Reporting On The Golden Fleece
Submitted by Mark Grant, author of Out Of The Box
The Greek Grand Prix
You didn’t know they had a road race in Athens? Yes, quite a famous one just a race of a different sort. Since January 13, 2010 when I first predicted the downfall of Greece the track has been busy while the IMF and the European Union populated the bleachers and the crowd roared with each new twist and turn and stared wide eyed as the Grecian chariot bounced off the walls and spun around time and time again on the track.
“Hateful to me as the gates of Hades is that man who hides one thing in his heart and speaks another.”-Homer
During the last election each and every party running promised to renegotiate the terms of their agreement with the Troika. This was the cornerstone of the political debate as the promises were poured like honeyed water on the populace in an attempt to gain power. Today all of the promises hit the wall and stopped as the IMF told Greece that there would be no new negotiations and so Greece put on the Golden Fleece and prepares for their whipping.
“Sing to me, Muse, of the wrath of Achilles, son of Peleus, which brought countless ills upon the Acheans.”
-The Iliad
Over the last year Greece has raided their university funds, their pension funds, their hospital funds and it is now stone cold bankrupt. They have done everything possible including refusing to pay their suppliers and raided their banks. I am not even sure that “insolvent” is an accurate word any longer as they are now flat out of cash and perhaps out of credit. The leaders in Greece, this morning, said they will no longer try to negotiate the bailout terms and they have gone into a last-ditch posture of bowing to the gods in the final hope that more money will be handed out as they prostrate themselves on the hard earth and moan in compliance.
“Men are so quick to blame the gods: they say that we devise their misery. But they themselves- in their depravity- design grief greater than the griefs that fate assigns.”
-Homer
The Troika’s report on the financial condition of Greece is going to be damning and they know it. There will be no more talk of a 120% debt to GDP ratio in a few years and promises to sell state assets and cure the rampant fraud in coming years is falling on deaf ears. This road has come to an end. Now there is only one decision left; will they get another charity hand-out knowing the loans made can never be paid back or not? The IMF is in a particularly difficult position as they can no longer contend that the situation can get fixed and they account to the nations that fund them and not to the citizens of Europe. Economically it now either has to be debt forgiveness, a subject brought up by no one, or it will be one more hand-out under no pretense of it being anything else or it will be default. Greece is either going to become the ward of the State or it is going to be cut-off and that decision is imminent. First will be the release of the Troika report and then the bang of the judge’s hammer as the Grecian road, so long in winding and unwinding has ended and ended by what had to take place which is that the financial well has run dry. The Grecian Urn was regarded and parched earth was all that was inside.
We are at that moment in time where Greece has capitulated and it is going to be hanging or life imprisonment and Greece, eyes downward cast, is waiting for the verdict. This situation may have been long in coming but it is going to be a disaster for the IMF and for the European Union however it goes. Greece (3) will be a “moment” of that you may be assured and the announcement will be coming shortly. The forthcoming decision will be a matter of credibility in the end as the next line in the sand will hit the ECB, the EU and the IMF in a place that hurts as the last free barrier, the private investors, has been breached and is it going to be the taxpayers of Europe that bear the brunt or is it to be the nation of Greece and her people. There can be no more excuses and the fantastic charades of the past have evaporated and been found wanting. The shepherd ascended Mount Olympus and finding no temples, no gods now is descending back down the mountain and trying hard to figure out just what to say to the people. We are about to face a “Moses Moment” when the worshipping of the “Golden Bull” will no longer cut it. Stand by!
“There will be killing till the score is paid.”-The Odyssey
http://www.zerohedge.com/news/first-money-market-casuality-ecb-jp-morgan
The First Money Market Casualty Of The ECB: JP Morgan
Yesterday, the ECB took the rate on its deposit facility to 0.0%. Today the money market casualities begin. Then again, as reported over two years ago, forcing MM investors out and into stocks is what the plan was all along.
http://www.zerohedge.com/news/spain-yield-back-above-7
Spain Yield Back Above 7%
Summit full life: One week. Literally. Last Friday morning speculation that Germany had "caved" to Mario Monti, somehow allowing beggars to be choosers, and would allow an unconditional and IMF-free rescue of Spain and Italy while the seniority of the ESM was eliminated, sending the Spanish 10 Year yield to under 6.2%. The same security is now back over 7%, where it was just before the summit, as Finland and Holland (or half of Europe's AAA-rated countries), and even Germany, made it quite clear, as we said all along, that stripping seniority of a piece of debt is far more complex than saying one wants to do it in a Memorandum of Understanding. The other thing pushing Spanish spreads wider was German FinMin spokesman Kotthaus saying that no decision on Spain can be taken on Monday as there is no Troika report on Spain bank aid yet, and that the European bailout activation, which was supposed to begin on July 9th, may be delayed until July 20. At that point it will likely be delayed again, only this time GSPGs may be trading wider than their lifetime highs of 7.285%. Finally, adding insult to Mario Monti "victory" is that Merkel's popularity rating just hit a multi-year high. So: who was last week's summit "winner" again?
And just in case there is any confusion about why the European Union is the biggest possible misnomer:
and......Finland would rather exit euro than pay for others: Jutta Urpilainen, Finance ministerHELSINKI: Finland would consider leaving the eurozone rather than paying the debts of other countries in the currency bloc, Finnish Finance Minister Jutta Urpilainen said in a newspaper interview on Friday.
"Finland is committed to being a member of the eurozone, and we think that the euro is useful for Finland," Urpilainen told financial daily Kauppalehti, adding though that "Finland will not hang itself to the euro at any cost and we are prepared for all scenarios."
The finance minister stressed that Finland, one of only a few EU countries to still enjoy a triple-A credit rating, would not agree to an integration model in which countries were collectively responsible for member states' debts and risks.She also insisted that a proposed banking union would not work if it were based on joint liability."Collective responsibility for other countries' debt, economics and risks; this is not what we should be prepared for," Urpilainen said.
Urpilainen acknowledged in an interview with the Helsingin Sanomat daily that Finland "represents a tough line" when it comes to the eurozone bailouts.
"We are constructive and want to solve the crisis, but not on any terms," she said.As part of its tough stance, Finland has said that it will begin negotiations with Spain next week in order to obtain collateral in exchange for taking part in a bailout for ailing Spanish banks.Finland has also voiced concern about an agreement reached at an EU summit in Brussels last week to use the European Stability Mechanism (ESM) to buy bonds to ease the unbearable borrowing costs which are squeezing Spain and other vulnerable eurozone economies.
And last year, Finland created a significant stumbling block for the eurozone's second rescue package for Greece, agreeing to take part only after striking a collateral deal with Athens in October 2011.
http://www.telegraph.co.uk/finance/debt-crisis-live/9380370/Debt-crisis-Finland-warns-of-euro-exit.html
12.41 Cyprus is the next eurozone bailout customer - except it's looking outside of Europe for the cash. Russia has received an official €5bn loan request, the country's finance minister says: "We have received the request. We are currently studying it."
12.30 Spanish 10-year bond yields have risen above 7pc - sort of. Bloomberg quotes 6.97pc as an overall figure, but a bid yield of just a shade over 7pc. Reuters is also quoting just over 7pc. That milestone is dangerous as it's widely thought to be an unsustainable level.
11.31 Italian bond yields have now edged above 6pc, and Spain is threatening to pass 7pc before the day is out, currently at 6.9pc. We'll keep you updated.
11.13 German industrial output data is out, and it's smashed expectations. It was thought that we'd see growth of 0.1pc, but it's taken a 1.6pc leap month-on-month.
10.29 The Finnish finance minister, Jutta Urpilainen, said in a newspaper interview this morning that she'd consider crashing her AAA-rated country out of the eurozone rather than face paying the debts of another country:
Finland is committed to being a member of the eurozone, and we think that the euro is useful for Finland. Finland will not hang itself to the euro at any cost and we are prepared for all scenarios.
Collective responsibility for other countries' debt, economics and risks; this is not what we should be prepared for. We are constructive and want to solve the crisis, but not on any terms.
10.06 UK factory gate inflation data is out, and it shows that that lower oil prices helped ease the figure down to a near 3-year low. Last month input prices fell by 2.3pc year-on-year and output prices grew by just 2.3pc.Samuel Tombs of Capital Economics said:
June's UK producer prices figures highlight the downward pressure on prices emerging at the start of the inflation pipeline. Output prices fell, causing the annual inflation rate to ease to 2.3pc. Given the relatively long lags involved, this points on past form to the potential for core consumer goods inflation to fall into negative territory in mid-2013. So, following a prolonged overshot of the MPC's 2pc inflation target, it is becoming increasingly likely that we are now heading for an equally elongated period of below target inflation.
10.02 In the same week that it took on the presidency of the EU, Cyprus has complained of falling an "unfair" victim to Europe's debt crisis.
Finance minister Vassos Shiarly said the nation went into the red only after paying "a very heavy price" to enable Greece to write off more than €100bn of debt owed to private banks. Cypriot banks held massive amounts of Greek debt, Cyprus lost €4.2bn.
This was not a fair way to deal with it. It was a European problem. I believe we should have shared that loss fairly on a level playing field.
09.14 Christine Lagarde, head of the IMF, has warned today that the global situation has become "more worrisome". There's been no officialchange to growth estimates, but it sounds awfully like she's preparing us for a downward revision on July 16 when the next update is due:
Over the past few months, the outlook has, regrettably, become more worrisome. This is a global crisis. In today's interconnected world, we can no longer afford to look only at what goes on within our national borders. This crisis does not recognize borders. The global growth outlook will be somewhat less than we anticipated just three months ago.
09.06 The Greek finance ministry has been unable to collect €12.6bn in tax fines - equivalent to 6.2pc of GDP - partly due to staff cuts imposed as part of an austerity drive, reports Kathimerini. The fines were handed down by courts after tax disputes. So far only €630m has been collected.
08.47 Other things we'll be watching out for today: the Greek parliament gets to work with the new PM Antonis Samaras presenting his crisis plan - thought to involve a raft of privatisations. Elsewhere, Mario Draghi, Mario Monti and Laurent Fabius, France's foreign minister, will meet for a chat about the eurozone economy. We've also got some data: UK producer prices and German total industrial production.
07.58 More countries could soon be lining up in Brussels with their begging bowls, as Slovenia's finance minister admitted yesterday that a bail-out "can't be ruled out".
Janez Sustersic told reporters that while Slovenia's banking system was currently "manageable with our own resources" and there was no "need to ask for EU help," he added:
If the problems of banks turn out to be bigger, if it turns out we were not aware of some of them or if new risks appear, then maybe down the road, asking for help can't be ruled out.
07.48 Three of the world's central banks took drastic action yesterday in an attempt to soothe the pain of the financial crisis. The Bank of England decided to pump an extra £50bn into Britain's ailing economy, while the European Central Bank and People's Bank of China slashed interest rates. Philip Aldrick reports:
China's move, in particular, came as a shock. It was the second time in a month that Beijing had reduced rates, prompting speculation that the world's second largest economy and engine of global growth could be stalling.
The interventions, which were not officially co-ordinated, came as Mario Draghi, the ECB president, confirmed that "some of the previously identified downside risks to euro area growth have materialised", and the Bank warned that the crisis on the continent was eroding confidence in the UK.
Following the ECB action, the euro fell to close to a three-and-a-half year low against the pound.
and.....
http://www.athensnews.gr/portal/1/56784
News bites @ 10
by Damian Mac Con Uladh 6 Jul 2012
Kostas, 68, removes copper wiring from cables to be sold for €4/kg. His pension has fallen €200 to €350 as a result of austerity
1. GOVT PROGRAMME Prime Minister Samaras will present his government's policy at the start of a three-day parliamentary debate at 7pm on Friday. A vote of confidence on the coalition is scheduled to take place late on Sunday. The main planks of the programme are expected to be privatisation and mergers of public sector bodies.
2. STOURNARAS Echoing statements by other government ministers earlier this week, Finance Minister Yannis Stournaras has said the country needs to get its reform programme back on track before seeking an easing of austerity measures. "The programme is off-track and we can't ask for anything from our creditors before we get it back on course," Stournaras was quoted as saying by the Financial Times. However, finance ministry sources stressed that Stournaras' statement did not mean the government had dropped its demand for a change in some terms of its international bailout. "This is just repeating the government line," the official said. On Tuesday, Development Minister Kostis Hatzidakis said that the troika would be more likely to approve changes to the bailout terms if they were convinced the government was serious about reforms. "The ball is our court," he told a conference.
3. GOVT HAS GIVEN UP The government has backtracked on its pre-election promise to renegotiate the terms of bailout, main opposition Syriza has charged. "Samaras' decision to meet the troika before presenting his government's policy statement to parliament and the Greek people clearly illustrates [the government's] intentions and priorities," the party said in a statement. Earlier, Syriza dismissed as false a claim by an ECB board member that the average public sector salary in Greece was 3,000 euros. The government, Syriza added, had failed to react "to this misinformed insult".
* * *
http://globaleconomicanalysis.blogspot.com/2012/07/german-central-bank-head-warns-merkel.html
Friday, July 06, 2012 12:32 AM
German Central Bank Head Warns Merkel on Repeated Weakening of Positions; Third Front Against Merkel
Chancellor Angela Merkel is now under pressure from a third front, this time, from Jens Weidmann, president of the Bundesbank (Germany's Central Bank). The Financial Times reports Weidmann warns Merkel over weakening
Germany’s top central banker has criticised the decisions of last week’s summit to help debt-laden eurozone members, warning that the bloc was “constantly mutualising risks and weakening the agreed rules”.
“Fiscal aid should be the last resort of crisis management,” said Jens Weidmann, president of the Bundesbank. “This position has by now been recognisably weakened.”
In a speech that looks set to increase political pressure on Angela Merkel, the chancellor, Mr Weidmann said strict conditions that had come with emergency aid at the start of the crisis had been “clearly eroded” since then – and possibly again at last week’s European summit.
In remarks apparently meant as a warning shot to Berlin, Mr Weidmann signalled any further steps to loosen aid conditions had to come together with eurozone commitments to pool fiscal decision-making. If mutual liability was to be the only path, then “those taking on liability should get the opportunity to exercise oversight.”Third Front
He lamented that the results of last week’s summit allowed for “a broad spectrum of interpretation” – especially over whether the eurozone wanted to stick to Maastricht principles or move towards fiscal integration.
This pressure from the central bank represents a third front against Merkel.
The ESM is already on hold waiting challenges from Germany's constitutional court. (see German Supreme Court Delays ESM; Another Setback for Merkel; Creeping Bailouts; Reflections on German Expectations for details)
Moreover, Merkel's Coalition About to Splinter Over Creation of "European Monster State". Simply put, the CSU (Merkel's coalition partner), has threatened to sink the Coalition if Merkel gives any more ground.
In all likelihood, this is close to if not the absolute end of the line for further Merkel concessions.
The irony regarding the latest wave of attacks is Merkel gave nothing to France and next to nothing to Italy and Spain in the 19th eurozone summit. For details, please see EU Summit Winner Was Merkel.
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