Loans and Finance

Loans and Finance

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News and information about loans, money, debt, finance and business issues.

Monday, October 31, 2011

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.

Friday, October 28, 2011

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.

Thursday, October 27, 2011

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.

Wednesday, October 26, 2011

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.

Tuesday, October 25, 2011

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

Monday, October 24, 2011

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

Sunday, October 23, 2011

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

Friday, October 21, 2011

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

Thursday, October 20, 2011

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.
"



Wednesday, October 19, 2011

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.

Tuesday, October 18, 2011

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!

Monday, October 17, 2011

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."

Saturday, October 15, 2011

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!"

Friday, October 14, 2011

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.

Thursday, October 13, 2011

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.

Wednesday, October 12, 2011

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.

Tuesday, October 11, 2011

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.

Monday, October 10, 2011

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.

Friday, October 07, 2011

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!!

Thursday, October 06, 2011

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?

Wednesday, October 05, 2011

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!

Tuesday, October 04, 2011

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.

Monday, October 03, 2011

The Boil Must Be Lanced

Unsurprisingly, it has been confirmed that Greece will not meet it budget targets. The 2012 draft budget approved by the Greek cabinet on Sunday predicts a deficit of 8.5% of gross domestic product (GDP) for 2011, this is well short of its 7.6% target.

Markets around the world are falling, apparently they have been "surprised" by this news.

Why?

It has been obvious for months that Greece will not meet its targets and will default.

As neatly summed up in the Telegraph

"Until Greece defaults it's hard to see any resolution."

The boil must be lanced, and quickly.

Meanwhile, the Belgium bank Dexia (which ran out of cash this summer) is about to collapse/be nationalised.