Loans and Finance

Loans and Finance

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

Tuesday, January 31, 2012

Greece Off Track

Canadian Business reports that the troika have delayed a meeting with the Greek government to discuss ways of reducing employment costs.

The troika have called off a meeting planned for Tuesday and will hold it later in the week.

Jean-Claude Juncker, the Luxembourg prime minister is quoted:

"Everyone knows that Greece's consolidation program is off track.

Greece must live up to its commitments."

Eurozone Unemployment Hits Record

As the EU political "elite" attempt to hold onto their jobs, by desperately propping up the Euro and attending a never ending round of well catered summits, they should spare a thought for the unemployed of Europe.

Figures released today by Eurostat show that unemployment in the Eurozone hit a record high at the end of last year.

The unemployment rate in the eurozone was 10.4% in December, some 16.5 million people were unemployed in December (a rise of 751,000 from the year before). A record 5.6 million of the unemployed are under 25.


Spain comes top of the unemployment league at 22.9% (51.4% of those who are under 24 are unemployed), whilst Austria comes in bottom at 4.1%.

Despite (or rather because of) the "efforts" of the Eurozone political "elite" to save their own jobs, the level of unemployment in the Eurozone continues to rise.

The "leaders" of the Euyrozone would do well to remember that by allowing such a high level of young people to be unemployed they are emulating the failures of the Middle East. As this situation worsens so do the risks of the disaffected, unemployed youth of the Eurozone emulating their counterparts in the Middle East and trying for their own "European Spring".

The Fluid Greek "Deadline"

The Greek Prime Minister, Lucas Papademos, has said:

"Significant progress made in talks about PSI...We are seeking to conclude negotiations with the troika by the end of the week".

This of course is the same fluid "deadline" that moves ever further forward into the distance.

Monday, January 30, 2012

No Deal Today - Don't Believe The Hype

Despite last week's hype from various "sources" within the EU, and the delusional IIF, (akin to the self congratulatory bullshit spouted by third world dictatorships) that a deal on the Greek haircut is imminent, reality has, once again, hit the fan.

The Euro Council meeting is under way, yet the much hyped "deal" is nowhere to be seen.

No surprises there then!

On top of this Angela Merkel has said that the second bailout tranche will not be finalised today, because the troika has not yet finished its assessment of the Greek economy.

Bloomberg quote her:

We won’t have a thorough discussion of Greece because the troika is in Greece and we don’t have a result of the talks with the banks.”

Europe Rearranges Its Deckchairs

As the EU holds yet another summit today to discuss the ongoing Eurozone crisis, still smarting from German attempts to takeover the country Lucas Papademos the Greek Prime Minister said that unless Greece's international backers agreed to a new bail-out, Greece would be unable to pay off its loans and be forced out of the Eurozone.

He warned that Greece faces “the spectre of bankruptcy and all the dire consequences that entails.

Nothing new there then!

What is actually required is for Greece and its bondholders to agree the haircut, and for Greece to actually make good on its promises.

Don't hold your breath waiting for either of those!


Meanwhile Nicolas Sarkozy claims that he will introduce a Tobin tax in France by August.

All very well, but he may well not be president by then!

Hester Waives Bonus

Stephen Hester, CEO of RBS, has bowed to political pressure and has waived his £1M bonus.

This is of course a Pyrrhic victory for those who were baying for Hester to waive it.

Had he taken the bonus, a large chunk would have gone to the taxman; as it is, the decision to waive the bonus has knocked a chunk off the value of RBS shares (which are owned by the taxpayer).

Be careful what you wish for!

Saturday, January 28, 2012

EU To Impose Dictatorship On Greece



Bloomberg reports that European policy makers are discussing plans to directly intervene in Greek budget decisions as the country struggles to cut its deficit.

Under the proposals, European institutions would have powers to implement austerity measures agreed under the terms of Greece’s bailout agreements.

This will not go down well with the Greek people.

In fact the Greek government have told the German government to fuck off wrt this proposal. This rejection means that Greece will not get its second bailout and will default.

Greece Will Default - Merkel Sees The Light

Angela Merkel has finally realised what the rest of the world (excluding Rehn) has known all along:

Andrew Neil
Foreign Office sources say Merkel now thinks Greece will default.

Friday, January 27, 2012

ECB Stands Back From Debt Talks

European Central Bank Executive Board member Jose Manuel Gonzalez-Paramo has said that the ECB is not involved in the Greek debt talks.

This is hardly good news, if Paramo is speaking the truth, for those who are hyping the rumour that a deal is close at hand.

The End of The Euro

Faisal Islam
I hear one European bank has already started to account for euros by nation, ie German euros, Greek euros, with internal exchange rates.

The Troika's Wishlist

Reuters reports that the EU, IMF and ECB (aka troika) have drawn up a report which includes a list of measures they want to see enacted by Athens, before the Euro130BN bailout fund is released (always assuming of course the bondholders agree to their haircut).

This is all very nice. 

However, given that the bondholders have yet to agree terms of their haircut and the Greeks are in denial about the wishlist actually being binding or relevant (government spokesman Pantelis Kapsis said the government would try to negotiate some of the points), the chances of Greece avoiding a disorderly default are the same as that of a cat in hell.

Iran To Stop European Oil Shipments

The FARS news agency reports that the Iranian parliament will debate an emergency bill this Sun that would halt oil exports to Europe from next week.

That will hit the EU's plans for a gradual imposition of sanctions.

Thursday, January 26, 2012

Greece To Lose Oil Supply II

A few days ago I asked where, with the implementation of EU sanctions on Iranian oil imports, will Greece, which currently imports 30% of its domestic oil from Iran on favourable terms, source its oil from?

I noted earlier this month that oil would likely rise to $150 a barrel, a price that would cripple the already enfeebled Greek economy.

Now it seems that IMF have woken up to this issue, and have warned that sanctions will cause a "large effect on prices".

The Telegraph quotes the IMF:

"A halt of Iran's exports to OECD economies without offset from other sources would likely trigger an initial oil price increase of around 20pc-30pc."

Brent crude is currently trading at over $110 per barrel, a rise of 30% gives a price of $143.

Greece Won't Play Major Role?

Reuters reports that Germany does not expect the troika of foreign lenders, that is currently in Athens, to deliver a report on Greece's progress before a summit of European Union leaders next Monday.

The German source that Reuters quoted then added that this meant that Greece would not play a major role at the EU leaders summit.

Who is he trying to kid?

Meanwhile, the Greek press is reporting that private lenders have accepted a lower interest rate in debt deal. Athens News Agency also says that PM Papademos and the IIF's Dallara are to meet at 8pm to resume debt swap talks.

My advice is, don't believe this rumour (especially given its source) because the ECB is not going to accept a loss.

Madness



David Cameron has told the Davos summit that to be even considering a Tobin tax is "madness".

Quite right!

Wednesday, January 25, 2012

Rats Leaving The Sinking Ship

Unsurprisingly, given the failure to reach a deal on the Greek haircut, and the abrogation by the Greek government of responsibility for talking with bondholders (the Greeks have passed the buck to the Troika), hedge funds are now scrambling of offload Greek debt.

The New York Times reports:

"Hedge funds that in the past month or so have purchased an estimated 4 billion euros, or $5.2 billion, of beaten down Greek bonds that mature on March 20 are now trying to unload their positions, according to brokers and traders.

That is because it is becoming clear to one and all that Greece — under pressure from its financial backers — is preparing to impose a broad-based haircut that would hit all investors with a loss of 50 percent or more, whether they agree to the deal or not."

Meanwhile, private boindholders are meeting in Paris to determine their next course of action.

The ship is sinking fast, and not all the rats will escape in time!

George Soros Speaks

George Soros is making an opening speech at the Davos summit.

Faisal Islam quotes him:

"outlook is truly dismal. EU.. is undemocratic to the point where the electorate is disaffected and ungovernable."

That dear readers is why, in a nutshell, the Euro will fail!

Tuesday, January 24, 2012

Hedge Funds Have The Edge

Bill Gross, who runs the world’s biggest bond fund at Pacific Investment Management Co (Pimco), has tweeted that hedge funds appear to be controlling the fate of Greece and beyond.

Quote:

" PIMCO
Gross: Hedge funds appear to control the fate of – by extension Euroland – by extension…??"

Greece To Be In "Selective Default"

Reuters reports that Standard & Poor's will likely downgrade Greece's ratings to "selective default" when (substitute "if" for "when") Greece concludes its debt restructuring.

Advice To Greek Politicians - Read The Small Print!

ekathimerini.com reports that a Greek cabinet minister didn't read the loan agreement with the EU in 2010.

"Development Minister Michalis Chrysochoidis, who has declared he intends to challenge for the PASOK leadership, said on Tuesday that when he was part of the Cabinet in 2010 he did not read the terms of Greece's loan agreement with the European Union and the International Monetary Fund."

Does it really matter if you don't read these agreements?

Well, the bondholders seem to think so.

Reuters reports:

"Hedge funds are combing through the small print of Greece's planned rescue deal with private creditors, readying a wave of potential litigation to squeeze a better payout from the country."

Well then, you sow what you reap!

The Greek Clusterfuck Negotiations

Despite the hype form some sections of the ill informed media and from the EU, that the Greek deal on haircuts was almost in the bag, reality has hit the fan.

Eurozone finance ministers have rejected the current offer from bondholders, and have "demanded" that negotiations between the Greek government and Institute of International Finance (IIF) reach agreement on a lower average coupon.

Lovely!

The EU seems to be under the impression that it has some control over this and that, like Canute, it can somehow control elemental forces (in this particular case, the markets and economic reality).

The EU ministers want a lower rate than the 4% currently being demanded by the bondholders.

Ain't going to happen without enforcement (ie a default).

Negotiations are turning into a clusterfuck!

There will be no deal.

Monday, January 23, 2012

Moody's States The Bleedin' Obvious

Moody's claims that a disorderly default would increase likelihood of Greece exiting Euro area.

No kidding???!!

Shortlisted For Accountancy Personality of The Year

My thanks to PQ Magazine for placing me on the shortlist for their 2012 awards, in the category of “Accountancy Personality of Year“.

Greece To Lose Its Oil Supply


The EU has agreed to an immediate ban on all new contracts to import, purchase or transport Iranian crude oil and petroleum products.

EU countries with existing contracts for Iranian oil and petroleum products will have until July 1, 2012 to complete those contracts.

OK then, here's a small question for the EU.

Where will Greece, which currently imports 30% of its domestic oil from Iran on favourable terms, source its oil from?

Sunday, January 22, 2012

Greek Haircut Talks Suspended

The Telegraph reports that that talks over a debt deal between lenders and the Greek government were suspended over the weekend, as the representative of bondholders flew out of Athens empty handed.

A spokesman for the IIF said that Mr Dallara had travelled to Paris for a long-standing social arrangement and his departure was "in no way a reflection on the talks". 

LOL:))

No one seriously believes that spin, surely?

Saturday, January 21, 2012

Greek Haircut Talks Continue

Unsurprisingly no deal has been reached yet between Greek bondholders and the Greek government, over the haircut that will have to be applied if Greece is to avoid default.

Talks will continue this weekend and into next week.

It seems that yesterday's hype by some sections of the media that a deal had been reached was, unsurprisingly, nothing more than hype.

Don't believe any reports about a deal being reached, until the details of the deal are presented in document that has been signed by the relevant parties.

Friday, January 20, 2012

Greek Haircut 70%

Holders of Greek bonds will have to take a 70% haircut, IF a deal is reached.

The crucial word is "IF".

Greece To Agree Deal With Bondholders?

Reuters reports that Greece and its private bondholders are inching closer towards a much vaunted debt swap deal.

Let us see if they can pull their nuts from the fire at the eleventh hour.

Going Going Gong - Fred Goodwin To Lose K?

"Sir" Fred the Shred Goodwin, disgraced ex CEO of RBS, may be stripped of his knighthood.

The Forfeiture Committee is looking into whether they can strip him of it, even though he has not been charged or convicted of a criminal offence.

All well and good.

However, the real question that should be asked is why the hell was he knighted in the first place?

Thursday, January 19, 2012

Same Old Lies - Greece Is Busted Flush

In October 2011 the "leaders" of the Eurozone assured the world that the Greek debt crisis was resolved, and that Greek bondholders had accepted a 50% haircut.

As I noted then:

".. there are some "issues" that may well unravel this sooner than the "leaders" of the Eurozone would like".

What a difference a few months make!

Moving forward to the present day, we see Greek finance minister Evangelos Venizelos has been addressing parliament. Greece failed to reach an agreement with its international creditors on Wednesday.

He is still prattling on about doing a deal with bondholders (the deal that the world was told was finalised last year) and has reiterated that he wants any debt swap with private sector bondholders to be voluntary.

Nonsense:

"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)
."

No one believes the Eurozone "leaders", most especially the Greek "leadership", anymore.

There will be no deal, and Greece will default.

As I noted in October last year, Greece is a busted flush.

PERIOD!

Wednesday, January 18, 2012

The Greek Tragedy Continues

The ongoing negotiations between bondholders and the Greek government are continuing.

The media is spinning the lie that there is hope for a deal.

"Deal" or no "deal", the reality is that Greece will default.

The IMF knows this, because it it seeking to increase its funding by $600BN to $1 trillion.

End of story!

Passing The Buck

The government, in a cost saving measure designed to save around £8M, has instructed the Royal Mint to issue new 5p and 10p coins (which are slightly thicker and made of a cheaper alloy).

However, the cost to the vending machine industry and local councils of updating machines to be able to take the new coins is estimated to be around £80M.

Add in the cost to the public of time wasted fumbling for coins that fit the upgraded machines (old coins won't work), and you have a remarkably unbalanced and inept "saving" measure applied by the government.

Tuesday, January 17, 2012

The Euro Suicide Pact

Joseph Stiglitz, the US economist, has compared EU austerity to medieval bloodletting where the patient almost certainly dies.

He has also warned that European governments have signed a "mutual suicide pact" by imposing the austerity plans.

That about sums it up!

The EFSF Begging Bowl

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

It would seem that S&P agree with me, as they have downgraded its AAA rating by one notch. This downgrade, although fully expected, has sent Eurocrats into a panic.

Klaus Regling, chief executive of the EFSF, is now in Singapore begging (not asking) them for money to prop up this failed mechanism.

My advice to the good people of Singapore is simple, don't waste your money on this busted flush.

Meanwhile Regling is trying to put a brave face on things, by claiming that this downgrade doesn't matter; so long as no other agency downgrades it.

The reality of course being that another agency will downgrade the EFSF.


Monday, January 16, 2012

Greece To Default Shortly

S&P's Kramer says that he believes Greece will default shortly - Reuters

Greece Takes It To The Wire

Greece has sent senior officials to Washington today for meetings with the International Monetary Fund, as the talks with bondholders over the size and terms of their haircut have stalled.

Financial Cyber War Declared

Seemingly a cyber war has been declared in the Middle East.

"The Tel Aviv Stock Exchange's (Tase's) Web site has been offline this morning, apparently down for "maintenance" hours after a Saudi hacker warned it would be the next target in an escalating cyber-war."

Greece Heading For Default

Bill Gross, who runs the world’s biggest bond fund at Pacific Investment Management Co (Pimco), has tweeted that Greece is heading for default.

Quote:

"Euroland downgrades make investrs aware countries can default 2! Centuries of histry prove the point & wl be most recnt exmple"

he also casts doubt on the integrity of Papandreou:

" on the rocks, ain’t no surprise. Pour a drink and he’ll tell you some lies."

Saturday, January 14, 2012

For Fuchs Sake! II

Standard and Poor’s have cut France’s AAA rating, and have also reduced the ratings of Italy, Spain, Portugal (now consigned to junk status) and Cyprus by two notches.

Austria, Malta, Slovakia, and Slovenia had their ratings lowered by one notch.

Needless to say these downgrades have not gone down well with the political "elite" of Europe.

Michael Fuchs, a member of the Christian Democrats (who earlier this week said the Greece had no intention of paying its debts), said that Standard and Poor’s was “playing politics” and stated that S&P should downgrade Britain as well:


If the agency downgrades France, it should also downgrade Britain in order to be consistent.

How exactly would that help restore confidence in the Euro experiment?

Friday, January 13, 2012

France To Be Downgraded

S&P are, so the rumour goes, about to downgrade France, Spain, Italy, Belgium and Portugal.

Meanwhile Greece looks more or less certain to default, as it is incapable of reaching an agreement with its bondholders on the size of their haircut.

Update

Now confirmed France to be downgraded


Lies Damned Lies!

The Greek political establishment are currently stating that no decision has been made yet on if, and when Greek bonds collective action clauses will be activated.

Which is kind of odd really, as on Monday this week I wrote that the decision had already been made.

"Greece is attempting to force its bondholders to accept a 60% haircut.

As I noted in
September last year:

"..
the Greek haircut of 50% that everyone is talking about is of course nonsense."

In order to achieve this haircut, and to ensure that bondholders "accept" it, Greece is to introduce retroactive collection action clauses to bonds
."


Yet here we are on Friday (some five days later), and the Greek government is stating that no decision has been made.


Was I wrong then?


Errmm..no I was not wrong, Amalia Negreponti (a respected Greek journalist) confirmed to me via Twitter that the decision has already been made:


amalia negreponti
 
" yes, it has. Since 2 days ago."
 
Could it be then that by denying this, the Greek political establishment is lying?
Surely Not!!!

It's The Debt Stupid!

In August 2011 I wrote the following about the shenanigans over the US debt ceiling:

"The bill allowing the President to raise the US debt ceiling has finally been passed by both houses.

Crisis over?

No, the markets have reacted badly to the fall in US manufacturing and have been less than impressed with the political antics on Capitol Hill.

Whilst the politicians who brought about this crisis may feel smug and self satisfied, they should bear in mind that US creditor nations such as Russia and China will never trust them again to deal with economic issues such as this in a sensible and rational manner.

As such the long term prospects for the US economy, and Dollar as a reserve currency, are bleak; thanks to the selfish indulgences of the politicians on Capitol Hill.

Breaking News

China rating agency Dagong downgrades U.S. to A+ from A

And so it begins!

The politicians were warned!
"

Well here we are in 2012 and the whole sorry business is about to rear its ugly head once more, as President Obama is seeking to raise the debt ceiling by a further $1.2 trillion to $16.394 trillion.

For why?

"To meet existing commitments."

Congress has 15 days to vote on a resolution of disapproval under terms of budget control legislation passed last year.

"Experts" predict that the shenanigans of last summer won't be repeated, because Congress won't be able to muster enough votes to block it.
We shall see.

Politicians are, after all, entirely self serving selfish individuals; they would never let an opportunity for political grandstanding and political brinkmanship be blocked by economic considerations or the financial welfare of their electorate.

Thursday, January 12, 2012

For Fuchs Sake!

Michael Fuchs, the deputy floor leader for Merkel’s Christian Democratic Union, has said it how it is wrt the ongoing Greek tragedy and Greece's future within the Eurozone:

“..the problem is not whether they are capable of paying their loans -- they will not, not at all, never.

Fuchs is right, Greece will not pay and will be forced to leave the Eurozone.

The British Gas 5% Price Cut and Their Price Fixing Scheme

In the wake of EDF's decision to cut prices by 5% (as a result of a fall in wholesale gas prices of 9%), British Gas have followed suit and have cut their prices (electricity not gas) by 5%.

Hoozah!

However, those of you with long memories may recall that back in July I wrote the following about British Gas's price fixing scheme:

"Watch out for the nice little rip off they tried on my dear old mum recently.

British Gas offer to fix your prices until 2013.

Good offer?

No....you have to pay an extra 5% on top of their new standard tariffs if you wish to fix.

Also, "oddly enough", there is no mention of what happens if prices fall (even if that is unlikely). It seems the hapless customers lock themselves into a fixed price which won't fall if British Gas drop their prices
."

So my question to British Gas is as follows:


Will the poor saps who signed up to your price fix scheme (at an extra cost of 5%) benefit from your 5% reduction in prices?

Wednesday, January 11, 2012

The Dangers of Skyscrapers

Forget charts, chicken entrails and other passe means of trying to predict economic downturns; instead look towards the sky, and the skyscrapers being built.

That at least is the conclusion drawn by Barclays Capital, which has concluded that the construction of skyscrapers heralds financial collapse.

To justify their theory, Barclays note that New York's Equitable Life building, was finished in 1873 during a 5 year recession and that the Empire State Building coincided with the Great Depression.

Chicago's Willis Tower built in 1974, heralded the oil shock. Malaysia's Petronas Towers were completed in 1997 at the time of the Asian financial crisis, whilst the Burj Khalifa in Dubai was finished at the time the Dubai property market fell over.

Barclays now warn that China, currently building 53% of the world's skyscrapers, may face economic problems as could India (currently building 14).

Closer to home, we have The Shard in London!

It may well be that skyscrapers herald economic problems. However, it is not the skyscraper itself that causes the problems but the hubris and egos that cause them to be built.


Rehn Loses Patience With Greece

Olli Rehn, the vice-president of the European Commission, has started to lose patience with Greece and has given the country a public kicking:

"Greece was accepted to the eurozone in 2001 partly based on false statistical information, but that is past. 

Greece did not reveal the truth of its economic and fiscal situation."

Whether this is designed to prod Greece to sort out its finances, or is simply a way of covering the Eurozone's backside when Greece leaves the Euro is not clear as yet.

Tuesday, January 10, 2012

The Fate of The Euro To Be Decided At The Gates of Rome

The ratings agency Fitch has decreed that the fate of the Euro will be decided at the gates of Rome, and has put Italy on notice that it faces a downgrade at the end of this month.

For good measure, Fitch's head of rating has stated that if Italian debt is restructured it will mark the end of the Euro as a reserve currency.

Given that a downgrade of Italy will increase the likelihood of a debt restructuring, Fitch has placed itself in the role of judge, jury and executioner.

In other news, the French are determined to push through a financial transactions tax; despite the fact that this tax has split the German coalition.

As European dictators learned in the past, a war on two fronts (in this case three fronts, Greece, Italy and France/Germany) is unwinnable. The European political "elite" need to focus their minds, and determine exactly what it is they really need to do, can do and want to do in the short term.

Monday, January 09, 2012

Greece Sells Its Soul To The Devil

Greece is attempting to force its bondholders to accept a 60% haircut.

As I noted in September last year:

"..the Greek haircut of 50% that everyone is talking about is of course nonsense."

In order to achieve this haircut, and to ensure that bondholders "accept" it, Greece is to introduce retroactive collection action clauses to bonds.

These will permit some high level of bondholders to agree on an alteration of terms of principal, interest rate or maturity date

This means that debt that is easy to restructure (ie what Greece currently has on its books) is being exchanged for debt that will be impossible to restructure (ie Greece has sold its soul to the devil - the Troika). 


The Death March of The Euro

Another week has begun in the long drawn out death march of the Euro.

This morning Germany held an auction of Euro4BN in six-month bills, and managed to receive an average yield of MINUS 0.0122%.

This is a first!

It means that investors are desperately looking for a safe haven.

Good luck to them, given that Der Spiegl is reporting (not for the first time) that Greece is heading for a disorderly default and that Czech central bank Governor Miroslav Singer has said

"If there is not the will to give Greece a massive amount of money from European structural funds, I do not see any other solution than its departure from the euro zone and a massive devaluation of the new Greek currency."

Given this crisis what should investors place their hopes and dreams on?

Art seems to be a safe haven, at least that seems to be the conclusion drawn by thieves who have stolen two pictures (one of them being a Picasso) from the National Art Gallery in Athens this morning.

Question For RBS

Why does it take up to six weeks for a Euro cheque drawn on the Ulster Bank (one of your brands) to clear into a sterling account of the NatWest (another one of your brands)?

The postal system between the UK and Dublin (where the relevant branch of the Ulster Bank is based) is not that slow.

Friday, January 06, 2012

EU Ban on Iranian Oil

There has been much hype and sanctimonious puffing of chests from the EU about its agreement "in principle" to ban imports of oil from Iran.

However, as Paul Stevens economist and emeritus professor at Dundee University in Scotland notes, Greece currently imports 30% of its domestic oil from Iran on favourable terms.

Were Iranian oil imports to be banned, where would Greece get its oil from?

Saudi Arabia?

Maybe, but at an economy busting $150+ per barrel.

As with all EU "plans" this one has not been thought through.

Hence the EU is now talking about sanctions coming into force within a year (rather than immediately).

The sanctions will never happen.

Now repeat after me:

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

To Be Or Not To Be? That is The Question Facing The Euro

Christine Lagarde, the CEO of the IMF, has spoken in South Africa about 2012 and the travails that face the global economy (ie the Euro).


"Will 2012 be the end of the euro currency?

I seriously don't think so. Its a young currency, its a solid one as well.

You have within the zone, not in relation to the currency, serious pressure and issues concerning the sovereign debt, concerning the strength of the banking system which are being addressed.


But the currency itself is not one that would vanish or disappear in 2012, not at all."

When addressing the question as to whether Greece will remain in the Euro, she was decidedly "measured" in her response:


"The euro partners have affirmed, reaffirmed their determination..."

Little confidence then of Greece remaining in the Euro!

Thursday, January 05, 2012

Hungary and Greece Race To Default II

It seems that Greece has judged edged forward in the race with Hungary to be the first to default.

Greece's entire schedule of emergency loans from the European Union and International Monetary Fund is being pushed back by three months because of a delay in the payout of a tranche in 2011, the European Commission said today.

Hungary and Greece Race To Default

It looks as though Hungary is set to beat Greece to being the first to default on its debts, and claiming the dubious "honour" of being the first EU country to default (note Hungary is not in the Eurozone).

Yesterday Hungary was forced to withdraw from a bond auction, as it struggles to roll over Euro5BN of debt, because the costs were too high.

It is due in February to start repaying a loan to the International Monetary Fund (IMF) that saved the country from financial collapse in 2008. Officials from the IMF and the EU are scheduled to resume talks about a financing agreement with Hungary on January 11. However, no one seriously believes that these talks will achieve anything.

Meanwhile Greece, keen not to be written off in the race to default first, has warned that it may suffer an uncontrolled default in March if labour costs are not further reduced.

Maybe, instead of just pushing for reduced labour costs, the Greek government should more proactively push to recoup the taxes evaded by the wealthy corrupt "oligarchs" in Greece?




Wednesday, January 04, 2012

Spain in Denial

According to Spanish newspaper Expansion, the Spanish government is considering applying for loans from the EU's rescue fund and from the IMF, in order to bailout Spain's beleaguered finance industry.

Unsurprisingly the Spanish government have denied this.

Even more unsurprisingly the markets don't believe the denial, and are pushing Spanish yields up.

Juncker Goes Back To The Future

Eurogroup Chairman, and prime minister of Luxembourg, Jean-Claude Juncker has stated that Greece is not contemplating a return to the Drachma.

However, he is always saying things like that:

"We have not been discussing the exit of Greece from the euro area, this is a stupid idea, it is in no way, it is an avenue we would never take."

Unfortunately for him, Greece and the EU no one believes him!


Tuesday, January 03, 2012

Greece Applies Pressure

Greece, very aware that its likely departure from the Euro would cause political havoc in Europe, has issued a thinly veiled threat to its creditors that if an agreement is not reached with them wrt the second Euro130BN bailout, then it will leave the Euro.

A Greek spokesman Pantelis Kapsis told Skai TV:

"The bailout agreement needs to be signed otherwise we will be out of the markets, out of the euro.

The situation will be much worse."

Details of the rescue plan need to be agreed and finalised before a major bond redemption in March this year.

To my view both Europe and Greece would be better off if Greece did leave the Euro.