http://www.zerohedge.com/news/2013-06-09/imf-says-another-greek-bailout-necessary
Submitted by Tyler Durden on 06/09/2013 19:15 -0400
and....
http://yanisvaroufakis.eu/2013/06/09/deutsche-welle-is-the-imfs-greek-mea-culpa-motivated-by-anger-over-germanys-undermining-of-banking-union/
http://www.zerohedge.com/news/2013-06-09/ecbs-unlimited-open-ended-bond-purchase-program-gets-%E2%82%AC524-billion-limit
Submitted by Tyler Durden on 06/09/2013 10:25 -0400
IMF Says Another Greek Bailout Necessary
Just six short months ago (before GGBs rallied 119% and the Athens Stock Index 53%), the EU and IMF agreed on Greek Debt/GDP targets, pronounced the nation "fixed", and went on winter vacation. Well, surprise, the hockey-stick of expected GDP has not come to pass and now, as Der Spiegel reports, the IMF is refusing to participate in further rescue programs for Greece unless financing for the nation is secured for the next 12 months - in other words - a new haircut for Greece will be required to cover the EUR4.6 billion funding shortfall.
Christine Lagarde's 'fund' is putting pressure on EUR members, after their mea culpa last week at the biliousness of their previous efforts to save the troubled PIIG nation, to agree to these new haircuts. This will not be a pretty dance - as with Merkel now a few short months away from a general election (and Germany owed EUR15 billion in KfW loans and a further EUR35 billion contributions to ESM/EFSF mechanisms), any agreement on her part would solidify opposition parties' proof that taxpayer money was lost (and the good money after bad argument).
Perhaps that is why GGB prices have dropped over 10% in the last week?
and....
http://yanisvaroufakis.eu/2013/06/09/deutsche-welle-is-the-imfs-greek-mea-culpa-motivated-by-anger-over-germanys-undermining-of-banking-union/
DW’s most recent Top Story focused on the IMF’s report of Greece, and its famous Mea Culpa. DW quotes my view that ”… IMF economists are considering an exit from the Troika and are now paving the path for it… They don’t want to watch idly as Germany is trying to undermine the planned European banking union…” For the DW website click here. Alternatively read on:
An internal IMF report which admits grave mistakes in the first aid package to Greece elicits angry reactions in Athens. But Premier Samaras claims his country is experiencing a success story.
In particular, the International Monetary Fund’s admission of having underestimated the recession and unemployment in Greece has sparked rage in the country. “They are admitting that we are paying for their mistakes,” wrote the left-leaning “Editors’ Newspaper.” Best-selling daily paper “Ta Nea” sees the IMF’s report as a “confession of failure.”
The self-critical assessment originates from an internal IMF report that was leaked to the press on Wednesday (June 5). This was also the day the Greek bureau of statistics had to report yet another rise in unemployment: to 26.8 percent.
“A bunch of dilettantes at work”
Greek TV journalist and commentator Chryssa Tavoulari welcomed this serve. She sees the IMF’s approach as feebleminded. She points out that Greece is still bankrupt – a country where 60 percent of young people cannot find a job. “Europe has slept through the whole thing – it’s a bunch of dilettantes at work,” she complained.
Now, the IMF is putting salt on the wound – and not without a reason, according to economics professor Yanis Varoufakis.
“The IMF economists are considering an exit from the Troika and are now paving the path for it,” Varoufakis told DW. “They don’t want to look at Germany trying to undermine the planned European banking union any longer,” Varoufakis believes.
IMF report as a chance
Lashing out at the German government is also not uncommon. However, the Greek government under conservative Prime Minister Antonis Samaras is refraining from such accusations and speculations. Finance Minister Yannis Stournaras has even welcomed the IMF’s self-critical assessment, saying that it offered “a chance to recognize mistakes in time so that they are not repeated.”
This ministerial statement does not come out of nowhere. With great interest, people in Athens have acknowledged the IMF’s conclusion that the February 2012 debt cut for private investors “should have come a lot earlier.” Now, according to Greek media reports, the IMF is considering an additional debt cut for Greece, which will in particular affect public creditors. Varoufakis believes there is no other alternative if Greece’s debt sustainability is to be guaranteed.
Greece is still in crisis mode
The economist points out that Greece is still in a similar situation to 2010: the debt situation is not sustainable, recession is omnipresent and the bank system is dysfunctional.
Greece needs to take responsibility
Others, too, believe that further concessions are necessary to ensure that Greece can carry its debts in the long run. It is therefore not surprising that the country is more than fine with another proposed debt cut offer from the IMF- even it’s meant to correct past mistakes. At the same time, some analysts believe that Greece should not just place the blame on others but also accept responsibility. This would probably make its EU partners more willing to pass on some of their demands, with or without official debt cuts, according to political analyst Dimitris Tsiordas.
Strong emotions are out of place here – what is necessary is rational thinking, believes Tsiodras. The ostensible disagreement between the EU and the IMF is in Greece’s interest, because it can put pressure on those responsible to introduce additional debt relief. This wouldn’t even require a debt cut. Fellow EU members could help through interest cuts or by providing funds for the recapitalization of Greek banks via the European bailout fund, the Athens analyst explains.
Strong opposition against Prime Minister Samaras
Meanwhile, Prime Minister Samaras is trying to attract investors around the world and speaks of a “Greek success story.” The latter is not completely without foundation, as some improvements in the country’s situation have been observed in recent months. A primary budget surplus at the end of 2013 seems within reach for the first time, and the country has partly regained its competitiveness by cutting wages. Furthermore, a major tourist influx is expected this summer.
The last thing that Samaras needs right now is a reignited debate about the meaning and purpose of austerity policies. However, this is exactly the discussion that opposition leader Alexis Tsipras is trying to start in the wake of the critical IMF report.
“While the IMF is acknowledging failure, our prime minister is talking about a success story,” Tsipras told Greek television. “Both cannot be true – unless you consider a flawed policy to be a success story.”
Recent opinion polls seem to back his position. Tsipras’ left-wing SYRIZA party is running a head-to-head race with Samaras’ ruling conservatives. At the same time, criticism is also coming from the right-wing corner of the political spectrum: the extreme-right Golden Dawn party remains the third most popular choice and continues to gain supporters.
http://www.zerohedge.com/news/2013-06-09/ecbs-unlimited-open-ended-bond-purchase-program-gets-%E2%82%AC524-billion-limit
The ECB's "Unlimited, Open-Ended" Bond Purchase Program Gets A €524 Billion Limit
One year ago, the ECB faced with an imminent collapse of the house of peripheral cards literally made up a bazooka: one so big and loud the market had no choice but to assume Draghi and company were not joking and actually knew what they were doing - it was the Outright Monetary Transactions (OMT), the successor to the SMP program, which was unique in that it was open-ended and unlimited. It was literally, "the kitchen sink" conceived to put a halt to the relentless selling which last July sent peripheral bond yields to record wides by instilling the fear of god, or in this case his monetary messenger on earth, Mario Draghi into the hearts of bond sellers.
Unfortunately, like everything else in Europe, this was merely the latest ad hoc made up rescue mechanism, and which as Mario Draghi reiterated on Thursday, still has no legal term sheet (but one is coming out "shortly", as he said in March and every time before that).
However, as we got closer to June 11/12, the date when the German Constitutional Court will conduct a public hearing on the various challenges to the ESM and OMT, the ECB would have no choice but to disclose more details about the real terms of the OMT to assure smooth passage of the OMT, and not to jeopardize the tenuous balance in Europe where things are once again going bump in the night with bond yields suddenly blowing wider on fears the Japanese bond carry trade is set to unwind. And if the validity and credibility of the OMT is also suddenly questioned, then Europe will go right back to imploding right before our eyes all over again.
The first such notable detail comes courtesy of the FAZ this morning, which reports that "in fear of the judgment of the Federal Constitutional Court, the European Central Bank (ECB) has revealed for the first time the boundaries of their controversial bond buying program... ECB President Mario Draghi announced last year, if necessary, that unlimited government bonds of distressed euro countries would be monetized to save the euro.Meanwhile, however, the central bank has limited this program to a maximum volume of €524 billion and also communicated this to the court." This is the maximum allowable purchases of Spanish, Italian, Irish and Portuguese bonds.
Why is the ECB revealing that the open-ended program in fact has a very set end now? "Apparently, to make the program legally less vulnerable the ECB has now said that it has commissioned legal opinions boundaries. Central bankers described the process as "containment."
Further details revealed that only short-end bonds with a maturity between 1 and 3 years would be permissible, which is as had been previously disclosed.
Naturally, the ECB in keeping with the facade of one set of truth for legal authorities, and another set of lies for the not so free market, immediately came out with its refutation.
First it was Joerg Asmussen, whose idea the OMT was in the first place, who told German Bild in an interview that the ECB is not being "accused" in next week's hearing, and that it provides a "good chance to clarify program details." Great - maybe it will also mean finally getting that legal term sheet which has been in the works for a year, and without which the OMT effectively does not exist!
Then Joerg suddenly gets very sensitive, saying the ECB last year was "only European institution fully capable of acting" when euro zone was "at danger of falling apart" and that the ECB had to get the message across that market participants "should not mess with the ECB" as it would defend the euro. Markets “got the message” without the ECB needing to buy bonds.
In other words, the ECB lied (just like everyone else seems to these days). And by the way Joerg, this is also known as crying wolf - soon the very same bond threat will reemerge, and this time nobody will believe you. Meaning that the ECB will have no choice but to do what it has threatened to do. The only problem is once the ECB does embark on open-ended unsterilized monetization, then the legal impossibilities of doing that in a fiscaldisunion, where every nation has its own set of bankruptcy laws, without a common banking resolution law, and without joint Eurobonds, this is impossible. And the ECB knows it very well. This is doubly so now that the IMF's reputation has been thoroughly destroyed. How long until the markets questions the credibility of those two other Troika members: the European Commission (already a joke) and the ECB itself?
And sure enough, just to hopefully avoid this out of control spiral, the ECB was quick to deny everything.
Moments ago, via Reuters, a spokesman for the bank said that "there is no limit to the European Central Bank's (ECB) bond-buying program," denying the FAZ report.
"The report is incorrect," an ECB spokesman told Reuters."As indicated on various occasions, there are no ex-ante limits on the amount of Outright Monetary Transactions. Their size would be adequate to meet their objectives."Germany's top court will consider whether the OMT infringes the constitution's insistence on sovereign parliamentary control over budget matters.No ruling is expected until after national elections in September, and legal experts say the court may for the first time defer to European judges in the euro zone crisis.
We'll find out in two days who is lying. In the meantime, Europe better hope and pray that the recent unwind in the Japan carry trade, which has been the primary driver for the unprecedented surge in peripheral bonds does not accelerate, and force not only the marginal holders of peripheral bonds, but everyone else to start dumping. In that case not even the threat of unlimited purchases will be enough.
Especially when one considers the chart we put up in April of last year showing that the funding needs of the periphery keep growing and growing and growing, and that sooner or later, neither guarantees, nor threats, nor actual purchases will have any impact at all.
http://www.telegraph.co.uk/finance/financialcrisis/10108010/German-court-case-could-force-euro-exit-warns-key-judge.html
German court case could force euro exit, warns key judge
Crucial hearings on the eurozone’s bail-out policies at Germany’s top court this week could set in motion events that force Germany’s withdrawal from the euro, a leading judge has warned.
9:00PM BST 08 Jun 2013
384 Comments
Udo di Fabio, the constitutional court’s euro expert until last year, said the explosive case on the legality of the European Monetary Union rescue machinery could provoke a showdown between Germany and the European Central Bank (ECB) and ultimately cause the collapse of monetary union.
“In so far as the ECB is acting 'ultra vires’, and these violations are deemed prolonged and serious, the court must decide whether Germany can remain a member of monetary union on constitutional grounds,” he wrote in a report for the German Foundation for Family Businesses.
“His arguments are dynamite,” said Mats Persson from Open Europe, which is issuing its own legal survey on the case on Monday.
Dr Di Fabio wrote the court’s provisional ruling last year on the European Stability Mechanism (ESM), the €500bn (£425bn) bail-out fund. His comments offer a rare window into thinking on the eight-strong panel in Karlsruhe, loosely split 4:4 on European Union issues.
The court is holding two days of hearings, though it may not issue a ruling for several weeks. The key bone of contention is the ECB’s back-stop support for the Spanish and Italian bond markets or Outright Monetary Transactions (OMT), the “game-changer” plan that stopped the Spanish debt crisis spiralling out of control last July and vastly reduced the risk of a euro break-up.
http://www.guardian.co.uk/commentisfree/2013/jun/07/jose-manuel-barroso-apologise-greek-people-imf
José Manuel Barroso should apologise to the Greek people
As European commission president, Barroso's failure to deal with the eurozone crisis has left the EU on life support
Email
The European commission president José Manuel Barroso … 'His remaining actions in office must be in the interests of the EU as a whole, not its most powerful member states.' Photograph: Julien Warnand/EPA
As a member of the European parliament with a Greek and German background, I have always felt European above all else. It pains me to see how divided the European Union currently is and how little is being done by its leaders to tackle the crisis and overcome these divisions.
The eurozone crisis has already had tragic implications for countless citizens across a number of member states. Dissent and dissatisfaction continue to rise, fuelling a new wave of populism and extreme nationalism throughout Europe. If things do not change soon, there is a very real danger that the situation will unravel so fast, there will be no time to react. This downward spiral has a name: José Manuel Barroso. As the president of the European commission, the executive body of the EU, his role is the most important in this crisis – and yet he seems incapable of doing anything other than barely keeping the EU on life support.
Over his two terms, Barroso has proven to be a commission president who stands in stark contrast to the bold French visionary, Jacques Delors. Where Delors was able to inspire faith and trust in the idea of the "European project" and in the betterment of the people living within its boundaries, Barroso oversaw the functioning of the established machinery, barely providing the grease where needed. He failed completely to secure support for a new constitution when times were better. He has not been able to rise to the occasion when times got rough.
The delays and ping-pong approach that have characterised his response to the euro crisis from the very beginning are inexcusable. It is incredible to hear Barroso repeat now, four years after economists first brought it up, that Greece's crisis was not a local problem but a European issue deeply intertwined with the single currency, the euro. He never pushed for sustainable reforms and his ambitious Lisbon agenda never really took off. The current decisions to promote growth do not inspire much confidence and soon unemployment will be a larger problem than the banking crisis was.
As the euro crisis worsens, dissent is slowly growing among the college of commissioners, who do not want to be responsible for the severe consequences of this mismanagement. The European parliament has already lost all respect for Barroso, something illustrated by the numerous debates at which he has been confronted with empty seats in the plenary chamber. In another anecdotal account, European parliament party leaders nearly fined MEPs in order to force them to attend Barroso's state of the union speech. Can anyone imagine President Obama facing the very real possibility of speaking in front of an empty Congress?
Meanwhile, the suicide rates in southern Europe go up every day. There has been no well-thought-out plan, no exit strategy for the euro crisis. The commission portion of the troika continues to act on behalf of the European stability mechanism owners instead of the European Union as a whole. This means that the commission is giving up its pivotal role, catering instead to the needs of the most powerful member states. Matters have only been made worse by the virtual deadlock of the looming German elections. But can the EU really wait until 22 September, especially knowing that the chances of Angela Merkel not being re-elected as chancellor are close to zero?
Barroso only has a short time left to leave a positive legacy to the European Union with his last actions in office. He should position himself unequivocally against the austerity measures and push for closer monitoring of what the troika prescribes and enforces. At the very least, the European parliament should be actively involved in this monitoring so that the actions of the troika have some democratic legitimacy.
Furthermore, instead of contesting the IMF on its recent admission of errors on the Greek bailout as commissioner Olli Rehn did, Barroso should openly admit that mistakes were made and formally apologise to the Greek people. Only then can the commission move forward with credibility.
Above all else, Barroso's remaining actions in office must be in the interest of the European Union as a whole, not its most powerful member states. He must truly push for "more Europe" and not let these calls be empty rhetoric. Where is the fiscal union that was discussed so intensely one year ago?
Europe is becoming more and more divided by the day. Lasting solutions demand courage and boldness. I urge Barroso to act now and let this be his legacy. Otherwise, he will be remembered as the man who let the European dream die on his watch.
