Germany Pushes For Grexit

On Monday I wrote the following about Greece:

"The reality facing Greece is that as and when Syriza's attempts to renegotiate/renege on the terms of the bailout fail (and they will), Greece will be faced with the choice of continuing with the terms of the bailout or leaving the Euro.

As regards the latter, there are already plans in place (in the ECB and banks/financial organisations within the Eurozone) for such an exit which Germany will be keen to implement. Greece has, whether it realises it or not, has voted for an eventual exit from the Eurozone."

A mere two days on, and the plans for pushing Greece out of the Euro are being made public and openly discussed.

The Institute of German Economic Research (IW) is quoted by the Telegraph:

"Financial support must be cut off if Greece does not comply with its reform commitments.

If Greece is going to take a tough line, then Europe will take a tough line as well."

In other words the IW wants Greece expelled from the Eurozone.

ZEW research group also added to the calls for Greece, if it won't abide by current agreements, to be pushed out of the Eurozone:

"Europe should clearly signal that it is not susceptible to blackmail."

Germany’s finance minister, Wolfgang Schäuble, said:

“Anybody discussing a haircut just shows they don’t know what they are talking about.

In contrast to 2010, the financial markets have faith in the eurozone. 

We face no risk of contagion, so nobody should think we can be put under pressure easily. 

We are relaxed.”

Let us not be under any illusions, Germany wants Greece out of the Euro. The Greek people have, unwittingly, given the Germans the excuse to push Greece out.   

Greek Bailouts "Money Down The Drain!"

Yanis Varoufakis Greece's new Finance Minister, speaking to Channel 4 News last night, gave a frank and honest view about the bailouts given to Greece over the last few years.

His view?

"Money down the drain."

His solution?

Write off the debts and ask for another bailout!

Brilliant!

Greece Unwittingly Votes For Grexit

Greece has voted for an anti austerity coalition led by Syriza.

From the EU's point of view this exercise in democracy is the worst possible outcome. Syriza has vowed to "end austerity" and to renegotiate the bailout package.

However, it is highly unlikely that the political rhetoric will become reality. Whilst the EU does not want a member state to leave the Euro (as that would undermine the doomed experiment), it knows that were it to kowtow to Syriza's demands it would set a precedent for other nations (eg Spain) to demand renegotiations.

The reality facing Greece is that as and when Syriza's attempts to renegotiate/renege on the terms of the bailout fail (and they will), Greece will be faced with the choice of continuing with the terms of the bailout or leaving the Euro.

As regards the latter, there are already plans in place (in the ECB and banks/financial organisations within the Eurozone) for such an exit which Germany will be keen to implement. Greece has, whether it realises it or not, has voted for an eventual exit from the Eurozone.

ECB's Euro 1 Trillion QE Package

The markets are on tenterhooks today, as they await news as to whether the ECB will launch a Quantitative Easing package worth up to Euro1 trillion.

In the event that reports of this possible package, and its size, are true it would represent twice that which had been expected.

We shall see.

The only certainty is that the ECB has always succeeded in disappointing, when it comes to actions matching rhetoric and rumours!

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British Gas Cuts Prices By 5%

British Gas has announced that, as from 27 February, household gas prices will be cut by 5%.

Last week E.ON announced that it was cutting gas prices by 3.5%.

The energy companies claim that this is as a result of the fall in wholesale gas prices. This is undoubtedly true. However, with an election in the offing, you can be sure that a considerable amount of political pressure has been applied to these firms to make a "feel good" cut in prices in the run up to the election.

Let us see how responsive these firms are to further falls in the wholesale gas price after the election!

Greece Running Out of Cash Again

It seems that Greece, or rather the Greek banking system, is running out of cash again (due to increased government borrowing and a run on the banks).

As per ekathimerini.com two Greek systemic banks have submitted requests to the Bank of Greece for cash via the emergency liquidity assistance (ELA) system. It is thought that requests from the remaining Greek banks will follow in the next few days.

As at the time of writing, the amount asked for is Euro5BN.

The ECB will consider this next week. Whilst the ECB ponders what to do, the bank run continues. Let us trust that there will be some banks left there for the ECB to rescue once (if) it makes its mind up.

Inflation at 0.5%

Inflation (CPI) has fallen to 0.5% in December, the joint lowest level ever.

Mark Carney, Governor of The Bank of England, has to write to the Chancellor to explain why the 2% inflation target has been missed, ie why we are in a protracted period of deflation.

As I have noted many times before on this site, there is no way interest rates will be raised anytime soon (despite what the so called economic "experts" and analysts have been warning about for the last few months).

Greece Election Failure

Greece's political gamble has failed, as it has has failed to elect a new president.

As such a general election will have to be held, thus creating massive uncertainty over a new bailout and its membership for the Euro. Suffice to say this is the worst possible outcome for the Eurozone.

Rouble Freefall

As I predicted sometime ago, Russia would end up raising rates (as it did yesterday to 17%) in order to try to fend off the reality of the market.

As I also predicted, raising rates would not work (as the UK learned to its cost when it raised rates to try to prevent it being thrown out of the ERM in 1992). The rouble is in freefall and Russia now faces imposing capital controls, further wrecking the economy.

The question that the West needs to ask itself is this, is pushing Russia to the brink of economic collapse really a sensible policy both economically and geopolitically?

The Great Amazon 1p Giveaway

The dangers of relying on software and algorithms was brought home on Friday when a software error on Friday has led to hundreds of items being sold for just 1p on Amazon, and now businesses say they risk going bankrupt if they are forced to follow through with the sales.

The glitch occurred between 7pm and 8pm on Friday, and affected firms that use the tool RepricerExpress.

RepricerExpress software automatically reprices items of stock if a cheaper version becomes available elsewhere online and is designed to keep businesses competitive.

A Facebook group for those traders who last money from this has been set up.

Traders both online sellers and those who deal with billions of dollars of share trades etc should take heed from this!

Greece Knobbles Its Economy

Greece has been granted a two month bailout extension by the EU, and in light of this Greece has decided to knobble its economy by holding presidential elections two months early. Thus ensuring that Greece is at the top of everyone's mind in the coming weeks.

Greece continues to fall now down over 8%, GR/GE 10y bond spread 47bps wider amid political uncertainty and potential snap elections
— RANsquawk (@RANsquawk) December 9, 2014

Premier Foods' Nice Little Earner

In a sure sign that it is in financial difficulties, Premier Foods (owner of brands that include Mr Kipling, Ambrosia, Bisto and Oxo) has been asking its suppliers for payments to continue doing business with the firm. 

The official term for this practice is "pay and stay". However, one supplier quoted by the BBC referred to it as "blackmail".

Premier Foods is of the view that the scheme did not break any rules under competition law. However, the government said it was "concerned by recent reports".

Newsnight has seen a letter sent by chief executive Gavin Darby, dated 18 November.

"We are aiming to work with a smaller number of strategic suppliers in the future that can better support and invest in our growth ideas.

We will now require you to make an investment payment to support our growth.

I understand that this approach may lead to some questions.

However, it is important that we take the right steps now to support our future growth."

All very well and seemingly "polite". However, the reality is that if a supplier doesn't cough up, they are "de-listed". As per the BBC, when a supplier raised questions in an email about the annual payments, a member of Premier's staff replied:

"We are looking to obtain an investment payment from our entire supply base and unfortunately those who do not participate will be nominated for de-list."

As to whether Premier can legally get away with this, is a question for legal experts.

However, what its suppliers needs to ask Premier is given Premier's financial problems, what happens to the "pay and stay investments" already handed over by suppliers if Premier goes bust?

Putin Issues SOS

In a sign that the Russian economy is in dire straits, President Putin has offered an amnesty on capital returning to Russia.

Putin calls for an "amnesty" on capital returning to Russia, meaning if people repatriate their money, they won't face tax/legal questions.
— Paul Sonne (@PaulSonne) December 4, 2014

This is all very well. However, if people were to heed the call to return their capital they would never be able to get it out of the country again.

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