees their government has made over the three years of the euro crisis, the job market is strong, borrowing costs are low and the country is approaching the balanced budget it so desperately craves....“If the euro fails, Europe will not fail,” said Mr. Lucke, contradicting the chancellor’s repeated insistence that the future of the 27-member European Union is tied to the success of its common currency. “If the euro fails, then the policies of Angela Merkel and Wolfgang Schäuble fail,” he said, referring to the chancellor and her finance minister....Steffen Kampeter, a deputy finance minister from Ms. Merkel’s party, told the newspaper Frankfurter Allgemeine Zeitung that Alternative for Germany was giving voters a far too rosy picture of how a euro-zone breakup would occur. “The new party is deluding voters that it’s possible to renationalize the common currency without drawbacks,” Mr. Kampeter said, “as if you could make eggs again out of scrambled eggs.”
http://www.zerohedge.com/news/2013-04-15/portugal-back-penalty-box
Portugal - Back In The Penalty Box
Submitted by Mark J. Grant, author of Out of the Box,
"Last night, Darth Vader came down from planet Vulcan and told me that if I didn't take Lorraine out that he'd melt my brain."
-George McFly
Mário Alberto Nobre Lopes Soares is a Portuguese politician who served as Prime Minister of Portugal from 1976 to 1978 and from 1983 to 1985. He was then the President of the Republic from 1986 to 1996. He is a senior and well respected statesman and hardly a voice of either the radical left or right.
Official projections put Portugal's debt to GDP at more than 124% by the end of this year. Utilizing Europe's continuing fantasy accounting; this is the number that Portugal and the EU posts for general consumption. However by counting liabilities and using American addition, subtraction and division I come up with a number of about 236%. The problem, as I keep reminding everyone, is that choosing not to count debts does not erase them and so time passed, some of the liabilities came due, and Portugal is on the verge of bankruptcy once again.
It was March 3, 2011 and the title of Out of the Box was, "Portugal Goes Down." Then in May 2011 Portugal did bite the dust and received $101 billion in bailout funds. Since then it has bobbed up, devastated its citizens with trying to meet the demands of the European Union and been hailed by both Brussels and Berlin for its imposition of the mandated austerity measures. Today I can assure you; Portugal is going down again.
Now Mr. Soares, over the weekend, took a different and surprising tact. He has called for all of the opposition parties in Portugal to "bring down" the government. Specifically he said, "In its eagerness to do the bidding of Senhora Merkel, they have sold everything and ruined this country. In two years this government has destroyed Portugal. We absolutely have to end this austerity." He also said that Portugal will "never be able to pay its debts however much it impoverishes itself. If you can't pay, the only solution is not to pay."
Pretty strong words for this elder statesman!
Now in the recent round of easing debt extensions were granted to Ireland and Portugal but Portugal's was tied to the imposition of further austerity measures. This is just after the Supreme Court in Portugal declared certain austerity measures unconstitutional and blew $1.7 billion of them out the window and out of Portugal's budget.
The country was already the poorest in Western Europe, with a minimum wage of $630 a month.
Unemployment is the third highest in the Eurozone, with 17.4 per cent of the country out of work and a 37% unemployment rate for people under 25. Quite large tax increases have hit everyone hard, with train prices soaring by 25% and VAT on electricity leaping from 6% to 23%.
Now a careful reading of what the EU is now demanding reveals an actual shortfall of about $6 billion and where Portugal is going to come up with that is a good question. The Prime Minister may be one of the favorites of Europe but that is not exactly the case in his own country as politics are about to get very nasty. The debt extension was one thing but when Portugal lines up again at the window, which is coming shortly, one has to wonder what new one-off solution will be forthcoming this time. Will it be the depositors again transcribed in Lithuanian, the subordinated or senior debt of the country postulated in Slovenian or some new scheme? Given the politics of Germany at present I find it highly doubtful that the answer is going to be a hand-out courtesy of the taxpayers of other countries.
Grant's Rules 1-10, "Preservation of Capital" are flashing red! If you have exposure to Portugal I would be heading towards the exit doors. Failure to do so may be a quite expensive proposition.
"The itsy bitsy spider climbed up the water spout. Down came the Goblin and took the spider out."
-The Green Goblin
-George McFly
Mário Alberto Nobre Lopes Soares is a Portuguese politician who served as Prime Minister of Portugal from 1976 to 1978 and from 1983 to 1985. He was then the President of the Republic from 1986 to 1996. He is a senior and well respected statesman and hardly a voice of either the radical left or right.
Official projections put Portugal's debt to GDP at more than 124% by the end of this year. Utilizing Europe's continuing fantasy accounting; this is the number that Portugal and the EU posts for general consumption. However by counting liabilities and using American addition, subtraction and division I come up with a number of about 236%. The problem, as I keep reminding everyone, is that choosing not to count debts does not erase them and so time passed, some of the liabilities came due, and Portugal is on the verge of bankruptcy once again.
It was March 3, 2011 and the title of Out of the Box was, "Portugal Goes Down." Then in May 2011 Portugal did bite the dust and received $101 billion in bailout funds. Since then it has bobbed up, devastated its citizens with trying to meet the demands of the European Union and been hailed by both Brussels and Berlin for its imposition of the mandated austerity measures. Today I can assure you; Portugal is going down again.
Now Mr. Soares, over the weekend, took a different and surprising tact. He has called for all of the opposition parties in Portugal to "bring down" the government. Specifically he said, "In its eagerness to do the bidding of Senhora Merkel, they have sold everything and ruined this country. In two years this government has destroyed Portugal. We absolutely have to end this austerity." He also said that Portugal will "never be able to pay its debts however much it impoverishes itself. If you can't pay, the only solution is not to pay."
Pretty strong words for this elder statesman!
Now in the recent round of easing debt extensions were granted to Ireland and Portugal but Portugal's was tied to the imposition of further austerity measures. This is just after the Supreme Court in Portugal declared certain austerity measures unconstitutional and blew $1.7 billion of them out the window and out of Portugal's budget.
The country was already the poorest in Western Europe, with a minimum wage of $630 a month.
Unemployment is the third highest in the Eurozone, with 17.4 per cent of the country out of work and a 37% unemployment rate for people under 25. Quite large tax increases have hit everyone hard, with train prices soaring by 25% and VAT on electricity leaping from 6% to 23%.
Now a careful reading of what the EU is now demanding reveals an actual shortfall of about $6 billion and where Portugal is going to come up with that is a good question. The Prime Minister may be one of the favorites of Europe but that is not exactly the case in his own country as politics are about to get very nasty. The debt extension was one thing but when Portugal lines up again at the window, which is coming shortly, one has to wonder what new one-off solution will be forthcoming this time. Will it be the depositors again transcribed in Lithuanian, the subordinated or senior debt of the country postulated in Slovenian or some new scheme? Given the politics of Germany at present I find it highly doubtful that the answer is going to be a hand-out courtesy of the taxpayers of other countries.
Grant's Rules 1-10, "Preservation of Capital" are flashing red! If you have exposure to Portugal I would be heading towards the exit doors. Failure to do so may be a quite expensive proposition.
"The itsy bitsy spider climbed up the water spout. Down came the Goblin and took the spider out."
-The Green Goblin
Just a reminder of how Portugals hole might be filled.....382 tons , 90 percent of reserves ! Spain and Ireland will see their gold seized in the next go round - but will Italy play ball with the Troika and turn over their 2,452 tons ?
http://www.testosteronepit.com/home/2013/4/13/austrias-last-stand-against-eu-assault-on-bank-secrecy.html
Austria’s Last Stand Against EU Assault On Bank Secrecy
SATURDAY, APRIL 13, 2013 AT 3:03PM
Austria would fight to maintain bank secrecy, declared uppity Finance Minster Maria Fekter. She is worried. After squashing Cyprus, gutting its offshore financial and money laundering center, and destroying its main resource, the EU has now trained its big guns on Austria and Luxembourg.
The big guns: German Finance Minister Wolfgang Schäuble and, for a change, French President François Hollande, who is spiraling into utter unpopularity at home, and whose budget minister had been sacked after being accused of committing “tax fraud laundering” via bank accounts abroad. Other countries have jumped on the band wagon. Even the UK is willing to negotiate. It’s getting serious. They want automatic transfer of bank data of foreign clients to their respective governments.
Germany has already singled out Luxembourg, a small country with an outsized, murky banking sector that has long been accused of “tax dumping.” It’s in a similar category as Cyprus used to be. As part of the bailout, Germany had insisted that Cyprus – in Chancellor Angela Merkel’s words –”change its business model.” Which scared Luxembourg. At the time, its Foreign Minister Jean Asselborn struck back and accused Germany of “striving for hegemony.” Germany did not have “the right to decide on the business model for other countries” and “to choke” them “under the cover of technical financial issues.”
He was brushed off in Germany, even by the opposition. “No business model can be tolerated in a market economy that circumvents fair competition,” retorted Joachim Poss, deputy leader of the opposition SPD. “Of course Luxembourg belongs to the group of problem countries.” Two weeks later, Luxembourg buckled.
But Austria, which isn’t nearly as dependent on its financial sector, remains recalcitrant. Germans love that place. They go there by car or train with a bunch of euros in their luggage for a couple of days of skiing, hiking, or browsing through the glory of Vienna, and when they have a few minutes, they stop by their bank. Austrian banks adhere to bank-secrecy rules. Deposits are not disclosed to German authorities. It works wonderfully, the combination of vacation and money laundering.
For most people in southern Germany, the nearest bank branch in Austria is only a few hours away. From Munich, for example, it’s about an hour to Achenkirch. I know several Germans who move their untaxed cash revenues out of harm’s way in this manner. One of them is the owner of a casual restaurant, mostly a cash business to this day. He declares enough of his cash revenues to justify his purchases, pay his people, cover his expenses, pay himself the minimum salary that makes sense, and show a small profit. He keeps the remainder, about a third of his revenues, as spending cash for his household. And every few months, he – with or without family – spends a day or two in Austria, but only when the weather is nice. This is vacation, after all.
Finance Minister Fekter doesn’t want to strangle this capital stream, and the income it generates for Austrian banks and the tourism industry. She said it’s smarter to go after the source, namely the tax dodgers when they’re in their own country, instead of creating a “data cemetery” – whatever she meant by that evocative term. And if the US is applying pressure, she said, the EU should return the favor and push the US to crack open states with their own secrecy laws, such as Nevada, where foreigners can hide behind nominee shell corporations.
But Fekter’s hard line contradicted her boss, Chancellor Werner Faymann, who’d said perhaps still in panic after the shock of Cyprus that Austria would be open to discussing an automatic data exchange.
Germany and Austria are joined at the hip, economically. They rarely disagree on monetary issues. For decades, the shilling had been pegged to the Deutsche mark. But bank secrecy has become a serious point of contention. And Fekter might well lose that fight.
My friends with untaxed nest eggs in Austria are already scrambling to find a safer place – while they still can. Because the EU, as Cyprus has shown, is serious about destroying tax havens and money-laundering centers – and it has ever more power and centralized decision-making to do so with horrendous force at the worst possible moment. Russian depositors in Cypriot banks can sing a song about that.
The average Cypriot household had a net worth of over three times that of German households, wealth that had been sucked out of the cesspool of corruption that the banks and the government were, until neither had a drop of lifeblood left. Now the party is over. And you can almost hear the snickering among European politicians. Read.... The Gloriously Ballooning Bailout Bedlam Of Cyprus
http://www.testosteronepit.com/home/2013/4/14/europes-stark-choice-resignation-or-revolution.html
Europe’s Stark Choice: Resignation Or Revolution
SUNDAY, APRIL 14, 2013 AT 9:16AM
Contributed by Don Quijones, a freelance writer and translator based in Barcelona, Spain. His blog, Raging Bull-Shit, is a modest attempt to challenge some of the wishful thinking and scrub away the lathers of soft soap peddled by our political and business leaders and their loyal mainstream media.
Two years ago this May, Madrid’s Puerta del Sol and Barcelona’s Plaza Catalunya, Spain’s two most important city squares, were occupied by thousands of indignant protestors. For many of the nation’s highly educated but disillusioned youth, enough was enough, and for a short while it seemed that a new era of political mobilization beckoned.
A few weeks later, however, such hopes were brutally dashed when the riot division of Catalonia’s police force, the Mossos D’esquadra, unleashed the untamed fury of the state upon the protestors’ makeshift camp, under the rather dubious pretext of ridding the city of a health and safety risk (this is Europe, after all!). The message was clear: all attempts to resist the new European economic reality, no matter how peaceful, would be brutally suppressed.
In little more than an hour, a whirlwind of police violence cleared the square of all the occupants and pretty much all of their belongings, many of which were never returned. All the while, a thick, dense ring of shell-shocked protestors and curious bystanders gathered around the square, looking on in a mixture of bewilderment, fear and anger.
And I was one of them. As I strolled around the square, with one wary eye on the aggrieved protestors and the other on the fearsomely armed and highly unpredictable mossos d’esquadra, a placard caught my attention. Its message was beautifully simple: “No soy anti sistema, el sistema es anti yo” (I’m not anti-system; the system is anti-me).
The placard was held aloft by a small child riding on his father’s shoulders. The cynical realist within me knew full well that the boy, who must have been no more than five or six years old, was merely channeling his father’s thoughts. But that didn’t stop my more romantic side from imagining that the child was, in actual fact, eloquently speaking out for his soon-to-be lost generation.
For if there is one thing of which you can be sure about present-day Europe, it is that its political and economic systems are not meant to serve or protect the interests of the youth; on the contrary, they have been designed to gradually erode their last-remaining freedoms and rights and, by leaving them the tab for the transgressions and greed of the global banking sector, deprive them of all hope of ever attaining the standards of living once taken for granted by their parents or grandparents.
Spain is a perfect case in point: In the two intervening years since the country’s 15-M moment, the economy has spiraled into a bottomless depression. Official youth unemployment in the country has reached a mind-boggling 60 percent. Thousands of Spanish savers and pensioners have been robbed of their life savings, victims of the national banks’ cunning (and, it goes without saying, unpunished) preferentes sleight of hand.
All the while, taxes continue to skyrocket and essential welfare spending has been mercilessly sacrificed on the altar of bank recapitalization. Countless of the nation’s homes have – and continue to be – repossessed, to later be given away at a fraction of their value to wealthy international property speculators.
Perhaps worst of all, the country’s current government, which took the reins of power six months after the inception of the 15th May movement, has proven itself to be the most corrupt and incompetent in living memory.
But Spain is by no means unique; it is, if anything, a mere symptom of what is happening throughout the eurozone. From Cyprus to Portugal and from France to Slovenia, an all-out war has been declared against the continent’s industrious middle classes.
And now, with Winter turning to Spring, and Spring soon to Summer, the people of Europe face the starkest of choices: resignation to the EU’s neoliberal, neofeudal agenda, and with it, the gradual elimination of the few remaining freedoms and opportunities we still enjoy; or a spirited last-stand against the encroaching totalitarianism of the European superstate.
Before you make your choice (if, of course, you are European), let me first make a few of my own personal observations vis-a-vis our current situation and future outlook.
1. In case you hadn’t noticed, we are already owned, lock, stock and smoking barrel, by the international cartel of too-big-to-fail banks.
2. Pretty much all our political representatives and institutions, whether at the national or EU level, have also been bought off by the same banks, whose agents – the national central banks, the Bank for International Settlements (BIS), the ECB, the European Commission, the IMF, OECD and World Bank - now stand head and shoulders above all other players in the global political order.
3. Said banks are, to all intents and purposes, bankrupt, both financially and morally. They are also quite literally a law unto themselves. By allowing them to continue to operate in a mark-to-model fantasy world as well as gorge themselves on virtually interest-free central bank credit and regular transfusions of tax-payer funds, our politicians have shown all too clearly on which side their bread is buttered. As such, as long as the current financial system remains in place, the banks and their senior executives will be free to continue bleeding dry our national economies and personal bank accounts.
As Golem XIV recently wrote in his blog, there now exists an official list, drawn up by the Financial Stability Board, of 28 banks that are now free to operate beyond any legal jurisdiction. Like HSBC, they can consort with and engage in business with some of the world’s most wanted criminals, at absolutely no risk of legal action. And as Golem notes, this month (April 2013), we can look forward to the announcement of “another list, this time of Globally Systemically Important Insurers (G-SIIs). They too will be above the Law.”
4. Democracy has absolutely no role, beyond a figurative one, in the European Union. The continued survival and expansion of the European superstate supersedes all other concerns, whether moral, political, social or economic. As such, no genuine form of democracy or civic political engagement will be allowed to take root. As in Stalinist Russia, complete power and authority will reside in the hands of faceless, unaccountable apparatchiks, all doing the bidding of the large global banks and conglomerates.
5. As the real economy (i.e. everything that is not the stock exchange) continues its descent into the abyss, businesses will continue to close down, jobs will continue to vanish at an alarming rate and taxes will continue to rise. What’s more, at a politically expedient moment, the final nail will be driven deep into the coffin of Europe’s welfare state system, once the envy of the world. Needless to say, the newly privatized healthcare, education and pension systems that will take its place will be the sole preserve of the upwardly mobile (i.e. not us).
Instead of paying for essential public services and utilities such as health care, education, pensions and infrastructure, the public’s ballooning tax burden will be directed toward two purposes: keeping the big banks afloat and sustaining the ever-expanding police-state apparatus that will be needed to keep the collapsing civic society in line. Put simply, we will be forced to finance our own enslavement.
6. Most importantly of all, the global financial system’s days are already numbered.Put simply, the system is buckling under the combined weight of unsustainable debt, unpayable pension schemes and a derivatives market whose total value dwarfs global GDP by magnitudes that exceed all human logic.
The question is, once it does collapse, who’s going to pick up the pieces and rebuild a new, more sustainable system in its ashes? Will it be us, the people, or will it be the same bankers, central bankers and heavily compromised political half-wits that got us here in the first place? Will we bravely stake our claim to a new future, or resign ourselves, in fear and despair, to the global bankers’ totalitarian nirvana?
Whatever choice Europeans make in the coming months and years, one thing is clear: the human, social and economic costs will be tremendous either way. For the unpleasant truth is that we have allowed ourselves to be led so far down the rabbit hole of exponential debt that reemerging into the light of day will take years of collective struggle and sacrifice. Also by Don Quijones.... Spain’s Descent Into Banana Republicanism.
http://www.zerohedge.com/news/2013-04-14/which-nations-are-next-credit-market-answers
Which Nations Are Next? The Credit Market Answers
- Bear Stearns
- Bond
- CDS
- Credit Default Swaps
- default
- European Central Bank
- Free Money
- Greece
- Hungary
- International Monetary Fund
- Italy
- Latvia
- Lehman
- Lehman Brothers
- Market Conditions
- New Zealand
- Sovereign CDS
- Sovereign Debt
- Sovereigns
- Ukraine
The debate about the usefulness of sovereign credit default swaps (SCDS) intensified with the outbreak of sovereign debt stress in the euro area. SCDS can be used to protect investors against losses on sovereign debt arising from so-called credit events such as default or debt restructuring.
Although CDS that reference sovereign credits are only a small part of the sovereign debt market ($3 trillion notional SCDS outstanding at end-June 2012, compared with $50 trillion of total government debt outstanding at end-2011), their importance has been growing rapidly. With the growing influence of SCDS, questions have arisen about whether speculative use of SCDS contracts could be destabilizing - and this caused regulators to ban non-hedge-related protection buying.
The prohibition is based on the view that, in extreme market conditions, such short selling could push sovereign bond prices into a downward spiral, which would lead to disorderly markets and systemic risks, and hence sharply raise the issuance costs of the underlying sovereigns. The IMF's empirical results do not support many of the negative perceptions about SCDS. In particular, spreads of both SCDS and sovereign bonds reflect economic fundamentals, and other relevant market factors, in a similar fashion. Relative to bond spreads, SCDS spreads tend to reveal new information more rapidly during periods of stress, admittedly with overshoots one way or the other. Given the current apparent 'stability' in many nations' bond market spreads, the chart below suggests an alternative way of judging what the credit market thinks - the volume of protection bid - and in this case some interesting names emerge.
Do Sovereign CDS Lead or Lag - the answer is both...
The Hasbrouck statistic shows whether SCDS or sovereign bond markets move faster to incorporate news: when the statistic is higher than 0.5, SCDS lead the price discovery process; otherwise, bonds lead. Statistics are estimated from a panel vector error correction model using rolling two-year windows of daily data. Resulting series are smoothed using a one-month moving average.
The chart below shows at what times SCDS lead and what times bonds have lead...
Vertical lines indicate events related to the global financial and sovereign debt crisis (upper panel) and to the EU's ban on naked short sales of SCDS instruments (lower panel) as follows:
- Bear Stearns collapse (March 14, 2008).
- Lehman Brothers bankruptcy (September 15, 2008).
- EU debt crisis intensifies in October 2010 ahead of Ireland’s financial aid request.
- European Commission consultation on short selling (June 14, 2010).
- European Commission short selling regulation proposed, banning naked short sales and SCDS protection sales (September 15, 2010).
- European Parliament adopts short selling regulation (November 15, 2011).
- Final Version of EU short selling regulation published (March 24, 2012).
- EU short-selling regulation becomes effective (November 1, 2012).
But since the ban, most notional amounts have been reduced - as the regulators forced 'speculators' or some might call 'price discoverers' out of the market - leaving behind only those who have 'legitimate' need for hedging. There is one stand-out - Italy! Italy notional hedges remain as high as ever...
And so while prices may be manipulated or managed or smoothed - thanks to insatiable demand from domestic pension funds and banks who can re-collateralize for free money at the ECB, there is another 'signal'. Instead of purely the relative prices (or spreads) of the CDS market, it is perhaps more useful to judge just how much of the sovereign bond market is being hedged as a measure of the market's fear of a restructuring event...
As is clear above, the relationship between credit rating (perhaps an independent measure of sovereign riskiness) and the outstanding CDS protection relative to the bond market is quite tight. There are a few outliers - Greece (private holdings are low and no official sector will 'hedge'), Egypt/Argentina/Venezuela (highlighted in green - have been in trouble for months/years and hedgers have largely unwound profitable hedges or have unwound the underlying exposure since these markets are priced for the event already. The most obvious standouts are where the hedgers hold a massive amount of protection relative to the nations' bond market (highlighted in red). These include Latvia, Hungary, Peru, Panama, and Ukraine.
Finally, of the world's so-called advanced economies, New Zealand stands out in a worrying manner - is this a second derivative, highly convex cheap bet of China's collapse?
Charts: IMF
http://www.zerohedge.com/news/2013-04-14/cyprus-mail-exiting-euro-debate-we-must-have
Cyprus Mail: "Exiting The Euro Is A Debate We Must Have"
- Consumer Confidence
- ETC
- European Central Bank
- Eurozone
- Market Conditions
- non-performing loans
- Recession
- recovery
Last week we laid out the apparent 'blueprint' from the EU Commission for every other country with a banking system in which non-performing loans are soaring. With Mario Draghi's patsy in place at the Cypriot Central Bank, happy to hand over the nation's gold at the beck-and-call of the EU leaders - despite the Cypriot President's disgust at the 'coercion' of the new deal chiding the central bank for "catching the government by surprise," it now seems, as this Cyprus Mail op-ed explains, that the people of this nation are ready for change - real change, , otherwise,"we may wake up one morning and find thecountry has completely shut down, crushed under the weight of its mounting, unserviceable debts with no banks, businesses or services able to operate."
Via The Cyprus Mail,
Every day seems to bring another piece of bad news regarding the state of economy, which has been in free-fall and has yet to hit the bottom. Since the first Eurogroup meeting of March 15, the situation has become worse by the day and there seems to be no end in sight.We may wake up one morning and find the country has completely shut down, crushed under the weight of its mounting, unserviceable debts with no banks, businesses or services able to operate.We are not being alarmist, but pragmatic given the way things have veered completely out of control, the government powerless to stop the rut and our EU partners intent on revising their economic forecasts drastically downwards and making more demands of the bankrupt Cyprus state. On Wednesday night it was revealed that Cyprus would need to find another €6 billion to contribute to its bailout, after a ‘debt sustainability analysis’ showed that the financial situation is much worse than originally estimated.Will the Bank of Cyprus’ uninsured depositors take an even bigger hit to cover this amount because it can certainly not be raised through taxes? And how long will it be before we are told that the €13billion we had to contribute to our bailout was not enough and an even bigger amount was required? We still do not know what ‘recommendations’ the anti-money laundering audit being carried out by Moneyval and Deloitte will eventually come up with and how these could adversely impact on the economy. For all we know, a bank may have to seek ECB approval before it opens an account for a foreign company.The truth is that even after the ESM board of governors formally approves the proposal for a financial assistance facility agreement on April 24, the uncertainty and instability will remain. Friday’s announcement that the “Eurogroup is confident that determined action in line with the reform measures spelled out in the MoU will allow the Cypriot economy to return to a sustainable path based on sound public finances, balanced growth and financial stability,” could at best be described as wishful thinking and, at worst, a joke.As countless economic analysts have pointed out, the numbers do not add up and the chances of macroeconomic targets being met are almost non-existent.Even the official debt sustainability analysis warned, “there is a non-negligible risk of a cycle of household and corporate defaults propagating through the economy, leading to further banking sector losses, worsening of labour market conditions, stronger than expected fall in house prices and a prolonged loss of business and consumer confidence.”It happened in other eurozone bailouts and Cyprus will be no different, despite the Eurogroup’s confidence. This is why it is an imperative for the government to be prepared, exploring all options.Perhaps the economy’s interests would be better served if Cyprus exited the eurozone, defaulted on its debts and re-adopted the Cyprus pound. The government has taken a dogmatic stand against such a move, citing all the obvious negative effects, but the option needs to be explored and studied in-depth by experts.The government should either hire a top consultancy firm or put together a team of economists, market analysts, technocrats, etc to carry out studies of the short- and medium-term effects of leaving the euro. The effects of staying in the euro and agreeing to a second and third bailout must also be studied.If we returned to the Cyprus pound, we may have recovery and growth sooner, but we may also have rampant inflation and be unable to import essential goods from abroad. Staying in the euromay protect what is left of people’s savings and ensure some economic stability but what good would that be in an economy expected to contract by more than 10 per cent this year?Only once these options have been comprehensively investigated and reports prepared by experts can there be a proper debate on what must be done and an informed decision taken. The matter cannot be allowed to be resolved through slogans, rabble-rousing and emotional outbursts by populist deputies more interested in their re-election than the good of the country. We are now paying the very high price of this amateurishness and superficiality, with which we have approached issues of vital importance to the country, over the years.The government needs to be prepared for the debate on leaving the euro that is certain to start as the country sinks deeper and deeper into recession. After all, the experts could conclude Cyprus would be better off out of the eurozone.
http://www.telegraph.co.uk/finance/financialcrisis/9993790/Wealth-tax-to-pay-for-EU-bail-outs.html
9:36PM BST 14 Apr 2013
Senior advisers to Chancellor Angela Merkel are pushing for better-off households to pay towards the cost of any future bail-outs for the weaker members of the single currency.
The proposals, from members of Germany’s council of economic experts, raise the prospect of taxes being imposed on property in a country like Spain if its government was forced to seek a bail-out.
The council, known as the “Five Wise Men”, is often used to test new policies that are later adopted officially.
The German suggestion is the latest sign that Berlin is intent on imposing even tougher rules on weaker southern euro members in exchange for using its economic might to support their finances.
As well as inflaming tensions between Germany and its smaller southern partners, the suggestion could also mean that Britons with holiday homes are dragged deeper into the eurozone crisis.
Around 400,000 Britons live or own homes in the south of Spain, which is suffering a deep recession that is hampering Madrid’s attempts to balance the public finances and stave off a bail-out.
Senior figures in Germany are now arguing that some richer home owners in countries like Spain, Portugal and Greece have so far avoided paying their fair share to rescue the euro, leaving Germany paying too much.
Taxes on property or other assets would mark a significant change in Europe’s approach to funding bail-outs for eurozone members. Until now, the cost of rescue packages for countries like Ireland, Greece and Portugal has fallen largely on people who invest money in either those countries’ bonds or – in the case of Cyprus – bank accounts.
Prof Peter Bofinger, an adviser to Mrs Merkel, said that levies on bank accounts are the wrong way of funding bail-outs, because rich people are able to shift their money out of the country.
“The resourceful rich just move their money to banks in northern Europe and avoid paying,” Prof Bofinger told Der Spiegel, a German magazine.
Instead of taxing cash, European Union governments should in future target property and other, less mobile assets, he said.
“For example, over the next 10 years, the rich should give up a portion of their assets,” Prof Bofinger said. Spain was last year forced to seek international help to prop up its banks. Despite recent signs of progress, some analysts believe the Spanish government itself could also have to seek a bail-out in order to pay its debts.
Spain is suffering from the bursting of a huge property bubble that has left many home owners struggling to sell houses for much less than the price they paid.
A “sovereign rescue” of Spain would dwarf any previous eurozone bail-out package, with Germany again likely to pay the lion’s share.
Mrs Merkel, who seeks re-election later this year, is coming under increasing pressure to drive an even harder bargain in Europe from German voters unhappy at footing the bill for what they see as southern profligacy.
Southern eurozone governments have argued that it is right for Germany to pay more because it is wealthier and because its economy has gained so much from the single currency.
But German economists are now challenging that argument. They say that new figures taking into account property values show that people in many southern countries are actually wealthier than their German counterparts.
Prof Lars Feld, another “wise man”, highlighted a recent study by the European Central Bank, which Germans say show that the people in bailed-out countries are often better-off than those in Germany. Less than half of Germans own their own home, lower than the rate in many southern eurozone members.
The ECB study found that the “median” wealth in Cyprus is €267,000 (£227,600), compared to just €51,000 in Germany.
The median or midpoint level – which strips out the distorting effect of the super-rich – was €183,000 for Spain, €172,000 for Italy, and €102,000 for Greece, and even €75,000 for Portugal.
Average wealth in Cyprus is €671,000, far higher than in the four AAA creditor states: Austria (€265,000), Germany (€195,000), Holland (€170,000), Finland (€161,000).
Prof Feld said the report showed that people in the crisis countries are richer than the Germans. “This shows that Germany has been right to take a tough line of euro rescue loans,” he said.
Alternative für Deutschland, a German eurosceptic party, is putting Mrs Merkel under increasing pressure in her response to the eurozone’s prolonged crisis.
Many members of the new party, which held its first conference on
Sunday, want Germany to pull out of the euro and revert to the Deutschmark.
http://www.telegraph.co.uk/finance/financialcrisis/9993691/German-Wise-Men-push-for-wealth-seizure-to-fund-EMU-bail-outs.html
7:55PM BST 14 Apr 2013
Professors Lars Feld and Peter Bofinger said states in trouble must pay more for their own salvation, said arguing that there is enough wealth in homes and private assets across the Mediterranean to cover bail-out costs. “The rich must give up part of their wealth over the next ten years,” said Prof Bofinger.
The two economist are members of the Germany’s Council of Economic Experts or “Five Wise Men”, a body that advises the Chancellor on major issues. There is no formal plan to launch a wealth tax but the council is often used to fly kites for new policies.
Prof Bofinger told Spiegel Magazine that it was a mistake to target deposit holders in banks, the formula used in the EU-IMF Troika bail-out for Cyprus where those with savings above €100,000 at Laiki and Bank of Cyprus face huge losses. “The canny rich in southern Europe just shift their money to banks in Northern Europe to escape seizure,” he said.
Prof Feld said a new survey by the European Central Bank had revealed that people in the crisis countries are richer than the Germans themselves. “This shows that Germany has been right to take a tough line of euro rescue loans,” he said.
The ECB study found that the “median” wealth of is €267,000 in Cyprus, compared to just €51,000 in Germany where home ownership rate is just 44pc and large numbers of people have almost no assets.
http://www.telegraph.co.uk/finance/financialcrisis/9990651/Portugals-elder-statesman-calls-for-Argentine-style-default.html
4:59PM BST 12 Apr 2013
Mario Soares, who steered the country to democracy after the Salazar dictatorship, said all political forces should unite to “bring down the government” and repudiate the austerity policies of the EU-IMF Troika.
“Portugal will never be able to pay its debts, however much it impoverishes itself. If you can’t pay, the only solution is not to pay. When Argentina was in crisis it didn’t pay. Did anything happen? No, nothing happened," he told Antena 1.
The former socialist premier and president said the Portuguese government has become a servant of German Chancellor Angela Merkel, meekly doing whatever it is told.
“In their eagerness to do the bidding of Senhora Merkel, they have sold everything and ruined this country. In two years this government has destroyed Portugal,” he said.
Dario Perkins from Lombard Street Research said a hard-nosed default would force Portugal out of the euro. “It would create incredible animosity,” he said. “Germany would be alarmed that other countries might do the same so it would take a very tough line.”
Cyprus items....
Cyprus items....
NEW: EAC asks customers to pay bills or get electricity cut off
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http://www.ekathimerini.com/4dcgi/_w_articles_wsite1_1_15/04/2013_493934
Gov't, troika reach deal, paving way for aid release
PM confirms that 15,000 civil servants to go by end of 2014 
After Finance Minister Yannis Stournaras heralded the breakthrough on Monday morning, telling reporters, “We have a deal,” Prime Minister Antonis Samaras gave a triumphant televised address in which he sought to reassure Greeks that three years of tough measures had not been in vain. “The sacrifices are beginning to pay off,” he said, adding that “the situation is changing, the psychology is changing.“ “Until recently, Greece had been an example to avoid in Europe,” he said, echoing Stournaras’s conviction that Greece would achieve a primary surplus this year, allowing it to seek more debt relief. The premier also confirmed that a total of 15,000 civil servants would be dismissed before the end of 2014, with 4,000 to go this year, but he stressed that each departure would be replaced by a new recruit. “The same number of new people will be recruited in their place,” he said. Poul Thomsen, the head of the International Monetary Fund’s mission to Greece, struck a similar note at a conference in Athens organized by The Economist, saying that public sector staff “will not be eliminated but replaced by young, capable people.” He did not confirm explicitly that the one-hiring-to-one-firing ratio would apply. Thomsen stressed that Greece had “indeed come a long way” with its reform program, noting that “the fiscal adjustment has been exceptional by any standard.” He noted, however, that major challenges remained. “Tax evasion remains a huge problem,” he said. Nevertheless, Greece has ticked enough boxes to put it on course for the release of a 2.8-billion-euro loan tranche that had been due in March as well as 7.2 billion euros for the recapitalization of the country’s banks, the envoy said. An official statement issued jointly by the IMF, the European Commission and the European Central Bank, which have jointly extended Greece two foreign bailouts worth 240 billion euros since 2010, confirmed that the creditors were happy with the government’s performance. “Fiscal performance is on track to meet the program targets, and the government is committed to fully implement all agreed fiscal measures for 2013-2014 that are not yet in place,” the statement said, adding that the release of a loan tranche of 2.8 billion euros that had been due in March “could be agreed soon by the euro-area member states.” The deal with the troika prompted angry responses from opposition parties, with Alexis Tsipras, the head of the main leftist opposition SYRIZA, taking particular issue with the civil service layoffs which he described as “human sacrifices.“ “Instead of emerging from the crisis, we are sinking further and further into it,” he said. |
And now the European countries are suffering from this economic crisis. I hope that this would end and the recovery will be fast as well.
ReplyDeletetoo big to fail