Evening wrap for Europe...... Definition of insanity on display , Spanish Edition
http://www.zerohedge.com/news/2013-05-28/why-nonsensical-spanish-data-about-make-even-less-sense
Why Nonsensical Spanish Data Is About To Make Even Less Sense
- Budget Deficit
- ETC
- Gross Domestic Product
- headlines
- Michael Cembalest
- non-performing loans
- Recession
- Unemployment
Spanish economic data does not always pass the sniff test. A simple example that JPMorgan's Michael Cembalest explains is that as unemployment rose from 10% to 25% from 2008 to Q2 2012, Spanish banks reported stable non-performing loans of 3%. The latest Mad-riddle, as he calls it, has to do with corporate profits but recent headlines from PM Rajoy, explaining his approach to solving the country's devastating youth unemployment problem just beggars belief. Simply put, as Bloomberg reports, he proposes to create a mechanism to temporarily exclude tax rebates granted to companies for hiring young people from the calculation of the government budget deficit - which, his twisted logic prompts, "would enable immediate action because we’d lower contributions to the Social Security system and this would facilitate and encourage hiring. So in summary, his suggestion to boost youth employment is... to further misreport the deficit and to underfund social security even more. With Spanish data already questionable (as we discuss below), this simply exaggerates an already farcical situation.
Via Michael Cembalest, JPMorgan,
Another Spanish Madriddle: should Spanish GDP data be taken at face value?Sometimes, Spanish economic data don’t make sense. Example: as unemployment rose from 10% to 25% from 2008 to Q2 2012, Spanish banks reported stable non-performing loans of 3%1. The latest Mad-riddle has to do with corporate profits. Earnings for companies in the MSCI Spain Equity Index boomed during the mid 2000’s, when leverage and consumption in the eriphery were rising. They then fell sharply during the recession. On the other hand, the non-financial gross operating surplus for the Spanish private sector show a consistent rise. It’s not uncommon for non-financial operating surpluses to be less volatile than earnings of public companies, as in the U.S.But the Spanish pair don’t even rhyme, and raise questions about Spanish data. One could discard this as a statistical aberration, except that gross operating surpluses are generally derived from the same data used to compute GDP. Other than a pick-up in exports, the rest of the picture in Spain still looks very grim: industrial production, real disposable income, domestic demand, imports, long-term unemployment, business loans, bankruptcies, etc. At some point, given the pace of decline in wages and asset prices, Spain should be able to attract foreign capital again.But you have to wonder if Spain can survive the journey.
and......
New Bankia shares tumble, wiping out family savings in Spain
Nationalised giant has now lost 99% of its stock exchange value since it was listed 22 months ago
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A Bankia cash machine with graffiti surrounding it in Madrid. Shares in the state-owned Spanish lender tumbled on Tuesday. Photograph: Susana Vera/Reuters
Spain's banking crisis wiped out billions of euros of family savings on Tuesday as small investors who bought shares in the nationalised Bankiawere finally able to trade them – but at only a fifth of their original price.
The wipeout on Madrid's stock exchange means that Bankia, which was created by the fusion of seven savings banks, has now lost 99% of its stock exchange value since it was listed 22 months ago.
Preference share owners had been given the tradeable shares, which came with a hefty haircut, as part of a cash injection worth billions of euros into the bank that wreaked most damage on Spain's financial system after suffering huge losses on toxic loans to real estate developers.
Bankia's 11bn new shares, part of a €15.5bn (£13.3bn) recapitalisation, tumbled as soon as they started trading on Tuesday morning. By the end of the day, they were worth half their €1 book value.
Trading in the new shares was meant to have marked a new start for the country's fourth-largest bank by market capitalisation. Last year, it needed a €24bn bailout as part of a wider European rescue of Spain's financial system.
"They're cheating us again, like they did before," Maricarmen Olivares, whose parents lost €600,000 in life savings made from selling her father's car workshop, told Reuters. "Everything is a swindle, the share listing, the compensation package, the value of the stock now."
Spain took €42bn of the €100bn offered to help it clean up banks that were drowning in a sea of bad real estate loans left behind by the country's burst housing bubble. Bankia was the biggest of four nationalised banks that needed funds, along with NCG Banco, Catalunya Banc and Banco de Valencia.
Questions are already being raised about whether banks will have to find yet more capital, amid worries that they have not owned up to all their bad property loans and as the country's economy continues to deteriorate. Reports suggest they may need €10bn more, though Spain can now easily raise any additional funds the state may have to provide on the markets.
Bankia may raise several billion euros from the sale of stakes in the British Airways owner International Airlines Group, electricity company Iberdrola and insurer Mapfre. It agreed last week to sell City National Bank of Florida to the Chilean bank BCI for $883m.
NCG Banco said on Tuesday it would sell its 80-branch EVO network as part of the restructuring plan negotiated with the EU after the injection of €10bn of public money into the lender.
Slovenia wobbling.....
http://www.guardian.co.uk/world/2013/may/28/slovenia-banking-crisis-euro-imf
Eurozone fears for Slovenia as bad debt brings economy to a standstill
Semi-privatisation and crony capitalism threaten 'catastroika' for the Balkan state
Skirting the economic scrap yard? This metals factory in Slovenia was closed by bankruptcy. Photograph: Srdjan Zivulovic/Reuters
Janez Novak is baffled: all this talk about a crisis but nothing seems to be wrong. Obviously business "isn't that bright", he says. Then there are the interest rates the banks have just raised. "I didn't like that much, but we'll get used to it," he adds with a wry grin. "After all, everyone's affected, even France and Spain."
Novak heads RLS, which manufactures motion sensors exported to the rest of Europe and the US. He reckons plans for an international bailout are something the media have cooked up.
But according to Alenka Bratusek, the recently appointed centre-left prime minister, urgent measures are required. In early May she presenteda package in an effort to stave off intervention by the dreaded troika: theEuropean commission, the European Central Bank and the International Monetary Fund.
Slovenia needs at least €900m ($1.15bn) by July to refloat one of its struggling banks. This is a large sum of money for a country with a GDP of only €35bn.
The question is where to find the funds. The public deficit is deepening and investors are beginning to question the country's solvency, to such an extent that it can no longer borrow on the money markets. On 30 April Moody's, the credit-rating agency, downgraded Slovenian bonds to junk status. Both Brussels and the OECD are urging the government to take action.
But why is there such a hurry? The economy may be sluggish, but Slovenia, once a part of Yugoslavia, still feels like a Balkan version of Switzerland, with plush mountain pastures and tidy streets. With the unemployment rate at about 10% and public borrowing equivalent to just over half of GDP – far less than France – many Slovenians cannot understand what the fuss is about. But Slovenia looks likely to be the next eurozone hotspot, though at first sight the situation seems very different. Here the banking sector's assets only add up to 130% of GDP, compared with 750% in Cyprus.
The root of the problem lies in what happened when Slovenia achieved independence in 1991.
While neighbouring eastern-bloc countries rushed towards the free market, Slovenia took a more cautious approach. Privatisation was limited and in many cases the buyers – senior management – were closely allied to the government. The money needed to buy businesses came from state-owned banks.
"Slovenians thought capitalism was the shops full of goods they saw in Trento [across the border in Italy]. They wanted that but without giving up the protection of the state," says Bozidar Jezernik, professor of ethnology at Ljubljana University. "Depending less on the collective organisation, more on oneself, is not a popular idea here."
Slovenia is still a place where family life, sport and general well-being are more important than material comforts. The "alternative capitalist" model fared quite well till 2008, when the badly managed publicly owned companies started to fail and bad debt rose. It emerged that banks had granted loans to those with good connections not business expertise. "A classic case of crony capitalism," says Igor Masten, an economist at Ljubljana University.
The banks' solution was to stop lending, even to companies in good health. "There's no point in applying for a loan. It's been like that for the past three years," says entrepreneur Mitja Zagar.
So as industry stumbled, the country tipped into recession. "Today Slovenia is clinically dead," asserts Primoz Cirman, a journalist on the Dnevnik daily.
Suddenly the former conservative prime minister, Janez Jansa, introduced radical austerity measures., which included disbanding the arts ministry.
A corruption scandal, which prompted the resignation of both Jansa and the leftwing mayor of Ljubljana, deepened the sense of disgust. Slovenians realised that a tiny elite had taken control of their country.
Some would be happy to see the troika clear up the mess. But the majority fear what journalist Bostjan Videmsek calls "catastroika", with drastic austerity and across-the-board privatisation, in short the end of the Slovenian model.
Bratusek, a political novice, is supposed to prevent this. But as the electorate are beginning to understand, she appears to be doing exactly the same as her predecessors: setting up a bad bank to centralise bad debt, privatising at least one of the three big banks and slashing state spending. That at least is what she said in a CNN interview at the beginning of April. The resulting YouTube video, which has since gone viral, has become the focus of mockery: she clearly lacks self-confidence and her English is very shaky.
In fairness hers is no easy task. She must reassure Brussels and the markets without alienating voters, and convince her rainbow coalition, part of which is anti-privatisation. On 6 May she had to fend off an attempt to impose a budget golden rule designed to balance the national accounts by 2015, a commitment she dismissed as untenable. Slovenia would have had to cut pensions and civil service pay by 30%, and halve welfare spending.
This was unfortunate, particularly as "it's all a matter of psychology", according to Masten. If the markets were convinced the country would soon be back on course, they would reduce the pressure and the catastroika could be avoided.
Greek news items....
http://www.ekathimerini.com/4dcgi/_w_articles_wsite2_1_28/05/2013_501278
Lenders draw billions from interbank market
Local banks have drawn liquidity of more than 15 billion euros from foreign lenders through the interbank market in recent months, as, after a long period of exclusion, Greek credit institutions are gradually reverting to normal operation conditions. Until recently it was only the European Central Bank (ECB) that offered cash flow to local lenders. However, now that the country risk has significantly eased, foreign banks are happy to revive transactions with their Greek peers, which use bonds from their portfolios as collateral. The cash flow of local banks is further strengthening the trend for the return of deposits. Over the last 12 months some 20 billion euros of savings have returned to local banks. Greek lenders have reduced by 50 billion euros or 37 percent their liquidity dependence on the Eurosystem (emergency liquidity assistance of the Bank of Greece, or directly from the ECB). With the completion of their share capital increase, domestic banks expect to be able to draw more liquidity from the interbank market by using the European Financial Stability Facility (EFSF) bonds they have received, amounting to 20 billion euros, for repos. |
Someone, give Greek FinMin a glass of water, please! Now that it’s still cheap…
Not really. Yiannis Stournaras, Greece’s finance minister was speaking at the Parliament. He spoke and spoke … words and number were shot from his mouth and eventually he got thirsty. Much to his surprised, the parliament staff had not put a glass of water in front of the eloquent speaker. “Mr President,” Stournaras said addressing the presiding chairman of the session, “I think here, that the House deprives me of water!”
Forcefully coming down to the real world, the personnel abandoned its comfortable dozing and rushed to supply with finance minister with water. The panic was apparently so big, that they grabbed not one, but two bottles of water.
Amid moderate laughter from the side of the lawmakers, a voice was heard saying in serious tone: “The moment you will sell the public water companies, you’ll see that more people will be deprived of water!”
The sharp and pointed remark had come from Zoi Konstantopoulou, MP from left-wing SYRIZA.
Video: footage excerpt from satirical Radio Arvyla
Greece plans to sell 51% of its stake to Thessaloniki water company in order to satisfy the demands of its lenders International Monetary Fund and European Union.
Civic organizations and opposition parties fear that privatization of water companies will skyrocket its price. Private Initiative “Save Greek Water from Privatization” has started a petition in avaaz.org. So far 24,242 signatures have been collected. Petitioners’ target is to reach 30,000.
EU Task Force: We’ll see reforms results in Greece after one year
Posted by keeptalkinggreece in Economy
“In a year we will know what with did with the reforms in Greece,” head of EU Task Force Horst Reichenbach told during a public hearing of the European Union. Speaking at the Committee on Budgetary Control of the European Parliament in Brussels about the application for financial assistance from the EU budget in Greece, Reichenbach said that ‘conditions were ready for an agreement that Greece could start the big major road projects.”
H also revealed that the EU Task Force is expected to stay in Greece for another two years and stressed that the success of the mission depends largely on the attitude of the Greek side to promote structural changes in the economy.
“The current government has done important work which must be continued, ” Reichenbach praised Samaras government.
However, he predicted that the Greek banking sector will have problems for a long time and noted that the structural funds could help to overcome the liquidity problem plaguing the Greek economy.
Greece has so far absorbed 56% of the structural funds and is above the EU average.
Whether the EU Task Force would help also small and medium enterprises and not only big projects, it hasn’t been revealed by Horst Reichenbach. Neither did he say why aspiring entrepreneurs still need dozens of papers and weeks to start a business.
PS I am afraid that after years of harsh austerity, fiscal adjustments and other economic crap at the very end the same people would profit from the famous slogan “Grecovery* is near”.
*Grecovery = Greece+Recovery, in opposition to Grexit = Greece + [euro] exit
Tuesday, May 28, 2013 12:08 PM
Book Supporting Euro Exit Becomes Instant Bestseller in Portugal; AfD Update
In an interesting development in the battle to see which country is bright enough to exit the euro first, a book urging a return to the Escudo (the prior Portuguese currency) became an instant a bestseller in Portugal.
The Wall Street Journal reports Idea of Euro Exit Finds Currency in Portugal.
The Wall Street Journal reports Idea of Euro Exit Finds Currency in Portugal.
A book by a Portuguese economist achieved a small feat on its release last month: It instantly topped Portugal's bestseller list, overtaking several diet books and even the popular erotic novel "Fifty Shades of Grey."A year ago, only 20% of Portuguese wanted to leave the euro. It would be interesting to see a similar poll in a few weeks after debate over the book escalates.
The book, "Why We Should Leave the Euro" by João Ferreira do Amaral, has helped ignite a public debate in Portugal about the real cause of the country's economic pain: Is it only the hated austerity needed to secure European bailout loans, or is the euro?
Public lectures, TV debates, newspaper columns and some politicians are starting to explore a question that until recently was confined to university seminars: whether the country has a realistic path to recovery inside the euro.
Portugal "has no chance of growing fast within a monetary union with a currency this strong," Mr. Ferreira do Amaral said in a recent interview. "Thankfully, this issue has stopped being taboo, and there is now a lot of discussion here and abroad." The book is in its fourth edition, selling more than 7,000 copies so far—a lot for an economics tract in the small Portuguese market.
Mr. Ferreira do Amaral is getting some high-profile backers. This month, Supreme Court of Justice President LuÃs António Noronha Nascimento called for Portugal and other Southern European countries to quit the euro, warning the gap between Europe's richer and poorer states will keep widening otherwise.
Whether the debate gains traction depends on the economy, analysts say. Portugal's government insists the long-awaited recovery will arrive in 2014, but many economists doubt that. If the recession continues, politicians will need to enact even more budget cuts to meet EU deficit targets. "It may become too hard for politicians to sell austerity measure after austerity measure," says Antonio Costa Pinto, political scientist at the University of Lisbon. "This could create the perfect environment for a shift of ideas."
Exit Discussion in Multiple Countries
- Beppe Grillo Supports "Referendum on the Euro Within a year"
- 1000 professionals and economists signed on to a Euro Exit Manifest and Jose Carlos Diez says "Spain Must Have a Plan to Exit the Euro"
- The anti-Euro AfD party is gaining traction in Germany.
- The UK Independence Party UKIP is Jubilant following Local Elections
AfD Update
On April 23 I wrote Political Prediction: Merkel Loses Chancellorship in September as Support for AfD Soars. At that time, I noted "I have been watching the iPhone app Wahl-O-Meter and AfD has risen from 5% of the vote to 6.6% now."
Wahl-O-Meter support for AfD now clocks in at 8.9% and the Green Party is down to 10.5% from 11.4%. Wahl-O-Meter is not a statistically valid poll, yet I have been told by reader Bernd (not AfD party leader Bernd Lucke) that Whal did better than polls in predicting results of previous German elections.
Mike "Mish" Shedlock
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