Taking The Piss

My bank informs me that a Euro cheque paid into my sterling account may take up to six weeks to clear.

Are they taking the piss?

La Guerre Est Finie!

France has admitted defeat in the war of words which it started with Britain.

French foreign minister, Alain Juppé, told the Telegraph:

"The comments [of the past few days] went further than their authors wished, [but there is] no need for excuses on either side. 

There is not an ounce of doubt that Franco-British relations, that will become excellent once again as we have too much in common to allow them to deteriorate. 

I cannot imagine that we will push Britain out of the European Union."

I wonder if the war will reignite, when France is downgraded; as the head of France's stock market regulator (AMF) believes it will be?

Jean-Pierre Jouyet, is quoted in the Wall Street Journal:

"Keeping the triple-A would be a miracle, but I want to believe it's possible."

Joyeux Noel!

Banks Rush For Cheap Loans

Once it was just the hapless individual seeking a personal loan or mortgage who would rush for "cheap" loans.

Now the boot is on the other foot, as banks have been falling over themselves scrambling for the "cheap" three year loan deal offered by the ECB. Rates will be an average of the ECB rate over the next three years.

The ECB has loaned Euro489BN to 523 banks, significantly above the Euro310BN expected by the markets.

This of course has given the markets a temporary pre Christmas "pick me up". However, it does not cure the systemic failings of the Eurozone. The money will be used by banks to buy up sovereign debt and shore up their own finances; it will not be used to lend to companies or individuals in the wider economy.

The Dangerous Juncture

IMF chief Christine Lagarde has told a roundtable on Africa's economic future in Lagos that the world economy is at "a very dangerous juncture".

Despite this, as predicted, the European finance ministers failed yesterday to raise Euro 200BN for the IMF.

However, France is not depressed and has issued an upbeat prediction (or is it a wish?) that the UK (the country that it was criticising so publicly a few days ago) will provide funds to the IMF.

The Germans were also displaying a heavy handed attempt at buttering the Brits, up when Guido Westerwelle, the German foreign minister, described the UK as an "indispensable partner" and promising a "hands-off" approach to our financial services industry.

"My main message is for the British people – you can count on us, and we can count on you. There is no doubt that we want to make the next steps in the EU together as 27. I am here to show you that we are willing to build bridges over troubled water."

How the tone has changed, clearly things really are bad!

Lions Led By Donkeys

Another day, another conference in the interminable death mach towards the demise of the Euro.

Today, at 15:30 CET, European finance ministers will hold a conference call to discuss increasing the funding of the IMF by 200 billion euros.

Apparently this was agreed at the summit on 9th December.

However, the Bundesbank has already put the kibosh on anything tangible being achieved today; by stating that is sees "no urgent need" to reach a decision.

Just in case the markets don't get the message, that nothing tangible will be agreed, the German Finance Minister has done his best to undermine any residual confidence remaining.

Last night Wolfgang Schauble said:

"It is clear that the sooner and the more paid-in capital the ESM (European Stability Mechanism) has, the more it gains trust on the financial markets. My priority is to create trust."

"Trust" is not a word that is used very often when describing the feelings that the markets have for the "leaders" of the Eurozone.

However, this morning his colleagues from the Finance Ministry were quick to ensure that "trust" was killed ASAP, stating:

"It is not very likely we will pay the full contribution (in 2012)".

Thus ends the year, not with a bang but with a whimper.

The people of Europe are lions led by donkeys!

Quelle Dommage!

One week on from the "Summit To Save The Euro", and it appears that the much hyped "deal" is already unravelling before it is even signed.

Viz:

- Fitch has downgraded a number of banks, including BNP Paribas and Deutsche Bank.

- The leaders of Hungary and the Czech Republic have stated that they are ready to reject the planned treaty changes and implied move towards a centralised tax system. 

- Mario Draghi, the head of the European Central Bank (ECB), warned that the bond-buying programme was “neither eternal nor infinite”.

- Pedro Nuno Santos, vice-president of the Portuguese Socialist Party told MPs:

"We have an atomic bomb that we can use in the face of the Germans and the French: this atomic bomb is simply that we won't pay.

Debt is our only weapon and we must use it to impose better conditions, because recession itself is what is stopping us complying with the (EU-IMF Troika) accord. We should make the legs of the German bankers tremble."

- Greece has yet to agree a deal with its bondholders etc.

Despite the above, the French appear to believe their own hype. France's finance minister Francois Baroin said:
   
"It's true that the economic situation in Great Britain is very worrying and that we prefer being French rather than British on the economic front at the moment. 
 
We don't want to be given any lessons and we don't give any."

As I said last Friday:

"Cameron, over the coming days, will be vilified by many for his actions. However, time will prove that the Eurozone and its "leaders" are not up to the job of running single currency.

Oh, and by the way, the "new treaty" is not yet a done deal. Member states have to formally sign up to it, and at least Poland and Ireland are already discussing having to hold referendums before they sign up! "

BIS To Prosecute Sir Fred Goodwin?

Not everyone is as content and as passive as the Financial Services Authority (FSA) when it comes to the RBS debacle and the stewardship of Fred "the Shred" Goodwin and other members of the board.

The Telegraph reports that the head of the Insolvency Service at the Department for Business Innovation and Skills (BIS), which is already investigating whether RBS's former directors could face civil charges, has asked his legal team to check the criminal allegations too.

The FSA report report into the collapse of RBS noted that:

 

"RBS appeared uncertain of its capital position at critical times.

 

So, at best, compliance was only established on a retrospective basis."

 
In theory this is a breach of the Companies Act, which states that directors must be able to "disclose [their company's] financial position with reasonable accuracy at any time".

The website of BIS says it "often" prosecutes "malpractice by company directors in relation to the keeping and preservation of company accounting records".

Penalties are "punishable by a maximum penalty of 2-10 years imprisonment and/or a fine."

How embarrassing for the FSA, if BIS launches a criminal prosecution.

France To Be Downgraded

A week is a long time in politics.

Less than a week ago President Sarkozy of France was crowing over the EU's "historic" summit, that allegedly set in place systems and procedures that might one day resolve the Euro crisis.

The markets were less than impressed, and it is now expected that S&P will downgrade France's credit rating from Sarkozy's much prized AAA.

Why believe this rumour?

Well, Sarkozy seems to know that it is more than just a rumour because he is publicly stating that a downgrade doesn't matter!

BTW, a downgrade does matter, but don't spoil his day by telling him that!

As to the EU agreement fixing the Euro crisis, well it seems it hasn't.

The ECB's Klaas Knot has said that the Euro crisis will drag on for another two years, and that at least Euro 1 Trillion is needed to fix it.

Best not tell Sarkozy that either:)

Greece Heading For Default

When Angela Merkel said that there would be no more "haircuts", it seems that she was telling the truth.

Talks between the Greek government and bondholders have broken down.

What does this mean?

Greece is about to default on its debts.

No More haircuts!

The FSA's Report Into RBS

The long awaited, and much delayed, report by the Financial Services Authority (FSA) into the Royal Bank of Scotland (RBS) near collapse has finally been issued.

The FSA concludes there were “underlying deficiencies in RBS management governance and culture which made it prone to make poor decisions”.

The report highlights that Sir Fred Goodwin (the then CEO) lobbied to have a warning letter from the FSA altered, to remove references to the deterioration in his relationship with the FSA along with the FSA's concerns over RBS’s commercial property lending.

Incredibly only 6 members of the FSA were overseeing RBS in August 2007 (when it went ahead with the disastrous "dule diligence light" takeover of ABN Amro).

Lord Turner, chairman of the FSA, attempts to explain why, despite these failings, “no-one has been punished” for this failure of governance and oversight:

 

“The fact that no individual has been found legally responsible for the failure begs the question: if action cannot be taken under existing rules, should not the rules be changed for the future.”

Blaming the "rules" is not sufficient excuse for inaction, given that the governance of RBS clearly failed on a spectacular level and that the oversight of RBS by the FSA was woefully inadequate.

Why is the FSA still in existence?

Britain Opts Out

David Cameron gave the EU Summit a hefty kick in the gonads yesterday, when he refused to sign up for the new treaty which, allegedly, will resolve the Euro crisis.


Cameron said:

"I said before coming to Brussels that if I couldn’t get adequate safeguards for Britain in a new European treaty, then I wouldn’t agree to it.  What is on offer isn’t in Britain’s interests, so I didn’t agree to it. 

Let me explain why this matters.  Of course, we want the eurozone countries to come together and to solve their problems.  But we should only allow that to happen inside the European Union treaties if there are proper protections for the single market and for other key British interests. 

Without those safeguards, it is better not to have a treaty within a treaty, but to have those countries make their arrangements separately.  That is what is now going to happen....

...The key question for Britain was: do you allow that to happen within the European Union treaties if you are not happy with the safeguards you are given?  I wasn’t prepared to agree that treaty, to take it to my Parliament in that way, and that is why I rejected signing this treaty today.  The right thing for Britain.  A tough decision, but the right one."

Sarkozy may well feel rather pleased with himself at the moment, as it means that in the new "two speed" Europe France will have greater sway. However, France and the Eurozone may care to consider that David Cameron's refusal to sign up was based on a shrewed assessment of whether the Eurozone and its "new treaty" is capable of resolving the Euro crisis.

Cameron has judged that the crisis will not be resolved by this course of action, and that signing up would be a disaster for the UK.

Here's what the others signed up to:

- Eurozone states' budgets should be balanced or in surplus.

- A similar rule will also be introduced in eurozone member states' own national legal systems; they must report national debt issuance plans in advance.

- As soon as a euro member state is in breach of the 3% deficit ceiling, there will be automatic consequences, including possible sanctions, unless a qualified majority of euro states is opposed.

None of the above will resolve the Eurocrisis, the ECB needs to act as a buyer of sovereign debt (ie print money); a role that it refuses to accept.


Cameron, over the coming days, will be vilified by many for his actions. However, time will prove that the Eurozone and its "leaders" are not up to the job of running single currency.

Oh, and by the way, the "new treaty" is not yet a done deal. Member states have to formally sign up to it, and at least Poland and Ireland are already discussing having to hold referendums before they sign up!

Another Day, Another Euro Crisis Summit

As the "leaders" of the Eurozone gather in Brussels for yet another "crisis summit" to save the Euro, the markets are waiting expectantly for the ECB to announcer a rate cut today.

Live streaming of the ECB press conference (14:30 CET) can be viewed here.

As and when the summit is over, and the rate cut (if there is one) announced, will the crisis be over?

No.

There is no coherent plan in place or in draft to resolve the inherent flaws with the Eurozone structure.

We can expect many more "crisis summits", as such the best option is for people to invest in the firms that provide the catering and accommodation for the participants!

A Bank Run on a National Scale

Greece is currently experiencing a bank run on a national scale, as savers pull their funds from Greek banks.

Speigel Online quotes Georgios Provopoulos, the governor of the central bank of Greece:

"In September and October, savings and time deposits fell by a further 13 to 14 billion euros. In the first 10 days of November the decline continued on a large scale."

Adding:

"Our banking system lacks the scope to finance growth."

Will things improve for Greece, and the rest of the Eurozone, after this week's "make or break" European summit this Friday?

Probably not.

Reuters quote a German official, who claims that the German government is "not sure if summit will reach conclusion on using IMF funds in eurozone crisis" and "can't forsee running EFSF and ESM simultaneously". They are "more pessimistic than last week on overall summit deal".

Well then!

Athens December 2011 - The New Europe

Source The Telegraph

The Eurozone's Death by a Thousand Cuts

As Angela Merkel and Nicolas Sarkozy held a press conference yesterday, in which they rehashed the vague and unconvincing aspirations about the reform of the Eurozone that they have issued before (note as per usual, there was absolutely nothing said about what they will do to address the current crisis), economic reality slapped the Eurozone in the face.

Standard and Poor's issued a warning that 15 out of 17 Eurozone nations may suffer a credit downgrade. There is now a 50/50 chance that France and Germany will lose their AAA ratings.

Does this matter?

Yes it does, the much hyped busted flush aka the EFSF relies for its non existent funding on the ratings of the Eurozone. In the event that these are downgraded, funding for the EFSF (if any actually ever materialises) will become more expensive and harder to obtain.

Suffice to say, the political "leadership" of the Eurozone is foaming at the mouth with indignation that their political aspirations are being blown off course by economic reality. However, as we know, the politicians who claim to be "leading" the Eurozone don't care much for reality.

Meanwhile, according to @FGoria (an Italian financial journalist) Greece is about to exit the Eurozone:

"A Cleary Gottlieb lawyer to me: "We're almost ready to advise Greece in an exit from Eurozone. We began our job over one year ago"." 


Thanks to the inaction of the politicians, the Eurozone is suffering a long and protracted death of a thousand cuts.

HSBC Fined £10M

The UK financial services industry has yet again blotted its copybook. This time HSBC's name has been added to the "wall of shame".

The Financial Services Authority (FSA) have fined HSBC £10.5M, and ordered it to pay £30M in compensation, for mis-selling investment products to elderly customers needing long term care.

The FSA said that between 2005 and 2010, a subsidiary of HSBC, NHFA (previously known as the Nursing Home Fees Agency) advised 2,485 customers to invest in investment bonds, and other asset-based products, to fund long-term care costs.

The average age of these customers was 83, a sample review suggested that almost 90% of these cases were mis-sold.

The average amount invested per customer was about £115K.

The FSA ruled that this advice was unsuitable, because these products were designed to be held for a minimum of five years. However, many of these customers were not expected to live this long!

Coupled with the disgraceful mis-sale of this unsuitable product was the fact that the product had charges.

The Telegraph quotes Tracey McDermott, acting director of enforcement and financial crime said:

"NHFA was trusted by its vulnerable and elderly customers, It breached that trust to sell the unsuitable products. This type of behaviour undermines confidence in the financial services sector.

This penalty should serve as a warning to firms that they must have the right systems and controls in place to manage and identify risks when they acquire new businesses. A failure to do so can lead not only to detriment to their customers but to significant reputational and regulatory cost."

Well done HSBC for "enhancing" the reputation of Britain's financial services industry!

The Naked Greed of Banks

Banks still seem to be operating with their heads in the sand.

"A customer borrowing £100 for 28 days without the consent of Santander would repay £200, for example.

That is the equivalent annualised percentage rate, or APR, of 819,100%.

Comparisons between banks and so-called payday lenders showed that the annualised percentage rate charged for borrowing £100 over 28 days varied from 969% to 819,100%.....

No payday loan lender charged an APR of more than 5,000% but two banks - Santander and Lloyds TSB - charged an equivalent APR of more than 300,000%. 

Santander told the BBC: "It's is confusing to compare payday loans with overdrafts on current accounts because an unauthorised overdraft charge is for unauthorised use of a current account while a payday loan is an agreed loan facility."

Barclays would charge a customer using a personal reserve - a pre-agreed emergency borrowing facility - £22 for every five consecutive working days they were in it. This means customers would pay £88 on top of the £100 capital after 28 days - an equivalent APR of 366,000%."

Source BBC

Merkel Nixes Eurobonds - Again!

Angela Merkel has again adamantly stated her opposition to Eurobonds as a means of saving the dying Euro experiment.

Quote: "Null and Void"

For good measure, Chancellor Merkel also gave a fulsome "Nein!" to the ECB acting as a lender of last resort.

She noted that the Euro crisis will take years to "sort out".

In terms of treaty adjustments and EU politics, she is correct. However, the Eurozone and global economy will not wait for years.

In the short term, whilst the politicians of Europe attempt to change treaties etc the markets need to be assuaged, otherwise the markets will tear the Eurozone apart.

Merkel and German politicians fret about "moral hazard". However, as I have stated on this site many times before, if your neighbour deliberate/carelessly sets fire to his house you help put the fire out first (lest it engulf your house as well) before you give him a kicking for being so careless.

Merkel et al need to bite the bullet and put a line under this issue now, with a major financial intervention by the ECB, new treaties in the coming years can address the issue of "moral hazard".

Absent Without Leave

Nine crucial days to save the Euro. Emergency swap lines put in place overnight by the world’s top central banks. A new captain taking over a huge, recently-built ship in the middle of a raging storm. If there was ever a time when publicly-elected representatives should be grilling the head of the European Central Bank, this is it.

So when Mario Draghi arrived at the European Parliament Thursday, your correspondent was amazed to see the former Goldman Sachs executive playing to a virtually-deserted house. A rough leaning-over-the-balcony headcount gave 35 MEPs out of 736, as per the attached photo (Draghi is just to the right of the blue lectern in the centre, sitting in the front row).

Source The Wall Street Journal

The Threat from Europe

Sir Mervyn king, Governor of The Bank England, has spoken forthrightly this morning about the threat from Europe.

Using phrases such as:

- "Exceptionally perilous conditions";
- "Major solvency concerns";
- "Systemic crisis"

Clearly shows that he is very worried, and that the threat to the UK from the Eurozone crisis is worsening.

Sir Mervyn has called for UK banks to increase their capital reserves (via cutting dividends and bonuses, not cutting lending), not because they are under capitalised (they are better capitalised than European banks) but because it is "sensible and desirable to build resilience to threats to UK stability."

The "threat" of course comes from Europe.

How will this all end?

Here are six possible scenarios:

1 The Euro is devalued in order to keep all member states together and ease the pain on PIIGS.

2 PIIGS leave the Euro en masse, and in an "orderly" fashion. The Euro remains relatively stable as remaining countries in it are stable

3 PIIGS leave the Euro one by one in a disorderly fashion, as markets push Euro down and yields up.

4 Eurozone leaders create a "big bazooka" to deal with the short term confidence issue, and move towards full fiscal/political union in medium term (the Euro stabilises).

5 Eurozone leaders fail to create big bazooka but continue to work towards medium term fiscal union, markets tear Eurozone apart.

6 Germany leaves Eurozone and the remaining members devalue Euro.

To my view options 3, 5 or 6 are the most likely.

Euro Hubris Pricked

The days of optimism and hubris about the Euro are long gone.

Wolfgang Schauble, Germany's finance minister has admitted that Eurozone finance ministers, who are meeting in Brussels, cannot agree on the terms of the European Financial Stability Facility (EFSF).

He went on to tell Handelsblatt that plans for the EFSF were too “intricate and complex” for investors to understand.

Based on my experience of finance and fraud, when someone says that something is too complex for people to understand it generally means that either:

1 They don't understand it themselves, or

2 They are committing fraud

The dithering and failure of Eurozone "leaders" to resolve the Euro crisis has destroyed confidence in the euro experiment. As such, multinationals around the the world are now making contingency plans for the breakup of the Eurozone.

Andrew Morgan, President of Diageo, is quoted in the FT:

“We’ve started thinking what [a break-up] might look like.


If you get some much bigger kind of ... change around the euro, then we are into a different situation altogether. With countries coming out of the euro, you’ve got massive devaluation that makes imported brands very, very expensive.”

The Eurozone has signed its own death warrant.

Busted Flushes

Eurozone finance ministers to meet in Brussels today to discuss ways to expand the European Financial Stability Facility (EFSF).

Given that it has been proven to be a busted flush, this meeting will be a remarkable waste of time.

Meanwhile, in the UK, George Osborne, will deliver his Autumn Statement.

This will be a "jam tomorrow" speech, in which he attempts to create the UK's mini version of the EFSF by using a £5BN cash injection from the government to leverage a further £20BN or so in finance from UK pension funds and the Chinese.

To give him credit, he may achieve more that the Eurozone has done with their busted flush!

The Farepak Debacle V

Regular readers may well recall that I have written several articles (some years ago) about the collapse of the Christmas savings company Farepak.

To add insult to injury of those who were robbed of their savings by its collapse, it now transpires that the cost of administering Farepak now stands at £8.2M in fees paid to BDO the administrator, lawyers and various others.

As for the 120,000 people who lost money (an average of £400 per person) the most they can expect to receive in compensation is £5.5M, most are still waiting, which equates to roughly £45 per head!

It is sad and ironic to see accountants and lawyers doing better than those who can least afford to lose money.

The Abyss

Starting the week as it will most surely go on, the OECD has given an urgent warning that Europe, and by definition the global economy, is standing on the edge of the abyss.

The OECD stated that the failure of EU leaders to stem the crisis could "massively escalate economic disruption" and end in "highly devastating outcomes".

"The euro area crisis represents the key risk to the world economy at present."

Needless to say, the Eurozone seems determined to dig its (and the global economy's) own grave, and continues to sow the seeds of confusion and despair.

Die Welt reports that Germany is considering issuing joint 'elite bonds' with five fellow AAA nations. That of course means the creation of a two speed Eurozone. Needless to say the German government has issued a hasty denial of the plan.

Which, given that France may well lose its AAA rating, is doubtless welcome news for the French (assuming that is, the Germans are being truthful in their denial).

Meanwhile in Washington, Barack Obama will today meet European Council president Herman Van Rompuy and European Commission president José Manuel Barroso at the annual EU-US summit.

Good luck with that then!

The EFSF - The Busted Flush

On Monday I wrote that the European Financial Stability Facility (EFSF) was a "busted flush".

Finally it seems that the reality of that has hit home to the Eurocrats, who are trying to sell this unwanted product from their bunkers in Brussels.

The Eurocrats have now admitted that "plans" to leverage a fund of Euro250BN to over Euro1BN will fail, and that less than half of that now looks likely (ie it will not be fit for purpose).

Unsurprisingly this failure is attributed to the fact that the markets simply don't believe anything that is coming out of the mouths of the Eurocrats or politicians in Europe.

Even if some money is raised for the fund (and that looks extremely unlikely), Eurocrats do not anticipate that it will be ready anytime before 2012.

In the meantime the markets will continue to deteriorate and the costs of borrowing soar.

Latvia, a Portent of the Future

Fitch has cut Portugal's credit rating to junk.

It has downgraded Portugal from BBB- (its lowest investment grade rating) to BB+ (the highest non-investment grade), with a negative outlook.

Meanwhile, in Latvia, people are queuing to take cash out of ATMs as stores now only accept cash.

Is Latvia a portent of the EU's future?

Dexia Deal Unravels

In mid October I wrote that the rescue "plan" for Dexia was unravelling.

Today (one month later) the media are awash with reports that Belgium is pressing France to pay more into an emergency facility for Dexia.

For why?

Because Belgium knows that if Dexia falls over, the collateral damage to France (wrt its exposure to Dexia) would be immense.

France is less than amused, because if it pays more into the rescue fund it's AAA rating will be undermined.

This "renegotiation" is of course going to send the whole deal "tits up".

As I noted in October:

THERE IS NO PLAN!

The Thomas Cook Affair

Today Thomas Cook announced the following:

"Thomas Cook Group plc announces that as a result of deterioration of trading in some areas of the business in the current quarter, and of its cash and liquidity position since its year end, the Company is in discussions with its principal lending banks with regard to its facilities during the seasonal low period of cash in the business.

While the Company currently remains in compliance with its financing covenants, it also intends to seek agreement from its lending banks to adjustments that will improve its resilience if trading conditions remain difficult.

As a result, the Company will delay its announcement of its full year results until these discussions are concluded.  The Company expects to report a headline operating profit for the year ended 30 September 2011 broadly in line with previous guidance."

Thomas Cook is now in the process of renegotiating the terms of its £1BN net debt burden for the second time in a month.

These discussions (with a syndicate of 17 banks) come a month after the company agreed a deal with lenders, that it hoped would end speculation over its future.

This announcement is more than a "tad ironic", given that on 29 September 2011 Thomas Cook in its Pre Close Trading Update stated:

"Overview
Many of our businesses have performed well this year, notably Northern Europe, Central Europe and our German airline. However, our overall performance has been impacted by our UK business and the disruption in the MENA region, particularly on our French business. Summer booking trends in our key markets have remained largely in line with expectations since we last reported.

• Underlying operating profit expected to be broadly in line with market expectations;
• Cashflow performance is strong;
• Variety of measures underway to strengthen the balance sheet;
• Actions underway to increase UK cost base flexibility as part of the overall UK business review.

Trading and cashflow performance
The Group delivered steady results for July and August, in line with our expectations, but September has been a more challenging month, particularly in our French business. However, we still expect to deliver a result broadly in line with market expectations.

Our focus on cashflow continues to deliver benefits, with a £78m improvement in free cash flow for the 11 months to 31 August 2011, driven by lower capex and cash exceptionals and good working capital management. As at the 28 September 2011, we had circa £830m headroom of available cash and committed bank facilities."

The company has lamely issued a string of profits warnings over the last 18 months, blaming everything from government cuts to the Arab Spring for unexpected hits to its revenues.

Unsurprisingly, the shares have fallen off a cliff from above 40p yesterday to around 14p at the time of writing.

It is clear that whatever arrangements Thomas Cook might (and that is not at all certain) be able to make wrt future funding, the fact that this announcement has caught everyone out by surprise has brought its continued existence into doubt:

1 Markets don't like being surprised.

2 Shareholders will quite rightly question the competence of the board.

3 Customers will avoid the company like the plague.

It seems that Thomas Cook has become the private sector's version of Greece!

The European Financial Clusterfuck

The European financial clusterfuck continues this week unabated.

Here are but a few headlines to start the week with:

- Moody's has issued a downgrade warning on France.

- Despite a landslide victory in Spain, for a party that will implement further austerity measures, markets are falling and Spanish bond yields are rising.

- Hungary has asked the EU and IMF for financial assistance, oddly enough they haven't put a figure on how much they actually want/need!

- The European Commission has sated that the "cure" for Europe's ills are Eurobonds. This has been publicly slapped down by Germany, which stated that Eurobonds were not a "cure" at all.

- The EU's Jean-Claude Juncker says if France were to lose its AAA rating so would the EFSF.

Wrt the latter point, so what?

The EFSF is a busted flush anyway, a downgrade in rating is completely irrelevant.

Oh, and if anyone is remotely interested, Belgium's politicians have yet again failed to form a government (Belgium has now been without a government for 526 days).


The week starts as it means to go on, badly!

Bring On The Superwaffe!

Problem sorted then David!

The German Juggernaut II

The German Juggernaut

br>
As the eye of the financial storm moves from Italy to Spain, it was fascinating to learn that the Irish budget was being circulated around the Bundestag for approval, before it was even seen by Irish members of parliament.

Coupled with the fact that both Greece and Italy are now, in effect, German financial protectorates (complete with German appointed Prime Ministers) and we have to wonder what form of "new" European political structure and governance model is being created.

Clearly David Cameron is concerned as well, because he is hot footing it to Berlin for talks with Chancellor Merkel.

Let us trust that something more tangible than a piece of paper will be forthcoming from that meeting!

Northern Rock Sold To Virgin

Taking a short respite from international news of doom and gloom (bond yields in Spain at 7%, Germany and France fall out over role of ECB etc) it has been announced that Virgin will buy Northern Rock plc (the non toxic part of Northern Rock) for around £750M now, with a possible further £280M over the next few years.

Northern Rock plc will be rebranded as Virgin Money, which has promised not to make anyone compulsorily redundant over the next 3 years.

Taxpayers have put around £1.4BN into Northern Rock plc. Hence the loss is between £400M to £650M.

The "bad bank" part of Northern Rock is estimated to contain losses of up to £21BN.

ECB Does a Canute

The markets remain unconvinced by the new unelected technocrat government of Italy, and as such the bond yields have risen close to 7%.

The ECB is currently "doing a Canute", and buying bonds in order to keep the yield down.

This of course is merely kicking the can down the road.

The Irony

It is ironic that the new leaders of Italy (Mario Monti) and Greece (Lucas Papademos), who are regarded by the Europhiles as the potential saviours of the Euro experiment, have not been elected to office.

Whilst the other "leaders" of the Eurozone may regard the lack of democratic process as a "necessary step", in order to save their beloved Euro, the people of Greece and Italy may not be so relaxed about it as and when the two new leaders attempt to push through their economic reforms.

Imposing "benign dictatorships" via appointed technocrats will backfire on the Eurozone, and will inevitably hasten its demise.

Fuckshites!

EU Bullshit

"For the fourth year in a row, the EU's annual accounts have received a clean bill of health from its external auditors."

Source EUROPA

The reality is of course entirely different.

There was an estimated “error rate” of 3.7% in payments from the 2010 Euro 122BN budget.

"In the Court’s opinion, because of the significance of the matters described in the basis for adverse opinion on the legality and regularity of payments underlying the accounts paragraph, the payments underlying the accounts for the year ended 31 December 2010 are materially affected by error."

Source ECA

This is why the EU is destined to fail.

A Smaller Eurozone

As the world waits for Greece and Italy to name their new Prime Ministers, it seems that France and Germany have finally woken up to the fact that the current Eurozone structure is doomed to failure. They have talked about creating a smaller Eurozone.

Additionally, Merkel's party is discussing a move to permit countries to exit the eurozone without leaving the EU.

The question is, will these rumours turn into facts before the markets tear the Eurozone to pieces?

How To Make Money Out of The Eurocrisis

Want to make money out of this shambles?

Easy, buy shares in the following companies:

1 The catering firms that supply food and drink to the Euro "elite" for their interminable meetings

2 The suppliers of paper and ink for the ECB and Fed printing presses (ECB and Fed are going to print shitloads of paper very soon)

Simples!

Veni Vidi Vici

It is now game over for Italy and the Eurozone, as Italian bond yields have breached 7% (a level viewed as economically unsustainable).

Can the Eurozone bailout Italy?

No, there is not enough money in the "kitty".

Emperor Berlusconi's excesses have managed to do what many a Eurosceptic has only ever dreamed of, namely destroy the Eurozone.

To follow the latest updates from Italy and Berlusconi's antics read "Veni Vidi Vici".

The End of The Beginning

As Italian bond yields hit a staggering and unsustainable 6.7%, Umberto Bossi of the Northern Leagues has called on Silvio Berlusconi to resign.

Suffice to say Berlusconi will not go without a fight, because he fears losing the immunity from prosecution that remaining in office gives him.

That being said it is clear that he is finished.

The removal of Berlusconi will give some temporary relief to Italy. However, it is clear that this is not the end of the Euro crisis, nor even the beginning of the end, but most likely the end of the beginning.

I should point out that the end of the Euro crisis will occur only when the Euro itself is consigned to the dustbin of history.

The world mnust brace itslef for months of further turmoil, as Eurozone countries are picked off one by one until the "leaders" of the Eurozone finally admit that the "game is up"..

Italy Next in LIne

As Greece shambles towards some form of coalition government which might, given that it has a gun pointed towards its head, "graciously" accept the bailout terms foisted on it by the Eurozone, attention now moves to Italy.

This morning Italian bond yields are rising (6.6% at the moment), and are approaching the levels at which the country will have to ask for a bailout.

The only problem with that is that there is no money with which to bail them out, the EFSF has managed to raise zero funds (despite Eurozone flunkies passing the begging bowl around the world) and the ECB flatly refuses to purchase anymore bonds from Italy unless there is evidence from Italy that it will implement an austerity package.

During the course of this week the markets will push the intractability of the ECB and the stubbornness/shiftiness of the Italian political system to their respective extremes; it will be interesting to see which one breaks first.

G20 Failure

The G20 in Cannes looks like ending up as an enormously expensive failure.

It is now highly unlikely that world leaders will announce a figure for the increase in IMF funding, as the Americans are keen to "keep up the pressure" on eurozone to sort themselves out.

The Greek referendum has been cancelled, and it looks likely that the Greek government will fall.

Italy is now under close supervision, as its bond rates rise.

The Chinese will not put a Yuan into the over hyped and poorly structured fantasy known as the EFSF.

All in all this G20 meeting has shown how lacking in real leadership the world really is, just at a time when it needs it most.

Acropolis Now!

The end game wrt the Greece farce is upon us.

Greece's finance minister, Evangelos Venizelos, has broken ranks and said that the referendum should not go ahead.

There are plans for yet another emergency Greek cabinet meeting this morning. The Prime Minister of Greece, George Papandreou, will resign and the government will fall.

As such the idea of the referendum can now be considered dead and buried.

Unfortunately the damage is done:

- Markets are in turmoil
- The Chinese will not fund the EFSF until Europe gets its house in order
- Obama is furious that his time at the G20 has been wasted
- Italy's yields are now at 6.5% etc

What next?

There will be elections in Greece, the time between now and those elections will see the Eurozone under even more pressure, as markets hate uncertainty. Additionally, until Greece decides (whether by election or referendum) as to whether it accepts the bailout package it will not receive the next tranche of Euro8BN recently agreed (which was meant to pay the wages of the public sector workers).

This is a mess, and the endgame for Greece and most likely the Eurozone.

Follow daily updates on the end of the Euro by subscribing to Acropolis Now!

Where's The Meat?

As Eurozone "Leaders" meet at the G20 in Cannes today, amid the wreckage of the bailout "plan" that was scuppered by Greece's decision to hold a referendum on remaining in the Euro, I have but a simple question to ask.

In the unlikely event that the "plan" for the Euro1Trillion EFSF bailout has not collapsed, where exactly is the money coming from to fund this?

I ask, because the Euro3BN fund raising to bailout Ireland has been pulled by the Eurozone.

The reason for it being pulled?

"Market conditions".

Now, if they can't raise a mere Euro3BN, how the hell do they expect to raise Euro1Trillion?

Oh, and one more thing, isn't Greece about to run out of money in the next week or so?

Given that the referendum has in effect put the bailout "plan" on hold (after all they cannot be forced to accept the money if they have not yet approved the "plan"), how will Greece pay its bills in the meantime?

Does anyone actually know the answers to the above?

The Birthplace of Democracy Rattles Its Cage

The Greek Prime Minister, George Papandreou, dropped something of a bombshell on the markets and the self satisfied Eurozone "leaders" yesterday by calling for a referendum on the latest Greek bailout and austerity package.

He told the Greek parliament:

“The command of the Greek people will bind us. Do they want to adopt the new deal, or reject it? If the Greek people do not want it, it will not be adopted…We trust citizens, we believe in their judgement, we believe in their decision."

Unsurprisingly the markets are falling, and the "leaders" of the Eurozone are spitting blood at what they regard as a betrayal by Papandreou (who had promised them he wouldn't call a referendum - but hell, who trusts politicians to keep their word?).

As ever, with any referendum, the devil is in the detail. Aside from the fact that the referendum will not be held until January (leaving ample time for the markets to have a nervous breakdown), it is not yet clear exactly what the question will be.

Some are asking if Papandreou has lost his mind. I think not, it seems to me that this is a very shrewd political move.

Papandreou knows that the Greek people are less than "enamoured" with the bailout and at the prospect of having "on the ground monitoring" (as demanded by Merkel). Were he to try to push the bailout through he may well face a serious escalation of civil unrest.


By publicly placing the decision for accepting the bailout in the hands of the people, he gives them the power and responsibility to either accept the deal and "knuckle under" to decades of austerity, or throw it away and leave the Euro in a disorderly manner.

However, there is another more "subtle" strategy at play here. The more than two months before the referendum is held, gives the Eurozone "leaders" more than enough time to realise the dire consequences for their own futures if Greece publicly votes down the terms of the bailout. Papandreou knows this, and has used the referendum as a means of extracting "sweeteners" and a better deal from the Eurozone.

The calling of a referendum serves as a public reminder to the "leaders" of the Eurozone that you cannot impose economic policy by dictat.

The move by Papandreou is clever politics, but it will play havoc with the global economy.

China Says "Not Yet"

Despite European hopes and spin that the Chinese will bailout Europe, by funding a large part of the EFSF, China is not rushing to write Europe a cheque.

Klaus Regling, went to Beijing to discuss terms. However, his poorly planned, uninvited visit and the comments of Nicolas Sarkozy about Beijing having a "major role to play" in proposals to expand the European Financial Stability Facility (EFSF) only seem to have irritated the Chinese.

China, quite rightly, wants more clarity on terms and conditions etc before it considers investing anything.

The official Xinhua news agency said that Europe must put its house in order:

"China can neither take up the role as a saviour to the Europeans, nor provide a 'cure' for the European malaise.Obviously, it is up to European countries themselves to tackle their financial problems."

Europe needs to understand that it is a "buyers' market", and that it is up to the Europeans to "sell" their "investment opportunity" (EFSF) to potential investors.

Where's The Money Hunny?

Despite all the hoopla exuded by the Eurozone "leaders" over their "plan" to save the Euro, there are quite a few nagging questions over the details of that "plan".

Not least, the elephant in the room, where is the money coming from?

Klaus Regling, the head of the eurozone bail-out fund, has popped over to China today to try to twist some arms there.

Good luck with that then, as China has already indicated it will only put money in via an IMF backed scheme. Note, the IMF cannot put money into the EFSF.

In other news, Italian bond yields have risen today above 6%, in the event they reach 7% then it's game over.

Meanwhile in Greece, where the country's pension funds have been cut in half by the rescue "plan", the people marked National Day by forcing state officials to leave the parades by hurling eggs, yogurts, raising banners with Swastikas proclaiming "No to 4th Reich" and chanting “Thieves!”

This video shows students marchingin Athens, and raising their hands holding black handkerchiefs.



Whatever the hype and spin from the Eurozone bunker, the decisions made by the "leaders" of the Eurozone have had, and are having, very real and unpleasant consequences for the people of Europe.

The Eurozone Agreement

After much pantomime and farce, there has been agreement of sorts on a way forward to try to save the Eurozone from collapse.

The key points are:

- Banks will take a 50% "haircut" on Greek debt

- The bailout fund will be leveraged to Euro1Trillion

- Banks have 6 months to raise Euro106BN

So, will this work?

It has bought some time. However, the Eurozone (in its current) form will eventually implode because of its inherent internal contradictions (eg you cannot have one monetary policy when there is such a disparity of growth between the member states).

That being said, there are some "issues" that may well unravel this sooner than the "leaders" of the Eurozone would like:

1 The "haircut" is, despite the spin (seemingly, according to the Euro spin machine the "haircut" is voluntary, therefore it is not a default!), a default.

Does this matter?

Yes, it does matter.

By defining it as not a default, the Eurozone has null and voided sovereign hedging via CDS (this has not gone down well with those who hedged against default).

2 According to George Osborne, the IMF cannot contribute to the bailout fund.

Therefore where will the money come from?

Seemingly Sarkozy is on the phone to China (as I write this) trying to persuade them to put money in.

Good luck with that then!

3 Many commentators are of the view that the fund (even if money is found to beef it up) is not large enough to appease the markets.

4 A large part of the Greek debt being "haircut" is tied up with Greek pension funds, ie the value of Greek pensions has been halved. Quite what the views of the Greek people will be, when they realise that their financial future has been cut in half is anyone's guess!

Real people are being affected by the decisions made by the clowns "leading" the Eurozone, the clowns would do well to remember that they only remain in office under the sufferance of the people.

Greedy Bastards!

MEPs have just voted for a 5.2% increase in the 2012 EU budget.

Draft Statement of EU Heads of State

Pathetic!

Source 

DRAFT STATEMENT OF EU HEADS OF STATE OR GOVERNMENT

At today's meeting, in line with paragraph 7 of the European Council conclusions of23 October concerning relations between the EU and the Euro area, the members of the European Council were informed by President Van Rompuy about the state of preparations of the Euro Summit that will take place later in the day.

They welcomed the consensus proposal on measures to restore confidence in the banking sector reached by the Council (ECOFIN) on 22 October. On this basis, they agreed the text annexed to this statement. The measures indicated in this text form part of a broader package, alongside the decisions taken by today's meeting of the EuroSummit. The Council will adopt the necessary follow up measures.

ANNEX

Consensus on banking package
1. Measures for restoring confidence in the banking sector (banking package) are urgently needed and are necessary in the context of strengthening prudential control of the EU banking sector. These measures should address:
a.
The need to ensure the medium-term funding of banks, in order to avoid a credit crunch and to safeguard the flow of credit to the real economy, and to coordinate measures to achieve this.
b.
The need to enhance the quality and quantity of capital of banks to withstand shocks and to demonstrate this enhancement in a reliable and harmonised way.
Term funding
2.
Guarantees on bank liabilities would be required to provide more direct suppo11 for banks in accessing term funding (Sho11-term funding being available at the ECB and relevant national central banks), where appropriate. This is also an essential part of the strategy to limit deleveraging actions.
3.
A simple repetition of the 2008 experience with full national discretion in the setting-up of liquidity schemes may not provide a satisfactory solution under current market conditions. Therefore a truly coordinated approach at EU-level is needed regarding entry criteria, pricing and conditions. The Commission should urgently explore together with the EBA, EIB, ECB the options for achieving this objective and report to the EFC.
Capitalisation of banks
4.
Capital target: There is broad agreement on requiring a significantly higher capital ratio of 9 % of the highest quality capital and after accounting for market valuation of sovereign debt exposures, both as of 30 September 2011, to create a temporary buffer. This quantitative capital target will have to be attained by 30 June 2012, based on plans agreed with national supervisors and coordinated by EBA. This prudent valuation would not affect the relevant financial repo11ing rules. National supervisory authorities, under the auspices of the EBA, must ensure that banks' plans to strengthen capital do not lead to excessive deleveraging, including maintaining the credit flow to the real economy or undue pressure on sovereign debt markets.
5.
Financing of capital increase: Banks should first use private sources of capital, including through restructuring and conversion of debt to equity instruments. Banks should be subject to constraints regarding the distribution of dividends and bonus payments until the target has been attained. If necessary, national governments should provide support, and if this support is not available, recapitalisation should be funded via a loan from the EFSF in the case of Eurozone countries.
State Aid
6. Any form of public support, whether at a national or ED-level, will be subject to the conditionality of the current special state aid crisis framework, which the Commission has indicated will be applied with the necessary proportionality in view of the systemic character of the crisis.

Another Day, Another Crisis in The Eurozone

Another day of rumour, tension and dashed hopes in the ongoing farce that is the Eurozone crisis.

Today Eurozone "leaders" are meeting in Brussels, to allegedly hammer out a rescue package for Greece and the beleaguered Eurozone.

Tensions are running high, not least because it is apparent that only in the last week have the "leaders" bothered to look closely at the figures required to save the Eurozone. Seemingly they got quite a shock.

In Greece the Finance Minister, Evangelos Venizelos, has finally got around to presenting Greek bankers with a plan for a 50% write down in debts (something that has been known about for several weeks). The real resistance to any write down is coming from French bankers, therefore I wonder when he will be making his presentation to them?

In the Bundestag Chancellor Merkel has told fellow MPs that Greece "needs permanent monitoring".

That will go down well in Syntagma Square!

Meanwhile rumours abound that the chief clown of Italy (Berlusconi) has done a deal with the Northern League that he will resign by year end, in exchange for their support of an increase in retirement age.

That's nice, the question is will the Italian people accept that?

Unsurprisingly the IMF is a "tad fed up" with the ongoing circus and wants to see a resolution. As such it is expected to take matter into its own hands in the not very distant future, as and when the circus in Brussels fails to achieve anything tangible.

It is going to be a long day!

As our "leaders" continue to make fools of themselves and create havoc in the markets, they may care to remember that this ongoing farce, the outcome of their decisions and the promises that they make is having/will have a direct impact on the lives of the millions of people living and working within the EU.

A Continent of SPIVs - Kicking The Can Down The Road

Sir Mervyn King, governor of the Bank of England, is appearing before the Treasury Select Committee (TSC) today.

He has told them that he has little faith in whatever "plan" is agreed by the Eurozone "leaders" (aka "Clown College"). In his view, whatever is decided at tomorrow's EU summit will not solve the region's underlying problems; it will only buy one or two years of breathing space.

Quite!

In the unlikely event that Clown College can come up with a plan to "kick the can down the road" for a year or so, how will this be financed?

It seems that, as Europe is skint, they will be tapping the IMF (funded by the USA) for the money which will be provided via a Special Purpose Investment Vehicle - aka SPIV.

How very appropriate!

Now repeat after me, and learn this for prep:

- There is no plan
- There was no plan
- There will never be a plan

Of Mice and Men

Despite the rancorous meetings over the weekend between various "leaders" of the Eurozone and other leaders from non Eurozone countries, the markets are optimistic that a deal will be reached by Wednesday that will resolve the Eurocrisis.

Sadly this optimism is somewhat misplaced.

Aside from rumours that Wednesday's "solve the Eurocrisis" meeting (the one that was postponed from Sunday) may in fact be postponed, today's economic news for the Eurozone is not good.

Goldman Sachs have published manufacturing and services PMI numbers that show a decline to 47.2 in October down from 49.1 in September. This is the sixth consecutive monthly decline, and it clearly shows that the Eurozone is in a recession.

Does this matter?

Yes, it does matter, aside from the obvious negative effects on people's standards of living it will also increase the pressure on ratings agencies to downgrade France's rating. In the event that this happens, the calculations behind the "plans" for the Eurozone bailout will go out of the window.

Now repeat after me and learn this for prep:

- There is no plan
- There was no plan
- There will never be a plan

Europe is Fucked II - Oh The Irony

"The options are ugly and, officials freely admit, smack of "smoke and mirrors" with too much reliance on the very leveraging and financial products the EU has previously blamed for causing the initial banking crisis. It was that mess, of course, which spilled over into the sovereign debt crisis that has threatened to tear down the euro. 

"Can the euro be saved by spreading the debt and slicing and dicing the EFSF's capital or guarantees into highly complex financial products?" asked one national finance ministry official. "It's looking much more like a fiendishly clever conjuring trick, or even a Ponzi scheme, than the big bang the markets want." 

Source Telegraph

Repeat after me, and learn this for prep:

- There is no plan
- There was no plan
- There never will be a plan

Europe Is Fucked!

Those of you who still think that the "leaders" of the Eurozone are capable of "leading" Europe out of its financial crisis, may care to read a few choice extracts from a report in the Telegraph about what really is going on at the Euro meeting this weekend:

"She says she is on a diet and then helps herself to a second helping of cheese," the French president allegedly said after a dinner meeting with Mrs Merkel....

Francois Baroin, the young and inexperienced French finance minister, attempted to hit back, complaining that the IMF's default medicine would hit France the hardest; the country's banks are highly exposed and could threaten its "untouchable" AAA rating. ....

But Mrs Lagarde, who had held his post until taking up the IMF job this summer, "shut him up" by brandishing the report and pointing to it its detailed figures. "She really slapped him down - and in perfect English too, a language he cannot speak," said a diplomat. ....

Their shouting could be heard down the corridor in the concert hall where an orchestra was about to play the EU's anthem, Ode to Joy," said an incredulous EU official. .....


So pointless was the gathering, that Didier Reynders, the Belgian finance minister, left early to attend the world premiere of the new Tintin film, The Secret of the Unicorn. .....

Wolfgang Schaeuble, Germany's finance minister, could not resist taking an "I told you so" approach - he had been, after all, the first to call for an "orderly" default for Greece 18 months ago, at a time when the cost of such a move was less than one third of the price today. 
 
"Schaeuble is a man who does not mince his words, whose reputation for harshness and arrogance is well earned. He was, frankly, unbearable," said one diplomat. ....

It was grim. The worst mood I have ever seen, a complete mess," said one eurozone finance minister." 

It should be clear to even to the Europhiles, that Europe is fucked!

Learn this for prep:

- There is no plan
- There was no plan
- There never will be a plan

Eurozone Descends Into Chaos

Yesterday I wrote that Sunday's EU Summit to save the Euro had been cancelled.

The Eurozone "heavyweights" (Germany and France) claim that is not true.

A statement released by the Elysee Palace said that Nicolas Sarkozy and Angela Merkel will meet to discuss their "ambitious and comprehensive response" to the crisis ahead of the European Council summit on Sunday.

So it's not been cancelled then?

Ahem, actually it has been postponed to (apparently) Wednesday, the statement added that resolutions would be "finally adopted" at a "second meeting no later than Wednesday".

In other words the meeting on Sunday is to save face, and to talk about a future meeting (the exact date of which is not yet known).

This is not "leadership", this is not "a plan".

Learn this:

- There is no plan
- There never was a plan
- There never will be a plan

EU Summit Statement

If anyone is interested, the Telegraph has a copy of the EU Summit Statement (for the forthcoming EU Summit scheduled for this weekend).

Aside from the fact that it is still full of gaps, there is one other problem. It would appear that this weekend's Euro Summit has been cancelled.

Learn this for prep:

- There is no plan

- There never was a plan

- There never will be a plan.

Why Greece is a Busted Flush

As our "respected" Eurozone "leaders" contemplate pumping more money into Greece, and the Greek parliament considers inflicting more austerity measures on the hard pressed Greek people, here is why the efforts of both the Eurozone and Greek governments will achieve nothing.

The text below is an open letter from Greek journalist, Kostas Vaxevanis, to Greek Finance Minister (and formerly Justice Minister) Evangelos Venizelos.

The letter highlights why Greece (sadly for its people) is in effect a busted flush, and why further bailouts and austerity measures will fail. Any further bailouts (which are not offered by the Eurozone out of sympathy, but in order to protect the status quo and vested interests of the Eurozone ruling "elite") will be syphoned off by corrupt officials/organisations, and will not resolve the systemic failings within the Greek economy.

In order for Greece to extricate itself from the self inflicted mess that it is in, Greece needs to address its internal corruption, leave the Euro and deflate its debts using a "new" Drachma.

Source Pastebin

A translation by the AnonLegionGR team.

Open letter of Greek Journalist Kostas Vaxevanis to Greek Finance Minister (and formerly Justice Minister) Evangelos Venizelos

The original Greek text is here.

"Mr. Venizelos,

What I am writing is well-known to both you and me. It is suspected, I believe, by the people as well. I would have stopped at our "showdown" on Nikos Chatzinikolaou's TV show, had you not stepped on my toes with your "you are a journalist of the State TV and you are paid by the Greek people" line. I hope you do not mean what everyone understood you meant.

So, I am a journalist and at this time I happen to work in the Public Television, and not State TV, as you call it. This is of great importance, as it reflects the perception each one has about ERT. It is a journalist's job to scrutinise those in power. The fact that I am "paid by the Greek people" is an additional responsibility for me, as I must be "worthy of my wage". The conclusion is that we are both paid by the Greek people. You are being paid by the Greek people since 1989, I am being paid by the Greek people for the past 2-3 years that I am part of ERT's staff.

The second thing that sounded as a threat on that show was that you would publicise journalists' origin of wealth. Amen to that! For the time being, do publicise on the internet the origin of wealth of Greek Parliament Members, as dictated by Law 3979/2011 (the Ragousis Law), because at the time I write these lines you are in violation of the Law. I would also suggest to examine the origin of the assets owned by our millionaire MPs and tax it. It is far more ethical and effective than slashing 300-euro pensions. I do not accuse any Greek politician of being a thief. But you do know what they say about Caesar's wife. Although it seems that in the Greek Parliament, Caesar is the MP's wife, who also simply happened to have a significant dowry.

Now, on to more difficult matters. Mr. Venizelos, you are a very important unit of what we call the political system. The system that is, in no small part, responsible for what the country is. We like to talk in general terms about it, but I have learnt to speak specifically. In the Ministries you have served, I keep encountering your laws (yes, I know, they are the Parliament's laws, but you know very well what I am talking about) during my investigations, finding they act as a "protection shield" for the political system and its vital space. The "Ministers' Responsibility" law, i.e. the law that grants complete unaccountability, immunity and impunity to Greek Ministers, is a creation of yours. This abomination that leads to a complete lack of punishment, that measures the duration of the Statute of Limitations by (hear, hear) terms an MP has served in the Parliament; this abomination that is a provocation against society. This is the law that Mr. Constantinos Karamanlis used to "erase" the crimes of his Ministers in the Vatopedi scandal - and beyond.

Yours is also the law that governs how TV stations work. In this country, one cannot even open a cigarette-selling kiosk without a permit. But TV stations can. These power centers work on temporary permits. Thus, media owers and governments can blackmail each other and "self-regulate" themselves.

Yours is also the law that "regulated" the debts of the Football (n.b. for our American readers: read "soccer" here) Clubs, i.e. a number of S.A.'s, under the "public demand" of football fans. These corporations were thrown deeply in the red by their owners (they even issued fake invoices) and you erased their debts. The money their owners stole. You took my money and gave it to the scoundrels and the ones that have been (and keep) setting football (soccer) games up.

Let us now leave your previous legislative work aside and move on to the second. That is, the Proton Bank scandal. I note, preliminarily, that all evidence shows that this is all a personal machination on your behalf and not a government decision. This has nothing to do with a personal "aggressive planning" on my behalf but with reality. In the Cabinet, you were fiercely attacked for the Proton Bank case, but you proceeded anyway.

The newspaper "Eleftherotypia" revealed that, in July 2011, you decided to give 100 million euros from the State's undisposed funds to the Proton Bank of Mr. Lavrentiadis. At that time, Mr. Lavrentiadis and his bank were under investigation for embezzlement. Furthermore, the 2362/1995 Law (a law created specifically to prevent new Koskotas-like embezzlement scandals) did not permit you to fund the bank. The State General Accounting Office's staff had told you this is illegal. You did it anyway. During our on air confrontation, you said the decision of the staff of the State General Accounting Office "was illegal because it was published in a newspaper". Now this is something new. The legality of an action is determined by whether it complies to the Law and not by the newspapers' circulation. The one that broke the Law was you, according to the 1995 law.

You knew it well. This is why you proceeded to create another legislation. In an unrelated law, the 4002/2011, you added an article that gives you pre-emptive immunity and impunity. You legislated that, when it comes to issues of banks' systemic stability, you have the right to decide on banks' funding. This "systemic stability" thing is a new invention. As if that was not enough, the law immunises Finance Ministers (including you, of course), since 1997. Why 1997? Did we have "systemic instability" back then or is a certain Minister of the Simitis government facing an instability problem?

After you gave the bank the 100 Million euros, you now put the State deeper in debt by making it pay 800 Million euros extra for the nationalisation of the bank. Of course, the fall of Proton Bank has nothing to do with the recession and the crisis. It is a result of its mismanagement by its bosses. They funded themselves. Instead of recruiting the Bank of Greece (another sinful story: a private bank presenting itself as an institutional instrument of the Greek State) to investigate the matter, you funded them and saddled us with this extra burden.

And you did not stop at that. Mr. Lavrentiadis, who allegedly embezzled 51 Million euros, will not go to jail. There will not be so much as a prosecution. The reason is another law you have passed. Your signature is on this law, too. With the 3904/2010 law, you legislate immunity and impunity for those who embezzle funds but return them before being prosecuted. So, Mr. Lavrentiadis, by returning the 51 Million euros (after investing this money, profiting from it or whatever else), has immunity. This is another legal "revolution" under the pretext of relieving prisons from overcrowding. As a former Justice Minister, you know that various laws "against the overcrowding of prisons" hid the release of a few famous convicts. In the past, in the name of "relieving prisons from overcrowding", Makis Psomiadis and various lawyer-fraudsters from Thessaloniki were released...

I can tell you a lot more. A lot, and it is my job to tell you. How are these things called in Court when a lawsuit against a journalist (another law of yours) is judged? "Facts and evaluational judgments". That is precisely what I am doing. One more reason is that I am being "paid by the Greek people", as someone who works in the Public TV that governments view as their personal property. I would urge you to respect it. And waste a little of your alleged intelligence and eloquence on giving me a reply. Because this is your obligation. Unless you prefer to fire me."

Strike

As Greek Prime Minister, George Papandreou, appeals for support from Greeks ahead of a vote later today on tax hikes, wage cuts and layoffs Greece has gone on a 48 hour strike. The strike will shut down government departments, businesses, public services and even shops and bakeries.

Sadly for the people of Greece, if the austerity measures are actually implemented (which of course they won't be, even if the vote passes) it will not make one jot of difference wrt improving the country's (or indeed the citizens') financial situation. 

Greece went bust a long time ago, and is only being kept going by grudging handouts from the EU.


The only solution is for Greece to leave the Eurozone, and devalue its debts under a "new" Drachma.

Dexia Rescue "Plan" Starts To Unravel

Belgium's hopes of rescuing Dexia, in a clean and market pleasing manner, have been dashed.

The European Commission has started to investigate the "plan", and assess whether the Euro4BN paid by Belgium contains state aid and, if so, whether it complies with EU rules on restructuring support.

As with all Eurozone rescue "plans", this appears to have been made up on the spur of the moment in a state of panic.

Now repeat after me:

THERE IS NO PLAN!

The Global Debt Clock

Source The Economist

By the way, the above debt figures EXCLUDE unfunded pensions, welfare payments, healthcare costs etc.

Six Days To Save The World

Reuters reports that finance ministers and central bankers of the Group of 20 major economies said they expected an October 23 European Union summit to "decisively address the current challenges through a comprehensive plan".

The French Finance Minister, Francois Baroin, said that Berlin and Paris were well on the way to agreeing a plan to reduce Greece's debt, stop contagion and protect Europe's banks.

I will believe that when I see it.

As I have noted many times before on this site, there is no plan!

Am I being too cynical?

No, I am not.

Angela Merkel has made it clear that “dreams that are taking hold again now that with this package everything will be solved and everything will be over on Monday won’t be able to be fulfilled."

There is No Plan!

Less than a week ago, the Belgium government announced that Dexia was to be "saved" by nationalisation.

As with any financial transaction, it is always wise to read the fine the print before signing on the bottom line. Sadly, for Dexia and Belgium, it seems that the Belgium government has not read the fine print.

Bloomberg reports that the European Central Bank has advised Belgium not to backstop Dexia SA’s interbank deposits, and to avoid providing guarantees on debt maturing within three months.

For why?

Because it risks interfering with the central bank’s monetary policy.

The ECB also said the planned debt guarantees for Dexia may last as long as 20 years, which is inconsistent with European Union guidelines for national support measures to be temporary in nature.

In other words, the Dexia "rescue plan" is against the rules.

It would appear that the "leaders" of the Eurozone are making it up as they go along.

In other news, it seems that the US will not fund any expansion of the IMF and that any rescue plan (not that there is one) for the Eurozone will have to be funded by the Eurozone.

Now repeat after me:

"There is no plan!"

Death By a Thousand Cuts

The slow torture death of the Eurozone continues, with the announcement by Fitch that they have cut the long-term sovereign credit ratings on Spain to 'AA-' from 'AA'.

There is a G20 meeting in Paris today, at which the Euro crisis will be discussed. However, those who expect some form of coherent plan to be announced will be severely disappointed.

Angela Merkel is playing down expectations of a quick solution to the eurozone crisis,  in her view the euro crisis cannot be solved overnight and there is no "big bang" solution.

Had the Eurozone "leaders" put some effort into resolving this mess last year, then one might have had some sympathy/respect for her view. However, the situation is critical, the markets are ahead of the curve whilst the politicians are months behind it.

Is This a Plan?

According to Robert Peston:

"The European Banking Authority is proposing that eurozone banks should hold capital equivalent to between 9% and 10% of their risk-weighted assets, on a Basel 2.5 basis, with sovereign debt in trading books and banking books marked down to market prices."

He estimates that this will cost around £200BN. However, both France and Germany appear to be behind the "plan".

The question is, given the amount of lies and rumours spread by the Eurozone "leaders" in order to push up the markets, is this a plan or not?

That all depends on whether there is genuine agreement between France and Germany over this, and what they then actually do to implement it.

For instance, were they to allow banks to achieve the improved capital ratios by reducing the size of their balance sheets then this would have disastrous consequences for lending just at a time when Europe needs to haul itself out of recession.

In essence, if it really is a plan it may not be a very good one.

Kicking The Can Down The Road

As predicted, the Slovakian parliament voted against endorsing changes to the European Financial Stability Facility (EFSF) and the government has fallen.

However, those hoping that this will finally draw a line under the uncertainty and dithering wrt the Euro crisis (by drawing matters to a head) will be sorely disappointed.

Slovak lawmakers are regrouping Wednesday, to broker a deal that will ensure that a new vote on the issue will pass next time.

As to when that vote will be is not clear. However, this political "fix" will ensure that the Euro crisis continues for a while longer as the can has been yet again kicked down the road.

EU Scared Witless

The EU (or rather the "leaders" of the EU) are scared witless today as the fate of the Euro experiment rests with the outcome of the vote in Slovakia today.

Based on this interview in Der Spiegel I can well understand why they are nervous.

Suffice to say, even if Slovakia votes in favour the inherent contradictions and systemic failings within the Eurozone's structure will ensure that the experiment will end in tears one way or another.

EU In Denial

Dexia (the bank that passed "Stress Test II" a few months ago), as expected, was nationalised over the weekend.

After the nationalisation was announced, the French Finance Minister, Francois Baroin, stated that he didn't think any more banks would need to be rescued by governments.

"Ironically", following on from his statement, Greece's central bank has activated a bank rescue fund to save Proton Bank (ie they have nationalised it)!

Proton is under investigation for possible violation of anti money laundering laws.

QEII Launched Into Choppy Waters

Hot on the heels of yesterday's launch by the Bank of England of QEII (valued at £75BN),
Moody's cut its ratings on a number of British banks.

RBS was dropped by two notches from A2 to Aa3, Lloyds TSB dropped by one notch to A1 from Aa3, Santander UK, Co-operative Bank, Nationwide and seven other smaller British building societies were also dropped.

The rationale being that Moodys' is of the view that the British government may not support certain banks in the event that they face collapse.

Unsurprisingly, George Osborne stated that he has confidence in the viability of the UK's banks.

The Treasury, as it happens, is also fighting tooth and nail any attempt by the EU to force UK banks to increase their capitalisation as a result of the soon to premiere "Stress Test III".

Is the reluctance by the Treasury based on their confidence in the banks?

Errmm..no.

It is a reluctance based on pragmatism, namely that were RBS to require more capital, the Treasury would be forced to buy shares (using taxpayers' money) at around 50p (as per the agreement with RBS) compared to the current price of 23p.

The alternative would be for the government to fully nationalise RBS.

Neither option appeals to Osborne.

In other news, a certain London based financial newspaper (which heavily relies on advertising revenue from banks) is continuing to spread the rumour that there is a plan for saving the Euro and the European banking system.

However:

Learn this,
Repeat this, and
Retweet this:

THERE IS NO PLAN!!

The Euro Crisis

Re the current Euro crisis, and rumours spread by Eurocrats and a certain leading London based financial newspaper (which relies on advertising revenue from banks) about plans to save the Euro and European banks:

Learn this,
Repeat this, and
Retweet this:

THERE IS NO PLAN!!

Dexia's Midnight Runners - Dexia Suspended

Share trading in Dexia has been suspended.

Oddly though their website has yet to mention it.

We can assume that the run on the bank (mentioned earlier today) will continue, and that Belgium (now that yields are rising) may well become the next Greece.

Dexia's Midnight Runners

Dexia is to be nationalised.

Fine?

Not really.

Belgium does not have the money to cover Dexia's exposure.

Belgium - Dexia: 180% of GDP.

One thing is for sure, they had better hurry up; as Euro1BN has already been lost as a result of a run on the bank.

Next up, as per my article earlier this morning, three French banks.

France Rebuilds The Maginot Line

FRANCES WALL OF STEEL (aka FRANCE'S WALL OF STEEL - MAGINOT LINE)

Another day, another day of rumour, contradiction, denial, false hope and dithering in Europe.

Today the markets will be digesting two significant related pieces of news.

The FT reports that the European Banking Authority (EBA) will be conducting yet more stress tests on European banks (yes, those same stress tests that were so widely ridiculed before by the markets), in order to assess whether the banks can withstand a significant Greek haircut on their sovereign holdings.

In case anyone is wondering, they can't!

As the FT wrly observes the move is "a tacit admission that the European Banking Authority’s two previous rounds of bank stress tests were not sufficiently robust."

Sadly for the EBA, whatever the findings of "Stress Test III", given the failings of "Stress Test I" and "Stress Test II" the markets will simply not believe the results.

The EBA claim that the new stress tests are not an indication that EU "leaders" are preparing for a Greek default. Instead, they claim that this is a precautionary measure intended to inform rapidly accelerating negotiations on EU-wide bank recapitalisations.

Well I don't think that anyone is dimwitted enough to believe that.

Indeed, as a portent of the likely results, Le Figaro reports that France is preparing a plan to nationalise "2 or 3 banks"..."just in case"; a financial version of the Maginot Line.

We all know what happened to the Maginot Line, don't we?

The New "Reality" From The Bunkers of Euroland

As the EU refuses to act to resolve the never ending crisis, markets have become used to the new "reality" of rumours/denials/promises/reneges being made by those allegedly "leading" Europe.

Unsurprisingly this febrile atmosphere, as we wait for Greece to finally/officially default and leave the Eurozone, has caused wild swings in the markets.

The latest round of news and rumours will do nothing to quell the volatility.

On the news front:

- Moodys' have downgraded Italy
- Greece is on strike (below is live footage from Syntagma Square)

Watch live streaming video from stopcarteltvgr at livestream.com

- Cameron (rather bizarrely) wants everyone to pay off their credit card debt (doesn't he understand that consumer economies are built on debt?) UPDATED Frightened by the ridicule heaped upon him, Cameron has changed that part of his speech.

On the rumour front:

The EU would have us believe that Dexia will be saved, and that European banks will be recapitalised. Oddly enough the markets actually believed this briefly and rallied. Commonsense then dawned, as the markets realised that this was in fact the normal bullshit being pumped out by the clueless bunker dwellers who "lead" the Eurozone.

As I noted yesterday, given Dexia's exposure (180% of Belgium's GDP), saving the bank is all but impossible. Add into the mix that other banks are also going to need saving (eg BNP and a number of Italian ones) and it becomes clear that the Eurozone is powerless to save them.

Unless the EFSF is expanded by to many trillions, it just can't be done. Germany has stated that it will not allow an expansion of EFSF.

Therefore, simply put, there is simply not enough money in Europe to save the banks without there being significant crystallisation of losses and a major print run of paper.

Meanwhile deep in the bunkers of the Eurozone our leaders are drafting the next rumour, which they hope will underpin the markets.

Fat chance!

A Finger of Fudge

As the Eurozone crisis worsens, and continues to play havoc with the global economy, Eurozone finance ministers have indulged in a large serving of fudge.

They have cancelled a meeting, scheduled for 13 October, when they were expected to sign off on the next tranche of Greek bailout money.

For why?

As reported yesterday, Greece has announced that it will miss its deficit reduction plan for 2011.

The Greek Finance Minister, Evangelos Venizelos, has said that a "delay" (note that the EU has "cancelled" the meeting, not "delayed" it)  will not cause Greece any problems as Greece has funds until November.

This is rather an "odd" admission, as Greece had previously said that it needed the money by mid October in order to avoid defaulting on its loans.

Does anyone believe anything the Greeks say anymore?

Anyhoo, the media are of the view that the "cancellation" or "delay" (depending on how optimistic you are) of the meeting is to enable the Eurozone to come up with a fudge; whereby the Eurozone's mandated budget targets for Greece for 2011 would be combined with the targets for 2012. Thereby fudging Greece's failure, and kicking the much kicked can further down the road to financial oblivion.

All very well if you are a Eurozone finance minister. However, the longer this farce continues the longer the global economy suffers.

In other news, Dexia SA (which is on the verge of collapse), BNP Paribas SA and Societe Generale SA are in a state of denial and are resisting pressure from regulators to accept more losses on their holdings of Greek government debt amid criticism that they haven't written down the bonds sufficiently.

The French and Belgium governments have pledged to prop Dexia up. However, they have overlooked one "small" detail"; namely the size of Dexia's exposure when compared to the host country's GDP.

Want to scare yourselves?

- Belgium - Dexia: 180% of GDP

Remember folks, Dexia passed its "stress test"!

Here are some other well known banks:

• France - BNP Paribas, Credit Agricole, SocGen: 237% of GDP
• Germany - Deutsche Bank: 84%
• Italy - Unicredit, Intesa Sanpaolo: 101%
• Netherlands - Fortis: 155%
• Spain - Banco Santander: 92%
• UK - RBS, Barclays, HSBC: 337%

 Source ZeroHedge

To put it bluntly the Eurozone hasn't a hope in hell of saving these banks, if they fall over. Dexia most certainly is going to collapse, and next up is rumoured to be Deutsche.

In other news, the rumour that Germany is printing Deutsche Marks in order that it may leave the Eurozone is doing the rounds again.

I for one would very much welcome that, as it would allow the remaining members of the Eurozone to devalue the currency and breath life into their dying/dead economies.