Thursday, January 3, 2013

Portugal warns Troika to back off on austerity demands - a theme for 2013 from the PIIGS ? Greece items - Greece embarks on bartering and starts to dump euros , tax evasion writ large , banks already showing a need for further bailout in 2013 - will the official creditors finally take the hit ? Cyprus President claims no deal regarding privatizations in exchange for a bailout - his tune will change or be changed for him ..... Around the horn in Europe by way of the guardian liveblog - UK construction data , unemployment number for Germany and Spain ......Day after review of US Fiscal Cliff resolution - for now ,

http://www.telegraph.co.uk/finance/financialcrisis/9776701/Portugal-warns-EU-IMF-troika-to-back-off-on-austerity-demands.html


7:23PM GMT 02 Jan 2013
Comments196 Comments
President Anibal Cavaco Silva called for urgent action to halt the “recessionary spiral”, warning Europe’s leaders that the current course had become “socially unsustainable”.
In a speech to the nation, he said Portugal would “honour its international obligations”, but in the same breath called for a tough line with the European Union-International Monetary Fund Troika over the pace of fiscal tightening under Portugal’s €78bn (£63bn) loan package. “We have arguments, and we should use them firmly,” he said.
“Fiscal austerity is leading to declining output and lower tax revenue. We must stop this vicious circle,” he said, cautioning the Troika that there would be no way out of the crisis until policy was set in the interests of the “Portuguese people” as well as foreign creditors.
His sombre speech was a reminder that Europe’s crisis is far from over.
Portugal’s jobless rate has risen from 13.7pc to 16.3pc over the past year, reaching 39pc for youth, even before the full impact of austerity hits.



and items pertaining to Greece and Cyprus....

http://www.ekathimerini.com/4dcgi/_w_articles_wsite1_1_03/01/2013_476736


Lagarde list probe unveils large-scale tax evasion


A number of Greeks holding accounts at a Geneva branch of HSBC are suspected of major tax evasion by the Financial Tax Squad (SDOE), according to Kathimerini sources.
According to a SDOE investigation of the so-called Lagarde list, a large number of the 2,062 Greeks figuring on the list are unable to justify their deposits as legally earned income.
The amount of suspected tax evasion is expected to reach dozens of millions of euros while a number of those holding deposits are expected to face charges once the SDOE probe is concluded.



http://www.ekathimerini.com/4dcgi/_w_articles_wsite2_1_02/01/2013_476663


Christofias to say no to privatizations


Cyprus' president says he would refuse any request by international lenders to sell off state-owned companies as part of a finalized agreement to bail out the crisis-hit country.
Dimitris Christofias said on Wednesday he has «no intention» of consenting to privatizations. A draft of the bailout deal with the European Commission, the European Central Bank and the International Monetary Fund says Cyprus will have to consider privatizations if it's debt is deemed unsustainable.
Cypriot banks, which took huge losses on bad Greek debt and loans, are estimated to need up to 10 billion euros in rescue money. That's more than half the country's economy, raising questions whether the government will be able to handle the debt. Cyprus' eurozone partners will decide on the country's bailout deal on January 21.

http://www.ekathimerini.com/4dcgi/_w_articles_wsite2_1_02/01/2013_476702


Bad loans increase by 50 percent in 2012


By Yiannis Papadoyiannis
Nonperforming loans soared in 2012, with bank officials estimating the rise at some 50 percent on an annual basis.
Officials say that NPLs came close to 24 percent of all loans at the end of December, from 16 percent in December 2011, while all bad loans come to a considerable 55 billion euros. This means that the sum of NPLs exceeds the total of the funds set aside for the recapitalization of the local credit system, which amount to 50 billion.
Nevertheless, there has been a notable improvement in economic conditions that is reflected in the significant slowdown in the rate of creation of new bad loans.
However, unless the growth of new NPLs is contained, banks may need yet another recapitalization process at the end of 2013, the same sources say.



http://www.guardian.co.uk/world/2013/jan/02/euro-greece-barter-poverty-crisis


Euros discarded as impoverished Greeks resort to bartering

Communities set up local currencies and exchange networks in attempt to beat the economic crisis
Volos-bartering
Stall-holders at a bartering market in the central Greek city of Volos, where shoppers use Tem coupons to exchange services or products. Photograph: Despoina Vafeidou /AFP/Getty Images
It's been a busy day at the market in downtown Volos. Angeliki Ioanitou has sold a decent quantity of olive oil and soap, while her friend Maria has done good business with her fresh pies.
But not a single euro has changed hands – none of the customers on this drizzly Saturday morning has bothered carrying money at all. For many, browsing through the racks of second-hand clothes, electrical appliances and homemade jams, the need to survive means money has been usurped.
"It's all about exchange and solidarity, helping one another out in these very hard times," enthused Ioanitou, her hair tucked under a floppy felt cap. "You could say a lot of us have dreams of a utopia without the euro."
In this bustling port city at the foot of Mount Pelion, in the heart ofGreece's most fertile plain, locals have come up with a novel way of dealing with austerity – adopting their own alternative currency, known as the Tem. As the country struggles with its worst crisis in modern times, with Greeks losing up to 40% of their disposable income as a result of policies imposed in exchange for international aid, the system has been a huge success. Organisers say some 1,300 people have signed up to the informal bartering network.
For users such as Ioanitou, the currency – a form of community banking monitored exclusively online – is not only an effective antidote to wage cuts and soaring taxes but the "best kind of shopping therapy". "One Tem is the equivalent of one euro. My oil and soap came to 70 Tem and with that I bought oranges, pies, napkins, cleaning products and Christmas decorations," said the mother-of-five. "I've got 30 Tem left over. For women, who are worst affected by unemployment, and don't havekafeneia [coffeehouses] to go to like men, it's like belonging to a hugely supportive association."
Greece's deepening economic crisis has brought new users. With ever more families plunging into poverty and despair, shops, cafes, factories and businesses have also resorted to the system under which goods and services – everything from yoga sessions to healthcare, babysitting to computer support – are traded in lieu of credits.
"For many it plays a double role of supplementing lost income and creating a protective web at this particularly difficult moment in their lives," says Yiannis Grigoriou, a UK-educated sociologist among the network's founders. "The older generation in this country can still remember when bartering was commonplace. In villages you'd exchange milk and goat's cheese for meat and flour."
Other grassroots initiatives have appeared across Greece. Increasingly bereft of social support, or a welfare state able to meet the needs of a growing number of destitute and hungry, locals have set up similar trading networks in the suburbs of Athens, the island of Corfu, the town of Patras and northern Katerini.
But Volos, the first to be established, is by far the biggest. Until recently the city, 200 miles north of Athens, was a thriving industrial hub with a port whose ferries not only connected the mainland to nearby islands but before Syria's descent into civil war was a trading route between Greece and the Middle East. Once famous for its tobacco, Volos was home to flour mills and cement factories, steel and metal works.
But, today, it is joblessness that it has come to be known for in a country whose unemployment rate recently hit a European record of 26%, surpassing even that of Spain.
"Frankly the Tem has been a life-saver," said Christina Koutsieri, clutching DVDs and a bag of food as she emerged from the marketplace. "In March I had to close the grocery store I had kept going for 27 years because I just couldn't afford all the new taxes and bills. Everyone I know has lost their jobs. It's tragic."
Last year, the Greek government stepped in with a law that supported finding creative ways to cope with the crisis. For the first time, alternative forms of entrepreneurship and local development were actively encouraged.
Although locals insist the Tem, which is also available in voucher form, will never replace banknotes – and has not been dreamed up to dodge taxes – they say it is a viable alternative.
For local officials such as Panos Skotiniotis, the mayor of Volos, the alternative currency has proved to be an excellent way of supplementing the euro. "We are all for supporting alternatives that help alleviate the crisis's economic and social consequences," he said. "It won't ever replace the euro but it is really helping weaker members of our society. In all the social and cultural activities of the municipality, we are encouraging the Tem to be used."

Vatican city cut off by Bank of Italy from all card payments due to failure to timely implement money laundering  protocols....

http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/9779057/Italy-bans-card-payments-in-Vatican-over-money-laundering.html
Harry Wilson
By , Banking Correspondent
6:21PM GMT 03 Jan 2013
Comments25 Comments
The Bank of Italy suspended all bank card payments on Vatican territory from the start of the year and ordered Deutsche Bank Italia, which manages electronic payments for the world’s smallest country, to turn off its systems.
Italian newspapers reported that the action was taken after officials at the Italian central bank became worried that the Vatican was not prepared to implement new anti-money laundering rules.
The suspension of card services means that the Vatican museum, along with the territory’s pharmacy and post office, have all been unable to transfer money and accept payments.
A spokesman for the Vatican told the Italian press the state hoped to find a non-Italian bank to provide it with access to payment services “quite soon” and that the problem would be “short-lived”. The Vatican has not commented directly on the Bank of Italy’s concerns.
Five million tourists visited the Vatican last tyear and spent €91.3m (£74m). However, until its payment systems are restored the Vatican said that all transactions, including buying tickets for its world famous museum, would have to be done in cash.

and Spain....

http://www.zerohedge.com/news/2013-01-04/spain-out-damned-spot

Spain - Out Damned Spot

Tyler Durden's picture
Submitted by Tyler Durden on 01/04/2013 11:56 -0500



Via Mark J. Grant, author of Out of the Box,
“And it is a mark of prudence never to trust wholly in those things which have once deceived us.”
                      -Rene Descartes

Spain

If you own the debt of Spain; sell it. If you are thinking about buying their sovereign debt; don’t. I hope that is clear enough. I don’t believe that I have left out any corner of my thinking or that there is any wavering on my part. All of the new Spanish debt will carry Collective Action Clauses which gives Spain the right to force bondholders to their knees. This is reminiscent of Greece and we should have all learned the lesson from that experience. Then there is what Spain certainly might do which is to retroactively pass CAC’s when expedient for the nation so that all Spanish debt could include these clauses. The clear signal here is that Spain is in serious trouble or CAC’s would not be an issue and that the State will put it to bondholders if necessary. Spain has benefited from Draghi’s “Save the World” plan which was by far the best move of the European Union in 2012. Yields are down, the central bank is the backstop and the ECB’s promise has limited the interest that each nation in Europe has to pay for their debt.
Yet there are two sides to this coin and that is that not only will interest rates affect the sovereign debt of a nation but the absolute amount of debt can also play havoc with the finances of a nation. The Wall Street Journal reports this morning that 90% of Spain’s national pension fund has now been utilized in buying Spanish debt of various sorts and class. This means that $77 billion has now been spent on propping up Spanish debt while another $7 billion has been withdrawn in cash. The pension fund is effectively out of money now and how they will fund their social security system is anyone’s guess. Spain plans to issue $270 billion of new debt in 2013 which is up from $242 billion in 2012 or a 10.5% increase. Even as the pension fund buying is unable to continue, the Spanish banks are up to their eyeballs in Spanish debt and the losses at the Spanish banks continue to mount. It is my opinion that Spain will be forced to the till at the ECB and the EU and that the amount of financing that will be demanded will cause rancor in the fiscally disciplined nations. For all of these reasons I have concluded that Spain is a disaster in play and their debt should be avoided or sold.

*  *  * 

and.....

http://www.zerohedge.com/news/2013-01-03/spain-plunders-90-social-security-fund-buy-its-own-debt

Spain Plunders 90% Of Social Security Fund To Buy Its Own Debt

Tyler Durden's picture
Submitted by Tyler Durden on 01/03/2013 19:16 -0500




With Spanish 10Y yields hovering at a 'relatively' healthy 5%, having been driven inexorably lower on the promise of ECB assistance at some time in the future, the market has become increasingly unsure of just who it is that keeps bidding for this stuff. Well, wonder no longer. As the WSJ notes, Spain has been quietly tapping the country's richest piggy bank, the Social Security Reserve Fund, as a buyer of last resort for Spanish government bonds - with at least 90% of the €65 billion ($85.7 billion) fund has been invested in increasingly risky Spanish debt. Of course, this is nothing new, the US (and the Irish) have been using quasi-government entities to fund themselves in a mutually-destructive circle-jerk for years - the only difference being there are other buyers in the Treasury market, whereas in Spain the marginal buyer is critical to support the sinking ship. The Spanish defend the use of pension funds to buy bonds as sustainable as long as it can issue bonds - and yet the only way it can actually get the bonds off in the public markets is through using the pension fund assets. The pensioners sum it up perfectly "We are very worried about this, we just don't know who's going to pay for the pensions of those who are younger now," or those who are older we would add.

Spain has been quietly tapping the country's richest piggy bank, the Social Security Reserve Fund, as a buyer of last resort for Spanish government bonds, raising questions about the fund's role as guarantor of future pension payouts.

Now the scarcely noticed borrowing spree, carried out amid a prolonged economic crisis, is about to end, because there is little left to take. At least 90% of the €65 billion ($85.7 billion) fund has been invested in increasingly risky Spanish debt, according to official figures, and the government has begun withdrawing cash for emergency payments.

Although the trend has drawn little public attention or controversy, it has become a matter of concern for the relatively few independent financial analysts who study the fund, which is used to guarantee future payments of pensions.

...

In addition, there are worries that Social Security reserves for paying future pensioners are running out much quicker than expected.

In November, the government withdrew €4 billion from the reserve fund to pay pensions, the second time in history it had withdrawn cash. The first time was in September, when it took €3 billion to cover unspecified treasury needs.


Together, the emergency withdrawals surpassed the legal annual limit, so the government temporarily raised the cap.

"We are very worried about this," says Dolores San Martín, president of the largest association of pensioners in Asturias, a small region that has one of the highest percentages of retirees in Spain. "We just don't know who's going to pay for the pensions of those who are younger now."

...

After the crisis began, some of those countries began using the pension reserves for other contingencies, such covering a drop in foreign demand for their government bonds. Since the collapse of Ireland's property boom, for example, most of its pension fund has been used to buy shares of nationalized banks and real estate for which no foreign buyers could be found.

"Most of the [Spanish] fund is an accounting trick," said Javier Díaz-Giménez, an economics professor in Spain's IESE business school. "Thegovernment is lending money to another branch of government."

Spanish officials defend the heavy investment of the Social Security Reserve Fund in their government's high-risk bonds. They say the practice issustainable as long as Spain can continue borrowing in financial markets, and they predict the economy will start to recover late in 2013, easing the debt crisis.

...

"With foreign investors staying away from the Spanish debt market, you're going to need all the support you can get from domestic players," said Rubén Segura-Cayuela, an economist with Bank of America-Merrill Lynch.

Spain's commercial banks already have increased their Spanish government-bond portfolio by a factor of six since the start of the crisis in 2008, and now own one-third of government bonds in circulation.

The percentage of Spanish government debt held by the Social Security Reserve Fund stood at 55% in 2008, according to official figures; by the end of 2011 it had risen to 90%. Analysts say the percentage has continued to rise, even as international agencies have lowered Spain's credit ratings.

Spain's continued use of those reserves to buy its own bonds appears to violate a rule set by government decree that mandates their investment only in securities "of high credit quality and a significant degree of liquidity."

But with unemployment now above 25% of the workforce and fewer wage earners paying in, the Social Security System is about €3 billion in deficit, according to government estimates.
And in other news, and completing the picture, if not the circle jerk, is news fromLibremercado that according to the Spanish Confederantion of Employer Organizations,some 60% of the Spanish companies are now losing money. Via Google translate:
The President of the Spanish Confederation of Employer Organizations (CEOE) has estimated that "60 percent of the companies are in losses. Thing is that entrepreneurs are more thoughtful and went outside."

Joan Rosell responds well after being asked if he receives "Spanish citizens too negative" in an interview with the newspaper La Razon, who heads a special titled "2013, the recovery begins," and says that "social unrest is evident and business world is no exception. "

The president of the CEOE has considered that the private sector "has already made ??all the restructuring that had to do and the decline in employment in the private sector has virtually stopped. now is the restructuring of the public sector."

After defining the first year of Mariano Rajoy in government as a year of shock, Rosell has considered that the Spanish economy remains "superfluous fat by many sides.'s Central government, regional and local. Avoid duplication. We are a country hiperregulado ".
It is not exactly clear why google translate had a problem with that last word...

http://globaleconomicanalysis.blogspot.com/2013/01/60-of-spanish-companies-are-losing.html

Thursday, January 03, 2013 2:00 PM

60% of Spanish Companies are Losing Money, Social Unrest Evident; Unemployment Rate Drops


Via Google translate from Libre Mercado, Joan Rosell, the president of the Spanish Confederation of Employer Organizations (CEOE) has estimated 60% of Spanish Companies are Losing Money.

This is a Mish-modified translation of some key snips. 
 In an interview with the newspaper La Razon, Rosell said that "social unrest is evident and the business world is no exception."

The private sector "has already made ​​all the restructuring that had to do and the decline in employment in the private sector has virtually stopped. Now is the time for restructuring the public sector."

After defining the first year of Mariano Rajoy's government as a year of shock, Rosell has considered that the Spanish economy has "superfluous fat on many sides: Central government, regional and local. We are a hyper-regulated country".
Still, the CEOE president has identified several dynamic sectors in the economy, such as tourism, and exports (automobile, capital goods, power and chemical), and Rosell points out that Spain is gaining positions and externally against France , Italy or Germany.
Unemployment Rate Drops

According to the Financial Times, Spain's unemployment rate fell in December. This is the first drop in unemployment since July. However, that drop follows heavy job losses in the prior two months.
 Spain saw a slight drop in the number of registered unemployed in December, in a welcome but most probably fleeting boost to the recession-plagued economy.

According to figures released by the ministry of labour on Thursday, the number of unemployed Spaniards fell by 59,094 between November and December. This followed two months of heavy back-to-back job losses, and left the overall number of unemployed 1.2 per cent lower at just under 4.85m.

December is usually a relatively strong month for the Spanish jobs market, as retailers, restaurants and other service providers bolster their staff ahead of the Christmas season. Even by that standard, however, the past month was exceptionally buoyant: according to Spain’s labour ministry, the drop in the number registered unemployed was the largest on record.
Raj Badiani, an economist with IHS Global Insight, described the December figures as a “rare piece of good news”, but pointed out that the rise in employment was the result of a “temporary fillip to short-term service sector employment”.

Most economists expect the Spanish unemployment rate to remain above 25 per cent in 2013, and for the economy as a whole to endure another year of recession.
Hyper-Regulation with Bloated Public Sector

Here is the problem in a nutshell: Spain is indeed a hyper-regulated economy, with a banking system that is insolvent, a hugely bloated public sector, unemployment over 25%, and youth unemployment over 50%.

Structural problems remain and over half of businesses are losing money. Don't get too excited about a seasonal rebound in hiring.


Mike "Mish" Shedlock


and...


http://www.guardian.co.uk/business/blog/2013/jan/03/fiscal-cliff-imf

UK construction at six month low

A slump in house building has forced UK construction into its steepest decline in six months.
The Markit/CPS construction purchasing managers index for December fell to 48.7 last month from 49.3 in November, well below the 50 level that separates growth from contraction.
The index is at its lowest since June, when poor weather and extra public holidays dented output. Residential building sank faster than at any time since December 2010, when snow caused disruption. Markit senior economist Tim Moore said:
December rounded off a miserable year for the UK construction sector. Survey respondents are also relatively subdued about the 2013 outlook amid reports from their clients that budgets will be under even greater pressure over the year ahead.

Spanish unemployment falls

Unemployment in Spain fell for the first time in five months in December, bringing some cheer to an economy suffering its second recession in three years.
As service industries hired staff for the holiday season, the number of people registering for unemployment benefits fell by 59,094 from November to 4.8 million, the Labour Ministry in Madrid has announced.
The number of service sector workers registered as jobless fell by 49,438, but this was offset by more construction and manufacturing workers registering as unemployed.
The result is the best on record for the month of December. martin Van Vliet, an economist at ING Bank in Amsterdam, said:
This is quite unique for a December. The recession could end in the second hallf but I'm not holding my breath. With the sheer scale of fiscal tightening in the pipeline I'm still a bit cautious.
However, the Organization for Economic Cooperation and Development predicts unemployment in Spain, already the highest in the European Union, reaching 27% this year.

German unemployment rises

The German unemployment figures are in, showing the number of people out of work rose of the night month running in December.
However, the increase was significantly lower than forecast. Labour Office data showed the total out of work incresaed by 3000 to 2.942 million. The total had been expected to rise by 10,000, according to a Reuters poll of 23 economists.
The rise was also lower than in November, when an extra 5,000 people were reported to be unemployed.

The Morning After

Yesterday's euphoria, which sent London shares smashing through the 6000 level for the first time in 18 months, has abated with the FTSE 100 edging down after the opening bell.
Blue chip shares fell 0.07% to 6023 at 3.30am, as relief over the US Congress deal to avoid the fiscal cliff was replaced by concerns about bigger political battles ahead.
President Barack Obama last night signed the temporary settlement which puts off deep national spending cuts for a further two months, but Washington politicians must now hammer out a deal to raise the national debt ceiling and set a new budget.
The ratings agencies joined the International Monetary Fund Wednesday in sounding a note of caution about the fiscal deal.
Steven Hess of Moody's sovereign risk group said in a statement that the package passed in Washington:
does not...provide a basis for a meaningful improvement in the government's debt ratios over the medium term.
The rating agency expects that further fiscal measures are likely to be taken in coming months that would result in lower future budget deficits, which are necessary if the negative outlook on the government's bond rating is to be returned to stable.
Notably, yesterday's package does not address the federal government's statutory debt limit, which was reached on December 31. The need to raise the debt limit may affect the outcome of future budget negotiations.

While Congressional compromise designed to avoid the "fiscal cliff" may support the still-fragile U.S. economic rebound, the compromise doesn't affect our view of the country's credit outlook, given that we believe yesterday's agreement does little to place the U.S.'s medium-term public finances on a more sustainable footing
*  *   * 


.
In our view, the fiscal cliff has always been more of a slope--one that the country, in many ways, has been on for some time, with businesses curbing investments and financial markets advancing and retreating in reaction to news both good and bad. We maintain our forecast for U.S. GDP growth of 2.2% this year, climbing to 2.7% in 2014.

IMF warning

Good morning, and welcome to our coverage of the key events in the global economic crisis.
After a new year's rally in European and US stock markets, the International Monetary Fund has moved to temper the euphoria.
The global lender has welcomed the temporary deal to avoid the fiscal cliff but says "more remains to be done" to avoid derailing America's fragile economic recovery.
"We welcome the action by the US Congress to avoid sudden tax increases and spending cuts, including through an extension of unemployment benefits during 2013," the IMF said in a statement issued late Wednesday by spokesman Gerry Rice. "In the absence of Congressional action the economic recovery would have been derailed."
"However, more remains to be done to put US public finances back on a sustainable path without harming the still fragile recovery," Rice added.
"Specifically, a comprehensive plan that ensures both higher revenues and containment of entitlement spending over the medium term should be approved as soon as possible. In addition, it is crucial to raise the debt ceiling expeditiously and remove remaining uncertainties about the spending sequester and expiring appropriation bills.”
The sequester (steep federal spending cuts) were put off for two months and a number of appropriation bills, which authorise government purchasing, are due to expire.

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