Thursday, April 11, 2013

Welcome to the " virtual " markets..... fundamentals when bad ( like the complete clusterfuck that is Europe - the shit pile that is the Cyprus bail out / in in particular ) ignored , interventions pump markets higher - what could go wrong ?

http://www.zerohedge.com/news/2013-04-12/overnight-sentiment-lower


Overnight Sentiment: Lower

Tyler Durden's picture
Submitted by Tyler Durden on 04/12/2013 07:00 -0400




There was little in terms of overnight newsflow to spook algos, but the tone is decidedly sour this morning following a lack of either the now traditional Japan or Europen-open buying ramps. The primary reason for this may well be the ongoing decline in the USDJPY which failed to breach the 100 barrier yesterday, coming as close as 99.95 before the Mrs. Watanabe onslaught had to be called off despite some more jawboning from Kuroda whose headlines are now summarily ignored, and which appears to have set a line in the sand for Japan, whose market naturally closed lower following this strengthening in its currency. Similarly troubling was the dip in the SHCOMP which closed down -0.58%, this despite the epic M2 and credit injection reported yesterday: if new liquidity can't send the market higher, what can?
Then moving to Europe, the other recently short-squeezed carry funding pair EURUSD has been selling off all night as well, dropping well under 1.3100 not helped by yet another weekly extension in the Cypriot capital controls, where additionally there was some confusion as to whether the country would request an extension in its €10 billion Troika loan, which Germany had previously said would never happen. Naturally, after this rumor was floated and there was little market enthusiasm, it was summarily rejected by the Cypriot finance minister although the question of where the country will get the required €6 billion in additional bailout cash remains very open. Finally, completing the circus that is Europe, Spain's Catalonia region which may or may not be independent soon, said it was impossible to implement the cuts needed to achieve 2013's deficit target.
End result, equity futures down, at least for now until the EURUSD and USDJPY stop lifting algos are asleep, TSYs up, and gold getting the usual am poleaxing. JPM and Wells are set to report today, and we algo get preliminary University of Michigan consumer confidence report for April, advance retail sales for March and producer prices.
SocGen provides the macro Outlook for today:
It has been an odd week in many respects, one where currencies of central banks engaged in asset buying programmes like the JPY and the USD have underperformed while the currencies of central banks no (longer) expanding their balance sheets (or due to carry or commodity characteristics) have done well. Risk assets have experienced a solid week generally speaking, with the Itraxx tightening by 10bp and US stocks hitting new all-time highs. At the same time, macro surprises have turned negative in the US, and inflation and exports in China are slowing. So are risk assets in denial? And why are core bond yields not backing up? We have seen this bifurcation between asset classes before, even when soft patches in the economy have occurred, but when central banks like the Bank of Japan take the meaning of reflation policy to a different level (monetary base to double to 50% of GDP by 2015), it is difficult to argue against what we are observing. The question is how long this can be sustained as metrics like growth and rate differentials are disregarded. How can you otherwise explain the performance of the AUD (lower rates following a softer jobs report), or the squeeze in EUR/USD above 1.31? If today's EU finmin meeting takes place without political wrangling over the debt maturity extension plan for Ireland and Portugal, short-term targets for EUR/USD will have to be raised. The more subtle point however in today's discussions in Dublin is whether a second Portugal bailout is necessary to cover increased financing needs starting in 2014 and running until 2020. This will not sound like music to the ears of EUR bulls and could present Troika officials with another PR and political nightmare that Germany is keen to avoid. As things stand, the shortfall in the Portuguese 2013 budget, estimated at around 0.8ppts by Moody's, makes it difficult to deliver necessary fiscal adjustments and comply with the conditions for the ECB OMT. Keep an eye on short-dated PGB yields over the coming days. The data calendar today brings US retail sales and Michigan consumer confidence.
And the full overnight recap comes as usual from DB's Jim Reid
Earnings season for the US banking sector kicks off today with both JPMorgan and Wells Fargo reporting before the opening bell - setting the tone ahead of next week’s results from Citigroup, Goldman Sachs, BofA and Morgan Stanley. In terms of consensus estimates, the street is expecting for JPMorgan to report earnings of $1.39 per share, or 6% higher than the prior corresponding period. We note that expectations for 1Q EPS have crept up steadily over the last few months, but the bank has a record of beating earnings estimates having done so 11 times out of the last 12 quarters. For Wells Fargo, consensus is for earnings of $0.89 per share, or growth of 18% relative to the same quarter last year, although slightly softer than the 20% earnings growth which the bank delivered last year. The stock prices of JPMorgan and Wells Fargo have risen 12% and 10% respectively this year, pacing a 10% gain in the S&P500.
Back to yesterday’s markets and the focus was on the better-than-expected US jobless claims (346k vs 360k expected and 388k last week) which underpinned an early rally in US equities. The Department of Labor said the waning of seasonal distortions drove the large decline in jobless claims. DB's economists had already discounted much of the backup in jobless claims over the previous few weeks because of the Easter holiday and believe the better jobless claims provide some support to the view that the economy is not witnessing another midyear growth stall, but instead merely a weather or sequester-driven soft patch.
The S&P500 ended with a gain of 0.36% despite some jitters on the back of underperformance in tech stocks (-0.72%). Reports of weak demand for PCs and smartphones sent tech heavyweights including Microsoft, Hewlett-Packard and Intel 4.5%, 6.5% and 2% lower on the day respectively.
Nevertheless, the S&P500 closed within 7 points of the 1600 level as it marked yet another record high. The Euro (+0.2%) continued its recent spike against the dollar, closing just shy of the 1.31 mark. Credit had another solid session with the European iTraxx, Crossover and CDX IG closing 2bp, 14.5bp and 0.5bp tighter on the day as they reach the pre-roll tights seen in March. In commodity markets, oil continues to decouple from other asset classes with Brent closing 1.4% lower after the IEA cut their forecasts for global oil demand, bringing the last two week’s losses for crude to 6%.
Turning to Asia, the Nikkei (-0.5%) is lagging on profit-taking after a week that has seen the index gain 10%. The KOSPI (-0.7%) is also underperforming amid reports that the Pentagon believes that North Korea has the ability to place miniaturized nuclear warheads on missiles (AFP). On that note, Deutsche Bank is hosting a special call on North Korea titled “No Way Out?” with Professor Victor Chua, Director of Asian Studies at Georgetown University. Details of the call are included at the end of today’s EMR.
Rounding off the main headlines, ahead of today’s Eurogroup meeting Eurogroup President Dijsselbloem confirmed that the troika are discussing a possible extension to the Irish and Portuguese bailout programs. Confirming what Reuters reported on Tuesday, Dijsselbloem said the troika made a proposal for a seven-year extension, which he hopes will be finalised at Friday's Eurogroup meeting.
Cyprus returned to the headlines after a government spokesperson confirmed on Thursday that the cost of its EU-IMF bailout has increased to EUR23bn from EUR17.5bn. Details on how the additional EUR6bn will be funded are not clear. The blowout comes as the projected fiscal needs of the state have increased as a result of the deeper-than-expected recession. With the increase in the size of the bailout, Cyprus will now be receiving a bailout that is larger than the size of its GDP. In 2012, Cyprus' GDP was just under EUR18bn, meaning the bailout is approximately 128% of GDP. Expect to hear more on this at today’s ECOFIN.
Turning to the day ahead, we have a full data docket in the US with the preliminary University of Michigan consumer confidence report for April, advance retail sales for March and producer prices. The two-day Eurogroup/ECOFIN meeting begins today. Bernanke delivers a keynote address at the Resilience and Rebuilding for Low-Income Communities Conference. He will make prepared remarks and will not take questions. JPMorgan and Wells Fargo’s earnings are scheduled for midday and 1pm London time respectively.















































































































































































































and.....




http://www.zerohedge.com/news/2013-04-11/there-no-risk-left-anywhere



( if there is no risk to be found anywhere , that means there is risk everywhere..... )



There Is No Risk Left... Anywhere

Tyler Durden's picture
Submitted by Tyler Durden on 04/11/2013 21:51 -0400



Many have argued that sovereign CDS markets 'caused' the problems in Europe - as opposed to simply 'signaled' what was in fact being hidden by cash market manipulation. But as the IMF notes in a recent paper, there are times when the CDS market leads the cash bond market and other times when it lags. But as far as looking at risk in Europe and the US, based on a wonderful model that uses Markov-switching to predict what the probability of the world being in a low-risk or high-risk state, we are as 'low risk' as we have been since the crisis began. Each time that level ofcomplacency was reached before, equity markets have rapidly sold off. What is perhaps most notable is the systemic compression of every risk indicator, first VIX (Kevin Henry and the fungible excess reserves of every prime dealer whale), then the liquid SovX index (via Greece CDS auction uncertainty and 'naked' short bans), then the Euro TED Spread (via LTRO), then individual Sovereign CDS (via Draghi's 'promise'). The result, the 'free-market' signal of risk is non-existent.
Look carefully at the Nov 2011 period onwards and the step by step compression of each risk indicator (from high probability of high-risk to low probability) - crushing the free market's signals...

The last three times the 'model' was so complacent about risk, Q3 2008, Q2 2010, and Q2 2012, the S&P 500 rapidly lost around 40%, 17%, and 11% respectively.

Charts: IMF

http://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100023990/emu-plot-curdles-as-creditors-seize-cyprus-gold-reserves/



EMU plot curdles as creditors seize Cyprus gold reserves

By  Economics Last updated: April 11th, 2013
Cyprus has agreed to sell gold reserves to raise around €400m
Cyprus has agreed to sell gold reserves to raise around €400m. (Photo: Alamy)
First they purloin the savings and bank deposits in Laiki and the Bank of Cyprus, including the working funds of the University of Cyprus, and thousands of small firms hanging on by their fingertips.
Then they seize three quarters of the country’s gold reserves, making it ever harder for Cyprus to extricate itself from EMU at a later date.
The people of Cyprus first learned about this from a Reuters leak of the working documents for the Eurogroup meeting on Friday.
It is tucked away in clause 29. "Sale of excess gold reserves: The Cypriot authorities have committed to sell the excess amount of gold reserves owned by the Republic. This is estimated to generate one-off revenues to the state of €400m via an extraordinary payout of central bank profits."
This seemed to catch the central bank by surprise. Officials said they knew nothing about it. So who in fact made this decision?
Cypriots are learning what it means to be a member of monetary union when things go badly wrong. The crisis costs have suddenly jumped from €17bn to €23bn, and the burden of finding an extra €6bn will fall on Cyprus alone.
The government expects the economy to contract 13pc this year as full austerity bites. Megan Greene from Maverick Intelligence fears it could be a lot worse.
She says the crisis has reached the point where it would be “less painful” for Cyprus to seek an “amicable divorce” from the eurozone and break free.
Quite so, and while we’re at it, lets seek an amicable divorce for everybody, for Portugal, for Ireland, for Spain, for Italy, and above all for Germany, since they are all being damaged in different ways by the infernal Project. All are victims of their elites.
It is an interesting question why Cyprus has been treated more harshly than Greece, given that the eurozone itself set off the downward spiral by imposing de facto losses of 75pc on Greek sovereign debt held by Cypriot banks.
And, furthermore, given that these banks were pressured into buying many of those Greek bonds in the first place by the EU authorities, when it suited the Eurogroup.
You could say that this is condign punishment for the failure of Cyprus to deliver on its side of the bargain on the 2004 Annan Plan to reunite the island, divided by the Attila Line since the Turkish invasion in 1974.
Greek Cypriots gained admission to the EU on the basis of a gentleman’s agreement, then resiled from the accord. President Tassos Papadopoulis later deployed the resources of the state to secure a "No" in the referendum on the Greek side of the island. No wonder the EU is disgusted.
But there again, Greece behaved just as badly. It threatened to block Polish accession to the EU unless a still-divided Cyprus was admitted, much to the fury of Berlin.
The workhouse treatment of Cyprus is nevertheless remarkable. The creditor powers walked away from their fresh pledges for an EMU banking union by whipping up largely bogus allegations of Russian money-laundering in Nicosia. A Council of Europe by a British prosecutor has failed to validate the claims.
The EU authorities have gone to great lengths to insist that Cyprus is a “special case”, but I fail to see what is special about it. There is far more Russian money – laundered or otherwise – in the Netherlands. The banking centres of Ireland and Malta are just as large as a share of GDP. Luxembourg’s banking centre is at least four times more leveraged to the economy.
It should be clear by now that the solemn pledges of EMU leaders are expendable. They change their mind whenever its suits them, and whenever the internal politics of their own countries demands.
Cyprus may not be a “template” but it is clearly a warning to any other EMU country that needs help from now on. The creditor powers will go to extraordinary lengths to avoid sharing the costs.
We now learn that one of those lengths is to seize gold reserves. So what will happen as Portugal’s economy slides deeper into its contractionary vortex, and its deficits remain stubbornly stuck near 6pc of GDP despite the fiscal cuts, and its public debt hits 124pc of GDP this year?
Portugal holds 382 tonnes of gold, the 14th largest holding in the world, and more than either Britain or Spain. For the sake of delicacy, I will skip over the methods by which Salazar acquired that gold.
So will the Troika order Portugal to hand over these reserves if the country requires a second bail-out, as deemed likely by a great number of analysts in the City?
Will they impose savage haircuts on anybody with savings or operational funds above €100,000 in Portuguese banks? Portugal’s banks may be healthy, but that is no protection.
The original plan in Cyprus – approved by the Eurogroup, but rejected by the Cypriot parliament – was to steal the money from any bank regardless of its health, and from small depositors regardless of the €100,000 guarantee. They have shown their character. The Eurogroup don’t give a damn about moral hazard. They are thieves.
Furthermore, the northern powers skip lightly over their own responsibility for what has happened. They seem not to recognise that EMU was a joint venture. The creditor states were entirely complicit. They flooded the South with cheap debt. They failed to understand the ruinous implications of monetary union just as badly as the southern states.
Eurozone citizens still have a touching faith in the euro and the EMU Project. They blame their own leaders, their own bankers, even the head of statistics office in Greece. But most still refuse to blame monetary union itself.
This is understandable. Even Nobel laureate Robert Mundell seems to have trouble understanding his own theory of "optimal currency areas".
Yet this escalating assault on bank savings and on the state assets of victim nations is gradually taking its toll. Throw gold into the mix and you touch an atavistic nerve. The Cypriot gold confiscation of April 2013 may matter more than first meets the eye.
On a side note, Greek unemployment reached a fresh record of 27.2pc in January. Youth unemployment reached 59.3pc. Ah, but, recovery is surely round the corner.
Greece’s foreign minister is digging himself deeper into a hole on the issue of war reparations against Germany. He told his parliament that Greece “reserves the right” to seek damages at the International Court of Justice in The Hague.
Germany’s Wolfgang Schauble dismissed the demarche as irresponsible. Time has resolved the matter, he said. They won’t get one bent Pfennig.
Nor will Germany when Greece defaults on its rescue loans.


Central Bankers are the true shot callers out here......



http://www.guardian.co.uk/business/2013/apr/11/eurozone-crisis-cyprus-bailout-dsa-eurogroup#block-5166ca14e4b06bae4b7cdab4

Draghi warns against firing Cyprus's central bank governor - report



Mario Draghi, president of the European Central Bank (ECB), speaks during a news conference at the bank's headquarters on April 4, 2013 in Frankfurt, Germany.
Mario Draghi, president of the European Central Bank (ECB), has reportedly written to Cyprus's president warning against dismissing his central bank governor. Photograph: Imago/Barcroft Media

As if Cyprus’ problems weren’t big enough, the island’s president also appears to face mounting criticism from European Central Bank Mario Draghi over his treatment of the governor of the central bank of Cyprus, reports Helena Smith, our correspondent in Athens.
She writes:
The ECB president Mario Draghi has reportedly taken the unusual step of reading the riot act to Cypriot president Nikos Anastasiades following mounting pressure on the island’s central bank governor to resign.
In a withering letter, Draghi warned the embattled leader that firing Panicos Demetriades over his handling of Cyprus’ worsening crisis would go against European Union law with which, he said, local legislation had to be “compatible.”
“As you know any decision to remove a governor from his duties is subject to judicial investigation by the Europe Union court,” he wrote adding that a central bank governor could only be sacked if he was found to be incapable of conducting his duty or judged guilty of serious misconduct.
The measures, he reminded Anastasiades, had been put in place to guarantee the independence of central bank governorship.
Draghi's letter was first reported by Ta Nea, Grece's leading daily, this afternoon - here's the story.
Helena adds:
Demetriades, who was appointed by former president Demetris Christofias, a veteran communist, has faced furious criticism over his role in the collapse of the island’s second largest lender, Laiki, and enforced losses depositors with over 100,00 euro at Laiki and the Bank of Cyprus will be forced to shoulder. Anastasiades says the central bank should have restructured Laiki after it was nationalized last year. The governor, who insists that the stringent terms of Cyprus’ bailout was a “political decision,” now faces criminal charges when a parliamentary investigation commences next week.
Draghi wrote the letter after the Cypriot leader sacked Demetriades’ deputy, Spyros Stavrinakis, earlier this week, Ta Nea said.
I just called the ECB, but alas they won't comment on the letter, or confirm that it was sent.
The ECB statute, though, is pretty clear that central bank governors can't be fired on whim. Here's the key section:
STATUTE OF THE EUROPEAN SYSTEM OF CENTRAL BANKS AND OF THE EUROPEAN CENTRAL BANK
14.2. The statutes of the national central banks shall, in particular, provide that the term of office of a Governor of a national central bank shall be no less than five years.
A Governor may be relieved from office only if he no longer fulfils the conditions required for the performance of his duties or if he has been guilty of serious misconduct. A decision to this effect may be referred to the Court of Justice by the Governor concerned or the Governing Council on grounds of infringement of these Treaties or of any rule of law relating to their application.
Such proceedings shall be instituted within two months of the publication of the decision or of its notification to the plaintiff or, in the absence thereof, of the day on which it came to the knowledge of the latter, as the case may be.
[end]












http://hat4uk.wordpress.com/2013/04/11/euroblown-it-looks-like-the-inflating-cost-of-the-euro-project-is-proving-too-much-for-germany/


EUROBLOWN: It looks like the inflating cost of the euro project is proving too much for Germany

A couple of days ago, Syriza leader Alexis Tsipras went on Greek telly to advise Prime Minister Antonis Samaras that he should cease negotiating with the Troika, and instead agree a joint strategy with “his counterparts in southern Europe”.
It’s not hard to see why Tsipras said this. It certainly feels as if the cost of being bailed out is rising….and at times changing from out to in. His line during the Skai interview was to point out that, geopolitically, Greece has a much stronger poker hand than you might think judging from the way the Government keeps in sticking its backside in the air for the Troikanauts to roger at will.
The thing is, whatever ClubMed seems prepared to give, the EC (aka Berlin) always winds up deciding it wants more. Once Nicosia decided to cave in, for instance, the total bailin bill for Cyprus grew within ten days from €17 to €23 billion – ie, by 35%. So you see, when Brussels-am-Berlin is paying, well then – the bailout cost remains constant….as in, constantly insufficient. But when the natives are paying, it sky-rockets.
There’s a trend here, and I think I’ve spotted it: eurozone casualties are being offered less – and waiting longer for it – while being asked for more and more in return. Thus in Athens right now, the Greek government is trying to secure the release of two slices of rescue funding. One is a €2.8 billion allocation that had been due in March, and is conditional on Greece meeting its pledge to streamline the civil service. The other is a €6 billion payout for the second quarter of this year, which will be released only if inspectors are satisfied with the overall progress of the country’s economic overhaul.
Unfortunately, the economic overhaul is producing an underperforming economy. Given that taxes are up, wages are down, unemployment is up and investment is non-existent, underperformance is pretty much what the textbooks predict. So, the March tranche is late…and the Q2 dollop is dependent on madness being redefined as sane. The roulette table is, let’s face it, not exactly level. But in a bid to disguise this at the same time as confusing the sh*t out of everyone trying to take the situation seriously, the EC issued the following “plan” for Cyprus during the last 24 hours:
‘In accordance with policy plans, major financial institutions will be downsized – and combined with extensive bail-in of uninsured depositors, plus a set of wide-ranging temporary capital controls and administrative measures. The programme is envisaged to build the foundation for sustainable growth over the long run. Nevertheless, in the short run, the economic outlook remains challenging. Real GDP is projected to contract cumulatively in 2013-14.’
Yeh right, well, hmm. You see, thing is, GDP does that irritating knee-jerk contraction thing whenever some ignorant f**kwit decides to try and build the foundation for sustainable growth by blowing up the foundations. And so we find that:
‘Short-run economic activity will be negatively affected by the immediate restructuring of the banking sector, which will impact on net credit growth and by additional fiscal consolidation measures. Temporary restrictions required to safeguard financial stability will hamper international capital flows and reduce business volumes in both domestic and internationally oriented companies. The bail-in of uninsured depositors will cause a loss of wealth, which will reduce private consumption and business investment. This, compounded by the impact of fiscal consolidation already undertaken and new measures agreed, will result in a sharp fall in domestic demand. Little reprieve can be expected from exports amid uncertain external conditions and a shrinking financial service sector.’
That is, if I may say so, not entirely encouraging. In fact, I rather think this is what the spin doctors call “expectation management”. So when their own policies turn out to be ruinous, the Eurocrats can come back with “Don’t say we didn’t warn you”. Remarkable.
However, events are running ahead of the EC’s bollocks. This afternoon, Slovenian 10-Year bonds spiked up to 6.47%. Two days ago, the Portuguese constitutional Court rejected the Troika’s bailout austerity plan. Italy is spoiling for a fight. And as we saw above, Alexis Tsipras obviously wants to join forces with Beppo Grillo and tell the Eunatics to take a running jump.
“We’re all wondering which pebble will cause the telling ripple,” a good friend said to me this afternoon. But I’m rapidly coming to the conclusion that it will be a telescoped aggregate of pebbles that does for the euro.
As I posted last night, ‘Downright denial of insolvency became “a strategy we must follow for eurozone growth”’. But this is merely the sort of thing said by those who know the game is up. I have a feeling in my water that our friends in Berlin may soon find the Frankfurt pressure to back away irresistible. After all, when Wolfgang Münchau says “Was nicht nachhaltig ist, endet irgendwann” (What cannot be sustained must ultimately end) then you have to feel that the last Euro-Bull is finally going Bear.


http://famagusta-gazette.com/approval-of-property-tax-legislation-a-precondition-for-first-loan-installm-p18927-69.htm


Approval of property tax legislation a precondition for first loan installment to Cyprus
Hasikos said that the Republic of Cyprus must collect approximately 70-75 million euro from Immovable Property Tax, additional to the current amount of 29 million euro.


FAMAGUSTA GAZETTE
• Thursday, 11 April, 2013
Interior Minister Socratis Hasikos has said that a bill on Immovable Property Tax (IPT) is being drafted at a rapid pace and will be tabled before the House plenary the soonest possible.

This, he pointed out, is a prerequisite for the first installment of Cyprus’ rescue plan, as agreed between the government and its international lenders.

In statements after a meeting of the House Committee on Internal Affairs, Hasikos said that he has worked with the Finance Minister Haris Georgiades with a view to complete this bill.

However, he added, the procedure was suspended as the Finance Minister left to attend the Eurogroup meeting to be held on Friday and will continue when Georgiades returns to Cyprus.

Hasikos said that the Republic of Cyprus must collect approximately 70-75 million euro from Immovable Property Tax, additional to the current amount of 29 million euro.

He stressed that the approval of this legislation is one of the conditions that must be met for the first installment from Cyprus’ international lenders to be disbursed.

Replying to a question, the Minister said that the memorandum of understanding with the troika of international lenders refers to the need to limit the costs of the local administration.

The government has concluded a deal with the Troika of international lenders, which needs to be ratified by national parliaments and the Eurogroup. The Eurogroup reached an agreement with the Cypriot authorities on the key elements necessary for the macroeconomic adjustment programme.

The island’s second largest bank, Cyprus Popular Bank (Laiki), splits into a "good" and a "bad" bank. The bank`s "good" assets are being transferred to the Bank of Cyprus, where a massive haircut is being imposed on uninsured deposits of more than €100,000.



http://www.ekathimerini.com/4dcgi/_w_articles_wsite1_1_11/04/2013_493263


Gov’t, troika edge toward deal on civil servants

 Athens hopes to be able to announce an agreement by Tuesday

 Administrative Reform Minister Antonis Manitakis leaves the prime minister's office at the Maximos Mansion in central Athens on Thursday.
Government officials continued tough talks with the troika on a contentious overhaul of the civil service on Thursday, indicating that gradual progress would likely yield a deal by Tuesday, as Finance Minister Yannis Stournaras arrived in Dublin, where he is to face his eurozone counterparts on Friday at an informal summit.
In Stournaras’s absence, Alternate Finance Minister Christos Staikouras led the Greek side in ongoing negotiations with troika envoys that were also attended by Administrative Reform Minister Antonis Manitakis whose ministry has been tasked with overseeing the streamlining of the civil service. Troika officials also met with Development Ministry employees to discuss a Greek proposal to lighten the burden on excessively indebted households and businesses. Other issues – including the possible reduction of an unpopular property tax and allowing debts to the state to be paid back in more than 40 installments – appeared to have been resolved, according to sources.
The government is expected to present as a victory for the Greek side the fact that Athens managed to plug a 4-billion-euro “financing gap” for 2013 and 2014 without imposing additional austerity measures, beyond the so-called “prior actions” already pledged to foreign creditors in exchange for continued rescue loans.
The key prior action that Greece has yet to make good on is the downsizing of the civil service. The troika reportedly wants the government to start by laying off 2,000 employees accused of disciplinary offenses. Manitakis has insisted that dismissals cannot be carried out until the cases have been resolved and is reportedly seeking ways to accelerate the process of disciplinary hearings. In any case, Manitakis reportedly objects to committing to a specific number of layoffs by a certain deadline.
Sources close to the minister said on Thursday that the troika’s call for 20,000 layoffs by the end of next year is over and above what Greece committed to in the second loan agreement it signed last year. If foreign envoys insist on this stance, Manitakis is likely to withdraw from the talks and allow other government officials to continue talks.
Sources told Kathimerini that the troika might give Athens some extra time – possibly until summer – to show progress in speeding up the process by which oath-breaking civil servants are found guilty or exonerated so that dismissals can begin.
A spate of surprise inspections by state officials on ministries and state organizations suggests that a significant proportion of civil servants are consistently failing to turn up to work. Inspections over the past week on offices of five ministries – Finance, Administrative Reform, Education, Health and Tourism – revealed that a large number of employees were absent without good reason. In the case of the Education Ministry, 20 percent of the employees were unjustifiably absent, Kathimerini understands. According to sources, civil servant absence rates soared during last November’s extended strike action by public transport workers. Employees have reacted angrily to the crackdown, with many accusing authorities of using “intimidation tactics.”


http://www.ekathimerini.com/4dcgi/_w_articles_wsite1_1_11/04/2013_493088


Schaeuble turns down prospect of WWII reparations


Less than a week after the publication of a top-secret report compiled at the behest of the Finance Ministry in Athens which suggested that Germany owes Greece billions in World War II reparations, Berlin has once again rejected the prospect of compensation.
“The issue was settled a long time ago. Paying reparations is out of the question,” German Finance Minister Wolfgang Schaeuble said according to reports in the media.
The report which was drafted by a team of experts at the Finance Ministry and leaked by To Vima newspaper on Sunday suggested that Greece is owed 162 billion euros in World War II reparations from Berlin.
According to the report experts found that Germany should pay Greece 108 billion euros for damage to infrastructure and 54 billion euros for a loan that the Nazi occupation forces obliged Greece to take in order to pay Berlin during the war.
The reparations are equivalent to about 80 percent of Greek gross domestic product.
“I deem that such statements are irresponsible,” Schauble was quoted as saying. “Instead of misleading the people in Greece it would be better to show them the road to reforms.”






http://www.zerohedge.com/news/2013-04-11/who-goes-next-portugal-or-slovenia-forensic-take


Who Goes Next: Portugal Or Slovenia - The Forensic Take

Tyler Durden's picture
Submitted by Tyler Durden on 04/11/2013 14:24 -0400



The troubles in Cyprus have set off a new examination of the health of the eurozone, with a particular focus on which country might be next in line for a bailout and the extent to which shareholders and depositors will take losses when banks fail (bail-ins). As UK think-tank, OpenEurope notes, much of the attention has settled on two countries. Portugal, which has been propelled back into the headlines, with the country’s constitutional court recently ruling against some of the government’s EU-mandated budget cuts. Secondly, Slovenia, which is facing a massive banking crisis, in turn providing another potential testing ground for the eurozone’s vaguely defined ‘bail-in’ plans. OpenEurope provides a quick run-down of thekey points to watch in each country.

Portugal
  • Domestic demand, government spending and investment are contracting sharply, leaving the country heavily reliant on uncertain export growth to drive the economy.
  • By cutting wages and costs at home (internal devaluation), Portugal has in recent years improved its level of competitiveness in the eurozone relative to Germany. However, this trend actually started to reverse sharply in 2012, meaning that the divergence between countries such as Portugal and Germany has begun growing again – exactly the sort of imbalance the eurozone is seeking to close.
  • In its austerity efforts, Portugal is now coming up against serious political and constitutional limits. For the second time, the country’s constitutional court has ruled against public sector wage cuts – a key plank in the country’s EU-mandated austerity plan – while the previous political consensus in the parliament for austerity has evaporated.
  • In combination, it will be increasingly difficult for Portugal to sell austerity at home and consequently to negotiate its bailout terms with creditor countries abroad.
  • Portugal may well need some further financial assistance before long. It is unlikely to take the form of a full second bailout, but could involve use of the ECB’s OMT, assuming Portugal can return to the markets fully beforehand (even briefly).

Slovenia
  • Slovenia is not Cyprus – in fact it is much more like Spain. Its banks are significantly undercapitalised with toxic loans now standing at 18% of GDP. Banks only have provisions to cover less than half the potential losses resulting from these loans.
  • At the same time, a heavily indebted private sector is now desperately trying to get debt off its books, which alongside continued austerity and lack of investment, have caused growth to plummet.
  • Though a full bailout is unlikely, the country could soon need an EU rescue package worth between €1 billion and €4 billion (between 3% and 11% of GDP) to help restructure the country’s bust and mismanaged banks.
  • Such a plan is likely to include losses for shareholder (bail-ins) but, unlike in Cyprus, it may not hit large (uninsured) depositors and there will be no attempt whatsoever at taxing smaller (insured) depositors.

Full report below:












Thursday, April 11, 2013 1:45 AM


Eurointelligence Founder Wolfgang Münchau, Once a Staunch Euro Supporter, Now Welcomes the Anti-Euro Party "Alternative for Germany"


Things have no gone full circle. Wolfgang Münchau, a staunch euro supporter now realizes the political hopelessness of it all. In an article in Der Spiegel, Münchau shows he is ready to throw in the towel.

Via Mish-modified Google Translation ... 
 In her final year as prime minister, Margaret Thatcher concluded that a too close interaction with the newly reunited Germany was out of the question.

Thatcher's Industry Minister Nicholas Ridley said in 1990 in a careless interview in "Spectator" that the planned monetary union was a German conspiracy with the aim of seizing power in Europe. Ridley had reason to resign. Thatcher was deposed shortly thereafter.

I was working as a journalist for the "Times" in London and still remember my outrage at Ridley's anti-German comments. In retrospect, I must admit, however: It's been exactly as predicted by Ridley. Germany has become the central power in Europe.

Thatcher and Ridley concluded that from a purely power-political perspective, a junior partner in such an asymmetric monetary union would  not be happy. That is how the Italians, Spanish and French feel today.

On Tuesday, George Soros recommended to SPIEGEL ONLINE that either Germany should accept the Euro-bonds or exit from the euro. Soros says that it would be better for Germany to leaving the euro than Spain or Italy. If the Southern states leave the euro, then there will be chaos.

One can certainly make the necessary adjustment within the monetary union, but that requires an almost total centralization of all economic policies. Eurobonds would be only the beginning. This is not a realistic political opportunity. If we reject this path, you should also be honest and say: this is an end to the monetary union.

I welcome the establishment of the anti-euro party "alternative for Germany". I do not share their position. But the position of AfD is coherent. In contrast, the position of the CDU and FDP, pro-euro but against eurobonds is inherently contradictory.

Margaret Thatcher was also consistent with respect to Europe. She had a sure instinct for both the economic and political power for the future development in the euro zone. For that I pay tribute with respect.

Soros: "If someone leaves the euro, it should be Germany"

Münchau referred to the Spiegel article (translated) Soros: "If someone leaves the euro, it should be Germany". It's an interesting read.

I disagree with  Münchau and Soros that the euro is worth saving. However, I agree with Münchau and Soros that a breakup of the eurozone is best accomplished by Germany leaving the eurozone than by a piecemeal breakup. I said the same thing long ago.

I appreciate the fact that Münchau now recognizes the political hopelessness of it all. This was apparent long ago, but it is far easier on me. I did not have to switch sides.

Unfortunately, a piecemeal breakup now appears to be destiny. Every head of state in  Europe desperately wants to keep this act together, especially chancellor Angela Merkel. Nonetheless, the politics are also such that eurobonds and transfer mechanisms are out of the question.

It's Just Impossible

  1. The Bundesbank said there should be no banking union until there is a fiscal union. 
  2. Angela Merkel said that there should be no fiscal union until there is political union. 
  3. François Hollande said that there should be no political union until there is a banking union 

  4. Merkel has explicitly ruled out eurobonds on many occasions.
     
So here we are.

And as I have stated on  many occasions ...

Eventually, there will come a time when a populist office-seeker will stand before the voters, hold up a copy of the EU treaty and (correctly) declare all the "bail out" debt foisted on their country to be null and void. That person will be elected.

One more major crisis is about all it will take.

Mike "Mish" Shedlock


http://www.zerohedge.com/news/2013-04-11/spanish-home-prices-plunge-most-record


Spanish Home Prices Plunge Most On Record

Tyler Durden's picture
Submitted by Tyler Durden on 04/11/2013 08:54 -0400



Despite reassurances from D-Boom that "Spain can once again be the engine of growth for Europe," the troubled nation appears to be going from bad to worse. House prices dropped 9.7% YoY in Q4 2012, its biggest drop on record, taking the price back to 2004 levels. This price pressure merely exacerbates the Spanish banking system's delinquent loans and drives up unemployment. But Spain is not alone, Slovenia, which many have their eye on for being the next bail-in, saw house prices slide 8.8% according to IBTimes. Perhaps there is a correlation between house price bubbles (cough US cough) and banking/sovereign collapse.
Growth Engine?
House prices fell at the fast pace on record in Q4 2012...

and Spanish non-performing loans are increasing at an ever-faster rate to September

as unemployment surges to all-time record highs...

Chart: Bloomberg


and....



http://www.zerohedge.com/news/2013-04-11/cyprus-bailout-size-increases-35-one-month-%E2%82%AC23-billion-120-gdp

( Sustainability in question as damage to  Cypriot banks and its bitcoin like economy  becomes more clear .... So , just where is Cyprus supposed to fire another 6 billion ? And what will the bailout size be next month ? )


Cyprus Bailout Size Increases By 35% In One Month To €23 Billion, 120% Of GDP

Tyler Durden's picture
Submitted by Tyler Durden on 04/11/2013 08:19 -0400



As was reported in the previously presented Cypriot Debt Sustainability Analysis, which among other things had this stunner inside of it, things in Cyprus have gone from bad to worse in the brief span of a month. 35% worse to be exact, because this is how much the total bailout of Cyprus has grown by in a few shorts weeks, from €17 to €23 billion, which happened because just as we predicted the stealth outflow from banks was much worse (read bigger) than previously reported, leaving banks with a far bigger hole to plug. This is problematic because at least previously the bailout as a percentage of GDP was in the double digits. No longer so, as the latest (and soon to be re-revised higher) bailout figure now stands at over 120% of the country's €18.8 billion GDP (which itself is about to tumble following the collapse of the economy).
From the Guardian:
Crisis-hit Cyprus will be forced to find an extra €6bn (£5.1bn) to contribute to its own bailout under leaked updated plans for the rescue.

In total, the bill for the bailout has risen to €23bn, from an original estimate of €17bn, less than a month after the deal was agreed – and the entire extra cost will be imposed on Nicosia.

Cyprus's politicians had already faced intense domestic political pressure for agreeing to impose hefty losses on savers at two struggling banks in order to fulfill its eurozone partners' demands of contributing €7bn.

But after a more detailed "debt sustainability analysis" showed that the black hole in the island nation's finances is far deeper than first thought, the total bill for Cypriot taxpayers and depositors has now been set at €13bn. The €23bn overall bill is larger than the size of the Cypriot economy.

The document, leaked on Wednesday night, underlines the botched nature of the initial bailout agreement, which was hurriedly cobbled together in March and had to be redrawn after Europe's finance ministers rejected the idea that depositors holding less than €100,000 – whose savings are meant to be insured – would face deep losses.

Under the new plan, which is likely to spark fresh public outrage, Cyprus will be forced to sell €400m-worth of gold reserves, renegotiate the terms of a loan with Russia and "bail-in" creditors of the Bank of Cyprus, to claw back some of the cost of the rescue.
Furthermore, as we also forecast, Cyprus will soon be forced to engage in some form of Greek-like PSA, or other "consensual" exchange offer, with the details still murky, but the outcome clear: convert yet another debt instrument into a "perpetual PIK" never to pay interest or be repaid again.
There was also a suggestion that holders of €1bn-worth of Cypriot government bonds could be urged to agree to a debt swap, reducing the country's repayments. That could signal a messy period of negotiation and uncertainty.
Finally, the DSA had the following clause, which was also previously reporterd:
Sale of excess gold reserves: The Cypriot authorities have committed to sell the excess amount of gold reserves owned by the Republic. This is estimated to generate one-off revenues to the state of EUR 0.4 bn via an extraordinary pay-out of central bank profits
Yet somehow this happened without the actual "Cypriot authorities" knowledge, because the entire morning has been spent by them denying they had any idea this has happened. Alas, when one has ceded all sovereignty to the Troika, the word "authority" has a far looser meaning.





Cyprus must not have read or been given the part of the plan requiring the sale of their gold and what about their natural gas and oil ?




Cyprus Central Bank Denies Plan to Sell Gold

By Holly Ellyatt | CNBC – 2 hours 5 minutes ago
The Central Bank of Cyprus denied that it will sell 400 million euros ($525 million) worth of its gold reserves as part of the conditions to Europe's bailout of the island state.
Aliki Stylianou, a spokesperson at the central bank told CNBC on Thursday that there was "no such thing being discussed."
"The decision to sell the gold is a decision to be taken by the board of the Central Bank of Cyprus (CBC). No such thing has been discussed or is in the process of being discussed. There are so many rumors flying about and this is just one of them," she said.
Stylianou's comments contradict the contents of a draft document from the European Commission assessing the financing needs of Cyprus, published by the Financial Times on April 9.
"The "programme" scenario takes into account a number of policy measures to strengthen debt sustainability, in particular (i) proceeds generated by privatisation of state-owned assets; (ii) the proceeds from the sale of excess gold reserves owned by the Cypriot Republic; and (iii) an asset swap in order to repay in kind part of the loan that the Central Bank of Cyprus extended to the Republic prior to the euro accession."
The European Commission (EC) also added that the "programme scenario" was based on the commonly agreed macroeconomic forecast and the fiscal consolidation measures...agreed between the Cypriot authorities and the Troika on 2 April 2013, including, inter alia...[the] sale of excess gold reserves of 0.4 billion euros."
The news that Cyprus was going to sell a large part of its gold holdings pressured bullion prices on Wednesday. Gold (Exchange:XAU=) settled 1.65 percent lower at $1,558 an ounce on Wednesday. A sale of the size suggested in the EC document would be the biggest bullion sale in Europe since 2009.
-By CNBC's Holly Ellyatt, follow her on Twitter @HollyEllyatt

and....


http://www.zerohedge.com/news/2013-04-11/overnight-sentiment-keep-ignoring-fundamentals-keep-buying

Overnight Sentiment: Keep Ignoring Fundamentals, Keep Buying

Tyler Durden's picture
Submitted by Tyler Durden on 04/11/2013 07:08 -0400



Futures green? Check. Overnight ramp in either the EURUSD or USDJPY carry funding pair? Check? Lack of good economic news and plethora of economic misses? Check. In short, all the ingredients for continued New Normal record highs, driven only by the central bank liquidity tsunami are here. The weakness started with Australia's stunning unemployment jump overnight which saw a 36,100 drop in jobs on just 7,500 expected. A miss in Chinese auto sales was next, with 1.59MM cars sole in March, below the 1.596 expected, and even despite the surge in M2 and loan data, the Shanghai Composite closed down once again, dropping 0.29% to 2219.6. Nikkei continued its deranged liquidity-fueled ways, rising 1.96% even as Kuroda is starting to become quite concerned about the rapid move in the Yen, saying he "may adjust policy before the 2% target is reached if the economy and other indicators are growing rapidly." They aren't, and won't be, but if the Nikkei225 is confused for the economy, he just may push on the breaks which would send the only reason for the latest rally, the USDJPY tumbling. Finally, looking at Europe, Italy sold well less than the maximum €6 billion targeted in 2016, 2017 and 2028 bonds, which dented some of the enthusiasm for Italian paper although with Japanese money desperate to be parked somewhere, it will continue going into European and all other fixed income, distorting market signals for a long time.
In short, expect the central-bank risk levitation to continue as all the deteriorating fundamentals and reality are ignored once more, and hopium and P/E multiple expansion are the only story in town.
SocGen summarizes the key events to watch out for
The NZD, AUD and SEK have been in a league of their own this week, logging average gains of 3.4% vs the JPY as investors pile into the JPY funded carry trade, but EUR/JPY is not following too far behind with a gain of 2.86%. The extent of grab for eurozone yield has been evident since last week, and flows have also been diverted into EM currencies. As we have pointed out there is a seasonal impact which could support the trend through Q2 bearing in mind historical trends. For some the price action is obfuscating and of course it is a step too far to conclude that the flows into, say EM or stocks, is a testimony of a broader return of risk appetite just as we are seeing a soft patch in the US. To underscore this point pay attention for a second to the German 2y auction yesterday. Total bids of a staggering E9.140bn, the highest since May 2011, and the accepted yield averaged 0.02% vs 0.06% previously. In other words, this flight into the German short-end is telling a story where ‘safety first' takes precedence. The point is that non-euro portfolio investments may well be supporting EUR/USD short-term, but the disconnect with German 2y yields is not ideal for gains to be sustained over a longer time horizon. A proposed extension of the maturities of the EU bailout loans to Ireland and Portugal to 7y (pending the approval by EU finmins) will help to reduce the burden for those countries but will they become self-financing to roll over around E20bn a year between 2016-2020 (Ireland) and between 2015-2021 (Portugal). The strong interest in German 2y paper illustrates there are quite a few who believe that the EU way of ‘kicking the can' cannot go on forever.
And the full overnight summary from Deutsche
The S&P500 (+1.22%) finished the session with its best one-day gain in more than a month and closed at a record high of 1587.73. Similarly, the Dow closed at a record high and the NASDAQ closed at its highest level since 2000. Across the Atlantic, equities paused for a short breather following the FOMC minutes, but soon resumed their upward march. The Stoxx600 (+1.8%) posted a solid gain, led by a 4% jump in banking stocks and a strong performance in Italy (+3.2%) and Spain (+3.4%), despite disappointing industrial production data in both countries. Given the increased talk of QE tapering, it was unsurprising to see gold (-1.7%) and US treasuries (10yr yields +5bp) weaker. A report that Cyprus will be forced to sell most of its gold reserves to raise around EUR400m to finance its portion of its bailout did not help sentiment in the precious metal.
According to Reuters, this will be the first major gold disposal by a euro area central bank since France sold 17.4 tonnes in the first half of 2009. Since October, the precious metal has lost 13%.
In terms of the FOMC minutes themselves, the key message appeared to be that Committee members are inching closer to deciding when to slow asset purchases, but that timing remained contingent on continued improvement in the data. The following line from the minutes probably summed it up: “Many participants…..expressed the view that continued solid improvement in the outlook for the labor market could prompt the Committee to slow the pace of purchases beginning at some point over the next several meetings, while a few participants suggested that economic conditions would likely justify  continuing the program at its current pace at least until late in the year”. Our US economics team concludes that while the majority of policymakers favored a taper in H2, they are not agreed on the necessary preconditions. They may try to reach a consensus at the April/May meeting. But the recent soft patch in the March economic data may cast greater doubt and ease the pressure for action.
In Asia overnight, the market has been surprised by the BoK’s decision to hold the seven day repo-rate unchanged at 2.75% despite the apparent political pressure to loosen policy as geopolitical concerns undermine confidence. The USDKRW (-0.5%) moved several points lower and the KOSPI weakened 0.2% following the BoK’s announcement. In Japan, the Nikkei (+0.3%) doesn’t seem to have been affected by governor Kuroda’s comments yesterday that the BoJ had taken all “necessary” and “possible” measures for now to achieve its 2% inflation goal. Elsewhere, the Hang Seng (+0.9%) is seeing solid gains, driven by financials, after China released monetary and credit data overnight which beat expectations by a fair margin. M2 money supply of 15.7% year-on-year beat estimates of 14.6%, while new loans of RMB1.06trn were comfortably ahead of consensus of RMB860bn. The Australian dollar is 0.3% weaker against the greenback following a disappointing employment print which saw unemployment edge up to 5.6% (vs 5.4% previously).
In terms of other headlines, a few interesting news stories have caught our eye. Starting with Greece, the Bank of Greece Governor George Provopoulos said that the country saw deposit inflows of more than EUR1.5bn in March despite fears the Cypriot banking crisis would cause outflows. Provopoulos said the Greek banking sector averted contagion from the Cypriot crisis by getting Greek lender Piraeus to buy Cypriot bank branches operating in Greece before they reopened after the extended bank holiday.
In Italy, Reuters noted the seemingly increasing signs of division within the centre-left party after weeks of stalled efforts by Democratic Party leader Bersani to form a government. Matteo Renzi, who challenged Bersani unsuccessfully in a party primary last year, called on the centre-left to either drop objections to dealing with Berlusconi’s centre-right bloc or accept the need for new elections. Renzi appears to be boosted by opinion polls which which suggest the Democratic Party could win 32.5%with him at its head compared with 28.2% under Bersani. The impasse doesn’t appear to have affected Italian funding costs thus far, with bond yields still well below those seen after the election in late February.
Also worth mentioning as we begin Q1 reporting season, Taiwan’s Hon Hai, the world’s largest contract manufacturer of electronics, posted its biggest revenue decline in at least 13 years yesterday. First quarter revenues fell 19% year-on-year, missing expectations by 9%, with some analysts saying that the results do not bode well for the sale of iPhones, iPads and other personal electronic devices. Maybe something worth keeping an eye on for the reporting season.
In the US, President Obama released his 2014 budget plans yesterday that will see a $744 billion budget deficit next year, $3.77 trillion in total spending and would add $8.2 trillion to the federal debt over 10 years. It would also eliminate sequester-related spending cuts and raise more than $1 trillion in new taxes.
The budget includes changes in spending on programs such as Social Security by $130 billion over 10 years by using a different inflation measure for calculating annual cost-of-living increases, and making $370 billion in changes to Medicare through cuts to providers. A number of Republican leaders were quick to dismiss the plan though.
Turning to the day ahead, US weekly jobless claims will gather a lot of attention in light of the past weeks’ pattern of rising claims and with last week’s payrolls disappointment. For the record, the market is looking for a print of +360k, down from last week’s five-month-high of +385k. It will be an otherwise quiet day for data.


http://www.zerohedge.com/news/2013-04-11/greek-unemployment-soars-15-one-month-hits-record-272


Greek Unemployment Soars By 1.5% In One Month, Hits Record 27.2%



Tyler Durden's picture
Submitted by Tyler Durden on 04/11/2013 08:02 -0400


There was much hope in the feudal states of Europe that the monthly December drop in Greek unemployment - the first in years - was the beginning of the end for local misery. Alas, it appears the Greek statistics office leaarned a thing or two from the BLS and it was all seasonal adjustments. As reported earlier today, things just got much worse again, with January unemployment surging by 1.5% in one month to a new all time record high 27.2%. More importantly, the number of employed people in Greece, which dropped to a new record low of 3.617,771 compared to 3,888,400 a year ago (and down 11,653 from December), is now nearly as much as the entire inactive population at 3,346,423 and far below the ranks of the unemployed (1,348,694 - an all time high as well) and inactive.
Spread by gender, the unemployment rate for males was 23.9%, while a record 31.4% of eligible women had no job in January.
Finally, youth unemployment once again hit a record high 59.3% in January, even as unemployment among those aged 65-74 has soared from 0.9% in 2008 to 6.9% in 2013.
Some of the amusing, or not so amusing if you are a Greek citizen, charts and tables just release:
Source: Elstat

http://www.ekathimerini.com/4dcgi/_w_articles_wsite1_1_11/04/2013_493153


Athens brushes off Schaeuble comments over WWII reparations


Greece on Thursday responded to comments by German Finance Minister Wolfgang Schaeuble who said Athens should not get distracted by the issue of war reparations from Berlin and instead focus on its economic reform program.
“The reforms being carried out in Greece bear no relation – and can bear no relation – to the issue of German reparations,” Greek Foreign Minister Dimitris Avramopoulos said in a statement adding that the Greek state has been raising the issue for many years.
“Whether this case has been resolved or not is determined by international justice, given that, by its nature, this issue concerns international law and the international justice organs,” Avramopoulos said.
“Greece is not ‘losing its focus’ on the reform policy, despite the great sacrifices the Greek people are shouldering,” he added.
In comments made to Germany's Neue Osnabrucker Zeitung newspaper, Schaeuble said the issue of war compensations has already been “settled.”
“I deem that such statements are irresponsible. Instead of misleading the people in Greece it would be better to show them the road to reforms,” the German said.
Schaeuble was referring to a top-secret report compiled at the behest of the Finance Ministry in Athens. Leaked by To Vima newspaper on Sunday, the report suggested that Germany owes Greece 162 billion euros in World War II reparations.
According to the report experts found that Germany should pay Greece 108 billion euros for damage to infrastructure and 54 billion euros for a loan that the Nazi occupation forces obliged Greece to take in order to pay Berlin during the war.
The reparations are equivalent to about 80 percent of Greek gross domestic product.


http://www.ekathimerini.com/4dcgi/_w_articles_wsite2_1_11/04/2013_493186


Gold swings as Cyprus denies bullion-sale plan


Gold swung between gains and losses as Cyprus denied it plans to sell bullion to ease its debt crisis and some investors reduced holdings on speculation that the US Federal Reserve may scale back stimulus measures.
Several Fed officials said the central bank should begin tapering its quantitative easing program later this year and stop it by year-end, according to the minutes of their March meeting, released Wednesday. Each month the Fed buys $85 billion of securities. Cyprus’s central bank hasn’t discussed any plan to sell gold reserves, the Nicosia-based institution said.
“From a sentiment point of view, it should remove some of the bearish feeling,” David Govett, head of precious metals at Marex Spectron Group in London, wrote in a report Thursday, referring to Cyprus’s denial. “As with all things Europe the waters are far from clear. I suspect that if there are to be any gold sales, they will not happen for a while to come.”
Gold for June delivery was little changed at $1,559.40 an ounce by 7:06 a.m. on the Comex in New York after dropping as much as 0.4 percent and gaining as much as 0.2 percent. Bullion fell 1.8 percent Wednesday. Gold for immediate delivery was 0.1 percent higher at $1,560.33 an ounce in London.
US data on April 5 showed payrolls growth in the largest economy in March was the slowest in nine months. Fed Chairman Ben S. Bernanke said earlier this week that U.S. economic conditions aren’t what he’d like them to be.
Assets in the SPDR Gold Trust, the biggest exchange-traded product backed by bullion, fell to 1,183.53 metric tons Wednesday, the least since May 2010. Goldman Sachs Group Inc. Wednesday cut forecasts for gold through 2014, saying the turn in the price cycle is accelerating on the US economic recovery.
Near-term risk in gold is toward the $1,521 to $1,539 lows, Barclays Plc technical analysts Jordan Kotick and Lynnden Branigan wrote in a report e-mailed Thursday.
Silver for May delivery slipped 0.3 percent to $27.58 an ounce. Platinum for July delivery traded 0.2 percent higher at $1,532.20 an ounce, and palladium for June delivery lost 0.1 percent to $720.10 an ounce. [Bloomberg]



http://pawelmorski.wordpress.com/2013/04/11/cyprus-of-course-its-a-template-you-imbecile/

Cyprus: Of Course It’s A Template

11APR
So we have the Troika’s Debt Sustainability report and the related financing document (kudos to the FT: others had it, only they posted it publicly. Worth reading Peter Spiegel’s post too) and what a shabby, despicable little document it is. The Cyprus negotiations started with a high-risk gamble – that depositors would bear part of the pain of restructuring; unfortunately, the Cypriot parliament then tried to bluff the Troika whilst declaring loudly that they didn’t have any cards at all, and a catastrophe was duly created.
Two-part post: greatest hits from the DSA/EFN; and a quick run-through the “Template” aspects of the solution.
1) the economic forecasts are worse than literally laughable (table) . The drops in consumption and investment look dementedly optimistic given the events of the past month. Exports to drop a mere 5% with the destruction of the banking industry and the introduction of capital controls. The wealth effect wiping deposit worth 60% of GDP will apparently barely register on consumption – the Troika must think the deposits are all Russian. Compare with Iceland (50% drop in investment) or Latvia (40%), the former boosted by devaluation the latter by an intact financial system. Public consumption drops 9% – Iceland held the line here, and we have bitter experience from Greece on how big fiscal multipliers are. These projections cross the line from wild optimism into contemptuously half-hearted fable. This table is a bare-faced lie.
DSA table
2. The attempts to haircut depositors have turned into a fullscale scalping. Aided and abetted by the Cypriot parliament, the bailout cost is EUR5bn higher than the original March 23rd plan envisaged – the pricetag for a mere 5 days. All of this falls on the depositors in the 2 big banks. As the FT notes, that’s 30% of GDP. Great job, Jeroen!
3. The fiscal projections suffer from the presistent Greek problem: undershoot fiscal targets – slaughter economy with new measures to get back to targets – undershoot revised targets. “Insanity is repeating the same mistakes and expecting different results” (Narcotics Anonymous Basic Text, not Einstein, apparently).
4. “Sale of Excess Gold Reserves” for EUR400m. My instant reaction to this is “WTF?”. May have an aim other than being a nifty piece of political humiliation, but buggered if I can see what it is.
It is envisaged to use the allocation of future central bank profits of approximately [EUR 0.4bn], subject to the principle of central bank independence (double WTF?)
5, The banking sector shrinks. The domestic banking industry shrinks at a stroke from 550% of GDP to 350% by a deft combination of taking people’s money and stripping the Greek operations (120% of Cypriot GDP) out and selling them to Pireaus. Given that the Greek operations were to a significant degree responsible for the disastrous GGB trades that wiped out the banks, and given that Pireaus stock rallied sharply afterwards, the Cypriots find themselves in the position of the Blackadder character who not only had a relative murdered, but had to pay to have the blood washed out of the murderer’s shirt. (excellent stuff here on how the Cypriot banks blew up, based on leaked documents).
6.
A number of other policy steps will alleviate financing needs over the programme period, but with limited or no impact on the public debt trajectory: i) the Cypriot authorities will endeavour the roll-over of up to EUR [1.0] bn domestic law long-term debt maturing during the programme period. In order to implement this, the Cypriot authorities intend to undertake a voluntary sovereign bond exchange cover ing bonds maturing in 2013-15.
Tipping their hand a bit there with that “domestic law” stuff. Clearly they don’t see much hope in getting rollovers from foreign investors protected by foreign courts. “Voluntary” is as ever a term the EU seems to struggle with, confusing it with “doing what we want”. At best, moral suasion on banks and local institutions, at worst more Greek-style ex-post re-writing of bond covenants.
This brings us to the question of why the programme looks like this. The (admittedly laughable) debt estimates in the DSA top out at around 65% of peak Greek debt:GDP and below where non-programme Italy is this year. Note that carefully: the Troika felt a path that took Debt:GDP above Italian levels was so dramatic that it required scalping bank depositors. “Sustainability” is a flexible thing. The priorities of the EU have shifted over the years.
The EU is recognising moving towards a new regime of bailing in banks – reducing the size of and protecting core contributions to ESM et al has become a major priority. While what happens will not be identical to Cyprus because Cyprus” banking system was unusual in size and structure. For a non-Template, the Cyprus solution drops some cracking clues as to EU priorities. At present, the capital structure is equity, subordinated debt, then senior debt and depositors together. The new hierarchy will be: equity, sub debt, senior debt, uninsured depositors, and then at the top of the mountain as the floodwaters rise, 
votersinsured depositors (remember that while a very big chunk of deposits are uninsured, almost all depositors are) the ECB and the Eurosystem (the Central Bank of Cyprus remains part of the Eurosystem family, albeit a red-haired stepchild). The ex-Bank Laiki had around EUR9bn of ELA claims at the ECB – enough to severely dilute the depositor haircuts had it been bailed in as per its legal status. In its anxiety to prove Professor Sinn wrong and that ECB claims are not a problem for Germany, the Troika has made it clear that they are a problem for the periphery.
Furthermore, after the Greek PSI, sovereign debt is out of the firing line. Cypriot banks were “different” in having a very small layer of non-depositor debt. But the EU is already divvying up various special classes of “bailinable” and “non-bailinable” depositor. This includes apparently putting interbank deposits on the firing line, presimably because they feel that Mr Draghi is a little comfortable post-OMT and would like the challenge of defrosting a frozen interbank money market.
Citi were out this week with a handy spotters’ guide (thanks Simon Hinrichsen for link) to figuring out which depositors should worry.
For depositors to be at risk, three conditions have to be satisfied. First, there have to be systemically important banks, that is banks whose insolvency would cause economic and financial damage significantly larger than the losses of the directly
involved bank creditors. This likely requires a large banking sector (..). Second, depositors have to be a large share of total bank funding,… Third, the banks have very poor asset quality and are insolvent, with the insolvency gap exceeding the value of the banks’ unsecured liabilities other than depositors.
So this comes down to an issue of asset quality. If the assets are good, then this will probably blow over. If they’re not, and uninsured depositors start to worry, this could get very messy very fast. Good job that we’re endlessly reassured that European banks are in fabulous shape.

http://www.guardian.co.uk/business/2013/apr/11/eurozone-crisis-cyprus-bailout-dsa-eurogroup


Cyprus debt sustainability report: Cyprus to supply €13bn


Good morning, and welcome to our rolling coverage of the eurozone crisis and other developments in the world economy.
The scale of the crisis in Cyprus has been exposed by the official report into the country's debt sustainability assessment, which leaked on Wednesday afternoon [covered in yesterday's blog].
The total rescue package has jumped to €23bn, from €17bn, and it won't be a surprise that it's Cyprus, not its international lenders, filling the gap.
Thanks to the documents [posted online last night by the FT's invaluablePeter Spiegel], you can see that Cyprus is now expected to contribute €13bn to the financing of the adjustment programme. When the deal was first agreed, it was €7bn.

Here's how it breaks down:

1) €10.6bn from restructuring the banking sector (the resolution of Laiki Bank, and "bailing-in" junior debt and uninsured deposits in the Bank of Cyprus)
2) €600m from raising corporation tax, taxes on capital income, and increasing the bank levy on deposits raised by banks and credit institutions
3) €400m through selling some of Cyprus's gold reserves
4) €1.4bn through privatisations.
Cyprus is also expected to haggle a lower interest rate on its loan from the Russian Federation. And roll over some of its own bonds (of which more shortly....)
The unexpected jump in the refinancing package underlines quite how botched the original bailout was, and the scale of the damage caused to Cyprus during those mad March days.
Cyprus is expected to suffer a dire double-digit slump -- contracting by 8.7% this year and another 3.9% in 2014. This chart explains:







Cyprus GDP - from DSA April 2013
Photograph: EC

But it could be much worse -- as the debt sustainability analysis itself warns:
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 price and a prolonged loss of business and consumer confidence.
All factors we've seen played out in other eurozone bailouts since the crisis began. 
And if these forecasts are too optimistic, it's Cyprus who will be dipping back into its pocket. The DPA again:
In the event of underperformance of revenues or higher social spending needs, the Cypriot government has committed to stand ready to take additional measures to preserve the programme objectives, including by reducing discretionary spending, taking into account adverse macroeconomic effects.
A strategy that worked so well in Greece...
The DPA is also pretty blunt about the changes wrought on the Cypriot financial sector. The Cyprus-domestic banking sector used to represent 550% of the country's GDP. Not any more....
As a result of these actions the Cypriot banking sector has been downsized immediately and significantly to [350]% of GDP.
And the conclusion of the Debt Sustainability Analysis could send shivers through Nicosia:
A number of downside and upside risks to the debt projections may impact on the actual debt trajectory. Although difficult to quantify, downside risks appear dominant.
There's some good analysis of the reports already this morning (which I'll link to next). But take a look yourself:
(with another nod to the FT).

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