Our first items the latest eurozone exit pronouncement, but interesting nonetheless.
Spain’s much in the news, with popular anger rising over the government’s surrender to the Troika, a hate-spouting parliamentarian, and demands for more investor control of Spain and some German schooling.
Lots from Greece, including anxiety over the coming visit of the Troika’s, a token Merkelian delay, a little stroking from a europol, another IMF diktat, rising polarization, and some fascinating poll results [including a public demand of the coalition government], a racist blood drive, and more.
By way of a side trip to Iceland [for a WikiLeaks win, it's on to Italy, where another downgrade has hit and the Bundesbanker scoffs at high borrowing cost , and then to Ireland, with some good and bad economic news.
We close with bad European news for an all-American company.
Italian, Irish incentives to eave eurozone
There could be an Itxit or an Irxit before there’s a Grexit, at least if national governments follow the logic, says a financial powerhouse.
Either way, there’s money to be made.
Italy and Ireland have more incentive to quit the euro than Greece, while Germany may have limited room to prevent departures from the currency union, according to Bank of America Merrill Lynch.
Using cost-benefit analysis and game theory, BofA Merrill Lynch foreign exchange strategists David Woo and Athanasios Vamvakidis concluded in a July 10 report that investors “may be underpricing the voluntary exit of one or more countries” from the bloc.
“Our analysis produces a few surprising results that even readers who may disagree with our conclusion are likely to find interesting,” the strategists wrote, according to Bloomberg.
Italy, the euro area’s third-largest economy, would enjoy a higher chance of achieving an orderly exit than others and would stand to benefit from improvements in competitiveness, economic growth and balance sheets, they said.
While Germany is the nation deemed able to leave the euro zone most easily, it has the least incentive of any country to quit because it would face weaker growth, possibly higher borrowing costs and a negative hit to its balance sheets, the strategists said. Austria, Finland and Belgium also have little reason to quit, they said, while Spain has the weakest case for leaving among economies most directly affected by the crisis.
The analysis is based on a framework which ranks eleven of the 17 euro-area nations on criteria such as how orderly their exit from the bloc would be and how it would affect economic growth, interest rates and balance sheets. Ireland and Italy received an average ranking of 3.5, while Greece was at 5.3 and Germany had the highest score at 8.5. The lower the number, the more there would be to gain from leaving.
Hmmm. So Germany’s the country that’d be hurt most by a collapse of the common currency. In that light, Angela Merkel’s singular mission to save the euro at all costs becomes even more comprehensible.
Spain borrows a third of a trillion
Now wonder they’re so eager to pump more cash into Spain, since they’ve got so much there already.
Spanish banks’ borrowing from the European Central Bank jumped by 17% in June compared to the previous month and loans were worth 337,206 billion euros, according to data published today by Bank of Spain.
Loans by the ECB to Spanish banks multiplied by seven in a year, from 14,777 billion euros to the 337,206 billion received in June, when the Spanish government announced its bailout request, the Bank of Spain said.
In the same period, the reliance of Italian banks on EBC loans, which is lower than Spain’s, remained stable.
Protests in Spain challenge austerity
First, a video of a violent confrontation in Madrid between police an anti-austerity protesters via vlogger antikriegTV:
And another Madrid street scene from vlogger normajed1:
And here’s raw footage from yesterday in Madrid from RT:
ANSAMed reports on yesterday’s events:
For the third day, public employees gathered to protest the government’s proposed 65 billion euro austerity plan, which is to be approved by the Cabinet today.
Called by Comisiones Obreras (CCOO), Union General de Trabajadores (UGT) and Central Sindical Independiente y de Funcionarios (CSIF) unions, hundreds of public employees blocked the capital’s main throughfares this morning and gathered in front of regional government headquarters, chanting ‘’Hands up, this is a robbery’‘ and calling for Madrid president and PP member, Esperanza Aguirre, to step down. Another 200 justice system employees gathered in Valencia in a similar protest against the harsh austerity packet, which includes cuts to year-end bonuses and leave time. The three major unions, CCOO, UGT and CSIF have announced they will form a national platform to include all public sector employees in opposing the austerity plan.
The long, the short, and the tall. . .
The only question who a Spanish conservative was telling to get fucked. The context implies that she meant those who will suffer from the just announced, Troika-compliant austerity measures just announced the by the conservative prime minister.
Either way, she’s a real class act — a class warrior you might say [and we will].
From Basque region news service eitb:
Andrea Fabra, a deputy of the ruling party PP in the Spanish parliament, became the center of political storm in the recession-hit country on Friday after video showed her insulting unemployed citizens saying “Fuck them all” just seconds after Spanish PM announced austerity measures.
The video shows the Spanish deputy, daughter of Castellon’s regional council president Carlos Fabra, clapping and yelling “Fuck them all” as Mariano Rajoy announced cuts in unemployment benefits as part of new austerity measures designed to slash 65 billion euros from the public deficit by 2014.
Rajoy also announced a 3-point hike in the main rate of Value Added Tax on goods and services to 21 percent and cuts in civil service pay and perks.
Spain’s main opposition party PSOE has asked the PP deputy to give up her seat. “Andrea Fabra must leave her seat. She is not worthy of representing the citizens. He shouted ‘Fuck them all’ when Rajoy announced the cuts to the unemployed, “the Socialists claimed on their Twitter account.
Fabra has admitted having pronounced those words but claims she was referring to the PSOE members of parliament, who were interrupting Rajoy’s speech with jeers and boos.
“Fuck ‘em all,” choruses Rajoy-hoy’s money man
Not that he said it literally. But in agreeing to stick the citizens with the tab for any losses on the coming bailout, he’s done just that.
The Spanish government will guarantee that emergency loans received under a European bailout package of up to 100 billion euros will be repaid, Spanish Economy Minister Luis de Guindos told German newspaper Frankfurter Allgemaine Zeitung, stressing creditors should not fear losses.
The minister told the paper that ‘the Spanish economy will give a positive surprise’ to markets ‘in the next three years’.
‘We are responsible for the repayment’, he said in the interview quoted by the Europa Press agency. ‘I am convinced there will be not even the slightest loss for creditors’.
Hell, just give Spain to investors, says
Yep, Germany’s central bankster has just declared that rather than simply letting investors say how Spain’s bank’s should be run, they should just tell everybody what to do.
Right, let financiers run the country because they’ve got everybody’s best interests at heart, right?
From Agence France-Presse:
European assistance to ailing Spain should target the country’s entire economy and not just the banking sector, the head of Germany’s central bank said in an interview published Saturday.
“The banks’ balance sheets are a reflection of the overall economy,” Bundesbank chief Jens Weidmann told newspaper Boersen Zeitung.
“If investors see that the conditions set down for aid to Spain go beyond just the framework of the banking sector, this would also have a positive effect on bond markets.”
Weidmann said recent announcements by the Spanish government, financial problems in the country’s regions and its high unemployment rate — a record 24.4 percent in the first quarter of 2012 — show Spain still has major issues to resolve.
Germany say’s it’ll tell ‘em what to do, too
Berlin is our sherpa; we shall not want, says the Spanish educator-in-chief.
Yep, young Spaniards will be going off to German companies for apprenticeships, where they’ll learn the discipline of “best German practice.”
Reminds us of a headline we read recently atop a column at WND: “Blacks should be like Jews.”
From the BBC:
Germany says it will help Spain to launch German-style apprenticeships for its young people, half of whom are unemployed because of the debt crisis.
Spain’s Education Minister, Jose Ignacio Wert, signed an agreement with his German counterpart in Stuttgart on Thursday, to give more Spaniards on-the-job training with German firms.
Spain’s youth unemployment has soared to 52% – the highest rate in the EU.
Mr Wert said Spain must learn from German best practice to improve skills.
“We want Germany to be our sherpa on this job training adventure,” he told Germany’s Frankfurter Allgemeine newspaper.
Merkel offers Greece a token delay
You don’t have to give us your complete plans for austerian compliance right now. Heck, take a week, take two weeks.”
We’re sure her generosity is appreciated.
From Deutsche Börse Group’s MarketNews International:
German Chancellor Angela Merkel is willing to allow Greece extra time to meet its deficit goals of at most a couple of weeks, the German daily Rheinische Post reported Friday, citing government sources.
The Greek government, however, announced on Thursday that it is seeking a postponement of the deficit goals of at least two years.
German government spokesman Steffen Seibert said at a regular press conference on Friday that Greece needs to stick to “the content and timetable” set in the memorandum of understanding agreed with its international lenders.
Seibert reaffirmed that the German government is determined to stabilize Greece inside the Eurozone, although it will be a long road for Greece to get its economy and budget back in shape again.
More from Spiegel:
Chancellor Angela Merkel’s spokesman Steffen Seibert said that “neither the content nor the timeframe of the memorandum are up for debate,” using shorthand for the austerity agreement between Athens and its creditors. According to a report in Friday’s Rheinische Post newspaper, the chancellor would consider a postponement of “a few weeks” at the most. The paper cites anonymous government sources.
The Chancellery was echoed by the other two parties in Merkel’s governing coalition. Speaking to German public radio station Deutschlandfunk on Friday morning, Economy Minister Philipp Rösler, of the Free Democrats, said “I have the feeling that the troika’s patience is slowly coming to an end,” referring to the trio made up of the European Commission, the European Central Bank and the International Monetary Fund. He also called into question whether Greece is even capable of being reformed to the degree necessary. “Our experience has, at the very least, made me skeptical,” he said.
Alexander Dobrindt, general secretary of the Christian Social Union, the Bavarian sister party to Merkel’s Christian Democrats, went even further. “From day to day, it is becoming more apparent that Greece only has a chance if it exits the euro,” he told the daily Rheinische Post.
A country with Great Expectations?
Well, at least “positive prospects,” so long as austerity is righteously embraced, says the EU’s regional affairs rep.
From Athens News:
European Commissioner for Regional Policy Johannes Hahn expressed his certainty that the Greek economy has positive prospects, during a press conference in Athens on Friday.
Hahn said he is confident that the government and the EU will work closely to overcome the existing difficulties.
Hahn arrived in Athens on Thursday on a mission to accelerate exploitation of the ESPA (National Strategic Reference Framework) funds and increase liquidity in the economy.
After holding meetings with Finance Minister Yannis Stournaras, Development Minister Kostis Hatzidakis and Interior Minister Evripidis Stylianidis, Hahn said that the new government seems dedicated to the implementation of its obligations, but predicted a “hot summer” due to the volume of work that needs to get done.
Asked if an extension should be given to the government to implement its fiscal adjustment programme, Hahn said that “we have always shown not only flexibility but also readiness to discuss”, adding however that nothing can change with respect to the targets and agreements.
Meanwhile Greek government struggles
It’s all those numbers and creditor agreements the Troika wants before their top brass lands boots on Athenian ground on the 24th so they can pitch for delays and memorandum revisions.
Prime Minister Antonis Samaras said on Friday that he would personally monitor the overhaul of the civil service, including the evaluation of personnel and slashing of red tape.
Administrative Reform Minister Antonis Manitakis said the aim was to reduce the number of civil service departments by about 30 percent.
European Regional Policy Commissioner Johannes Hahn, who was in Athens on Friday, also highlighted red tape as a problem, noting that it discouraged investors and should be tackled “immediately.” Hahn did not rule out the prospects of flexibility being introduced to Greece’s economic program but said the fiscal targets would have to be respected, noting that the troika’s report was not expected until September.
Other EU officials were less understanding. The spokesman for German Chancellor Angela Merkel, Steffen Seibert, said the terms of Greece’s debt deal should not be changed. “Neither the content nor the time frame of the memorandum are up for debate,” he said, adding that Greece must “make great exertions” to continue receiving aid. Seibert refused to comment on a report in the Rheinische Post according to which Merkel regarded an extension of Greece’s fiscal adjustment period as “unacceptable” and was prepared to offer Athens an extension of only “a few weeks.”
The German daily also reported that Greece has failed to hit some 210 out of 300 targets.
IMF boss delivers the usual harrumph
Actions speak louder that words, so there’ll be no words until after the action — compliance with the dictates of the memorandum.
From A. Papapostolou of Greek Reporter:
In high-stakes deals on the Street, the side with the leverage usually demands “show me the money first, then we’ll talk.” But in the rarefied and much higher-stakes world of desperate sovereign borrowers and multilateral lenders of last resort like the International Monetary Fund, it’s the other way around – “show me the goods first, then you get the money.” In the case of Greece, Christine Lagarde says “implementation must happen, more than lip-service.”
In a wide-ranging, extended interview the IMF Managing Director told CNBC the new coalition government in Greece is saying the right things. “I’m quite pleased to see that the Greek authorities are aware of the fact that they have to demonstrate their determination to own, adopt and implement the program. Because I think that’s a quid pro quo that was not necessarily in place previously. That change of attitude I think was warranted, is welcome, and will help have a better dialogue with the authorities.”
Here’s the “but”, though. Asked directly if she’s willing to give the new Greek coalition government more time to implement the reforms and austerity measures required to receive more emergency money, Lagarde said it’s “way premature to discuss extension, to discuss additional financing.”
She said the sequence should be: “first of all it’s a new mindset, a proper fact-finding exercise, and then a discussion with the authorities to see how with their new policies, their new strategy, the situation can be accommodated.”
Greeks lose faith in government
What’s remarkable is that some apparently had any faith left at all.
Most Greeks believe their new government is unable to resolve their near-bankrupt country’s problems, a poll found on Thursday, Reuters reported.
The poll by Public Issue for Skai TV found 51 percent of Greeks believe the government is unable to tackle their country’s problems, against 47 percent who think it can.
Sixty-six percent of those surveyed said Greece was on the wrong path. Only 23 percent said things were going well.
The poll is one of the first published since a re-run election on June 17 which failed to produce an outright winner but gave the conservatives a slight lead over the radical leftist SYRIZA party, which opposes the bailout.
Forty percent were not satisfied with the election result, the poll found. Only four percent said they were “very satisfied” and 33 percent that they were “a little” satisfied.
But 45 percent said they viewed the government in a positive light, while 43 percent had a negative impression of it.
More from Ekathemerini:
Of the respondents questioned, only 12 percent said they were confident that the government could rise to the myriad challenges it faces.
There has, however, been a substantial drop in the percentage of people who feel Greece is heading in the wrong direction. In May, this figure was at 86 percent but it has now dropped to 66 percent.
There remains, however, great skepticism about the political parties, with 39 percent of those questioned saying they do not trust any parties as capable of governing effectively.
Democratic Left is the most popular of all the parties with an approval rating of 60 percent. Its leader, Fotis Kovelis, remains the most popular of the party chiefs, although support for Prime Minister Antonis Samaras has risen from 36 percent to 50 percent.
Yet another poll result: Renegotiate or else
Most Greeks insist on renegotiation of the harsh terms of the Troika-imposed austerity memorandum and demand the government do just that.
Nearly three-quarters of Greeks say the country’s new coalition government led by Antonis Samaras must insist on a renegotiation of the terms of Greece’s international loan agreement, a poll by MRB for Real News newspaper showed.
Of those surveyed, 73.9 percent said the coalition should insist on discussing the terms even if such talks lead to the danger of Greece leaving the euro area, according to an excerpt of the poll published on Saturday on the web site of Athens-based Real News.
That compared with 15.5 percent who said the government should accept the current terms of Greece’s bailout, according to the newspaper.
Another poll: Greeks most worried about food
And no wonder. In a country where unemployment has soared and salaries dropped, just getting your next meal can be a hardship.
From Athens News:
Greeks are the most concerned in Europe about national food security, a recent survey conducted by Eurobarometer shows.
The report, entitled “Europeans’ attitudes towards food security, food quality and the countryside”, reveals that 94 per cent of Greeks are concerned about national food security, more than twice the EU average (43%). Particularly low levels of concern are noticed in the Netherlands (11%) and Denmark (11%).
Greece also stands out as the only EU country where the majority of respondents are very concerned about food safety (61%), with the EU average being 15 per cent.
Levels of concern about national food production are strongly related to those about EU production. 79 per cent of Greek respondents are concerned about EU food security.
Golden Dawn’s Aryanesque blood drive
Doctors are notably outraged that the Neo-Nazi party with the Hitleresque salute has undertaken a Greeks-only blood drive.
From Greek Reporter’s Marianna Tsatsou:
A few days ago, far-right Golden Dawn party announced their decision to run blood donations for Greeks only. Doctors and medical authorities of the country expressed their outrage over this statement and marked it as “inhuman and racist.”
Golden Dawn has recently organized kitchen soups for Greek citizens as well, not permitting people of other ethnicities to attend. They put up posters all over Athens calling for volunteers to donate blood “for Greeks who need our help.”
Party members, commenting on the blood donation, made clear that bottles collected will be provided to people they choose, not to everyone. They also added that they will cooperate with a big Athens-based hospital on the “selection” of patients.
But, as appears, it was a big lie. Health officials replied that such action would be illegal. Moreover, hospital’s manager Yiannis Stefanou said that they will not make any such discrimination, no matter what party members claim.
Reminds us of a story told us by a college anthropology prof who’d been a medic in World War II. Seems that back then, Army blood bottles for transfusions came with labels indicating the donor’s race. Whenever a white transfused patient spouted racist rants, our prof would find a bottle of the right type from an African American donor, then overlay the label with another with Caucasian label, but slapped on crooked and only partially pasted down and just a hint of the N in Negro showing. He knew that patients, being bored, peeled at labels, and having administered the new bottle, he’d sit back and wait for the inevitable explosion.
Tsipras steps up the heat
The leader of the number two party in Parliament, the left Syriza alliance, is keeping up a dumbeat of criticism of the coalition government.
From Athens News:
Alexis Tsipras has continued his assault on what he called the “three party memorandum government” during a speech given at the two day meeting of the European Left Party, which is being held in Athens.
Speaking on the issue of privatisation and the latest measures that the government will announce, he said that “the program just doesn’t compute, the equation has no solution and that means that if at the end of the next two years this government has consented to all the unreasonable demands of our creditors, then our already weakened and bankrupt country will voluntarily have to beg to exit the eurozone”.
He also said that for all its promises of solutions, the Samaras-led coalition was little more than “a government that speaks of the interests of our creditors, as if the were actual targets expressing the whole of the continent”.
Tsipras also saved some of his barbed comments for the Democratic Left, saying that he no longer expected anything from his former comrades, seeing as the identify “the memoradnum-friendly government programme as progressive”.
A rare victory for WikiLeaks
The Icelandic arms of the two giants of the credit card trade have been ordered to accept donations for WikiLeaks, transactions they’d stopped after the release of all those State Department cables.
The scope of the ruling is limited and both companies are based in the U.S., so it remains to be seen just what the outcome will be.
From the Associated Press:
WikiLeaks declared victory Thursday in the first round of its campaign against the financial blockade imposed by Visa and MasterCard after an Icelandic court ordered their local partner to resume processing credit card donations to the secret-spilling site.
Visa and MasterCard were among half a dozen major U.S. financial firms to pull the plug on WikiLeaks following its decision to begin publishing about 250,000 State Department cables in late 2010.
WikiLeaks says that the ensuing blockade has led to a 95 percent fall in revenue, something which founder Julian Assange says has forced him to focus on fundraising at the expense of his site’s publication work.
The judgment, handed down by Reykjavik District Court, is “a very important milestone in our campaign,” WikiLeaks spokesman Kristinn Hrafnsson said in a telephone interview. Lawsuits remain active in Denmark and in Belgium, he said, but the Icelandic win was “a small but very important step in fighting back against these powerful banks.”
The District Court ordered Visa and MasterCard’s local partner, Valitor, to resume funneling donations to WikiLeaks’ payment processor, DataCell, within two weeks or face 800,000 kronur (about $6,000) in daily fines, according to DataCell lawyer Sveinn Andri Sveinsson.
Another downgrade for Italy
This time from Moody’s, and based on the likelihood of a Grexit, among otherf things.
From the London Telegraph:
US ratings agency Moody’s downgraded Italy’s government bond rating by two notches, citing the knock-on effects of a possible Greek exit from the eurozone and Spain’s banking woes.
In reducing the rating to Baa2 from A3, Moody’s said that Italy was now “more likely to experience a further sharp increase in its funding costs or the loss of market access” for borrowing to service its budget.
The downgrade pushed the country’s 10-year bond yield back above the 6pc danger level.
The move lowered Italy’s rating to two notches above junk-bond status, and came just before the debt-laden country attempts to raise €5.25bn in a medium and long-term government bond auction on Friday.
On Thursday Italy raised €7.5bn in one-year bonds at a sharply lower rate than previously, indicating improved investor confidence.
But in a statement, Moody’s spelt out the challenges both external and internal that face the eurozone’s third-biggest economy.
Europols deliver up ornamental rage
It’s not that Moody’s downgraded another country [again]; it’s when they did it that’s got the europols in a huff.
From Agence France-Presse:
The European Commission on Friday criticised the timing of the credit downgrade of Italy by the ratings agency Moody’s.
“I do think one can legitimately and seriously question the timing of it, whether the timing is appropriate,” Simon O’Connor, the commission’s economic affairs spokesman, told a news conference.
He noted that the downgrade coincided with an “important bond sale that Italy was undertaking today.”
The spokesman said the government of Italian Prime Minister Mario Monti had taken “determined and wide ranging” policy actions to clean up its public finances and repair structural weaknesses.
“We consider that Italy’s reform effort in the past year has been impressive and it may not be an exaggeration to say it has been unprecedented,” O’Connor said.
So they bleed money? That’s Italy’s problem, not ours
Yep, another grumble from the Bundesbanker, who says that just because Italy has to pay a fortune to borrow on the open market doesn’t entitle them to lower cost eurozone emergency help.
Italy’s borrowing costs don’t justify asking the euro area’s rescue fund for help, Bundesbank president Jens Weidmann said.
“Of course I can understand why a country would want to lower its refinancing costs,” Weidmann said in an interview with German financial newspaper Boersen-Zeitung. “But because of the last-resort aspect of financial aid in the currency union, that alone can’t be a justification for granting it.”
“If Italy stays the course on reforms, it’s on a good path,” Weidmann told the German newspaper. Asked whether the euro area’s third-largest economy needs to tap the planned European Stability Mechanism, he said, “No, I don’t see Italy in that situation.”
The European Central Bank Governing Council member’s comments indicate German reluctance to allow the government-run bailout funds to buy Italian bonds to insulate that country from the debt crisis.
Irish praised of austerity, money hinted
Yep, the Irish have done such a good job of following the eurocratic/IMF budgetary dictates that they deserve a bone.
From Agence France-Presse:
Ireland is clawing out of the economic crisis which drove the “Celtic tiger” economy into a debt bailout, EU-IMF auditors said on Thursday, implying that the country could be rewarded with some easier rescue terms.
But the auditors, while giving Ireland high praise for constantly hitting targets and winning back some market confidence, warned that growth would remain modest into next year.
They also said: “Fiscal targets for the first half of 2012 were met, further extending Ireland’s record of consistently achieving programme targets.”
And “the (public) budget deficit is on track to be within the 8.6 percent of GDP target for 2012.”
Government revenues were running ahead of expectations.
But the deficit “remains the largest in the euro area” and the government had to keep tight control of spending, notably of health care.
And what has all that good work won them?
A shrinking economy, for openers.
From Ben Chu of The Independent:
The Irish economy contracted by 1.1 per cent in the first three months of 2011, official figures showed yesterday. Consumer spending fell by 2.1 per cent as the government continued to impose deep cuts and tax rises.
The sharp drop in output casts doubt on the European Commission’s forecast that Ireland, alone of the eurozone states that have been bailed out, will register growth in 2012. The commission predicted in its spring forecast that Ireland would grow by 0.5 per cent this year.
However, Ireland’s Central Statistics Office also said that the economy expanded in the final three months of 2011 by 0.7 per cent, having previously recorded a 0.2 per cent decline. That means Ireland avoided a technical recession last year, defined as two quarters of negative growth. Growth for 2011 as a whole was revised up from 0.7 per cent to 1.4 per cent.
American carmaker hit in Europe
Following GM’s Opel, Ford become the second American carmaker to report growing losses in Europe.
Ford’s western European sales slumped 10pc in the first half of 2012 as it opted not to match heavy discounting by rivals, the second-largest US automaker has said.
The sales decline hit 16.1pc in June, year-on-year, in Ford’s traditional 19 western European markets.
French, Italian and Spanish car sales have all tumbled in the first half, while those in Germany remained flat, rounding off a gloomy period for Europe’s auto industry as it battles government austerity and economic downturn.
“The economic environment remains very difficult,” Roelant de Waard, Ford of Europe’s sales chief, said in a statement. The company said first-half sales by all automakers hit their lowest level in Europe since 1994.