We’ve got another save-the-euro declaration, rumors of coming big buys of Italian and Spanish bonds by the eurobank, an optimistic stock surge, and a German bank saying no to those bond buys, an economists’ plea to share the pain, and a look at til-debt-do-us-part.
From Spain we’ve got word that a bailout plea is coming, a British bank poulls its cash from Iberia, and hit to Europe’s biggest [and Spanish] bank, rising unemployment, and a shrinking legislature.
Lots from Greece, starting with the Troikarch Prime Directive, a central bankster’s diktat, a selective bank bailout, and more.
We conclude with a story about French desires for a vote on Merkel’s agenda, Britain’s central bankster saying it was all just an accident, a bit hit for an Irish bank, Siemens sings along with Kermit, and Danish youth unemployment.
The new eurohybrid, Hollerkle
That’s our neologism for the emerging alliance between two politicians who, in theory, should stand poles apart, German Chancellor Angela “the Iron Maiden” Merkle and French President and a-Socialist François Hollande.
While Merkle once proposed to come to France to campaign for Hollande’s predecessor [a move Nicolas Sarkozy rejected, what with the history between the two countries], the two have emerged as BFFs in the latest iteration of the eurocrisis.
From Deutsche Presse-Agentur:
Germany and France are “determined to do everything” to safeguard the euro, their leaders said Friday after speaking on the phone.
“France and Germany are fundamentally committed to the integrity of the eurozone. They are determined to do everything to safeguard it,” German Chancellor Angela Merkel and French President Francois Hollande said in a joint statement.
They called on national governments and European Union institutions “to fulfil their obligations towards this end, each according to their prerogatives,” and renewed a vow to quickly implement summit decisions from last month.
The euro rose 0.4 per cent to 1.2343 dollars and shares rose after the statement. The eurozone blue-chip Eurostoxx 50 was up 1.6 per cent.
Fascinating how a guy who calls himself a socialist can become the telepal of another leader whose conservative policies should, by definition, be anathema to him.
But the today’s eurosocialism’s nothing like the version of yore, dancing to same bankster-orchestrated tune as the continent’s open neoliberals.
Eurobank to start scooping up Spanish, Italian bonds?
While the European Central Bank is rejecting Greek bonds as collateral, they apparently have no problem with those of Spain and Italy, two other nations now mired in the same debt trap as Greece.
French newspaper Le Monde reports that the European Central Bank is preparing to restart purchases of Italian and Spanish bonds, and that it is preparing “concerted action” with EU states.
It also reports that German Chancellor Angela Merkel and French President Francois Hollande may discuss this plan today, Business Insider reports.
This is a potentially bombshell report, indicating not only that the ECB will make good on statements made yesterday by Mario Draghi, but that EU leaders are preparing to act simultaneously.
While the eurobank is holding Greece to a short lease and hinting from time to time of that Grexit thing, there seems to be a recognition that the more populous and industrial countries of Spain and Italy should be kept inside the eurozone at all costs.
That there’s a long-term strategy in mind is certain, but we’d sure like to see it spelled out.
Stocks rise on euroecstasy
The combination of today’s Hollerkle pronouncement and yesterday’s declaration from European Central Bank boss Mario Draghi promising to save the euro at all costs did the expected to the markets.
From the Associated Press — and catch that comment:
The Dow Jones industrial average climbed over 13,000 in midday trading for the first time since May, and ended the day with a gain of 1.5 percent, or 187.73 points, to 13,075.66. The Standard & Poor’s 500-stock index rose 1.9 percent and the Nasdaq added 2.2 percent.
Mr. Draghi’s remarks were influential because many investors fear that disaster would ensue if the 17 countries that use the euro were split apart. Keeping the euro zone intact, however, depends heavily on the cooperation of stronger countries like Germany that have footed much of the bill for bailing out weaker nations.
“Talk is cheap,” said Michael Strauss, chief investment strategist and chief economist at the Commonfund investment firm in Connecticut. “While there’s some euphoria over this, at the end of the day, is Spain going to still be in a recession? Yes. Is Greece still going to be in a recession? Yes. So I wouldn’t get too carried away.”
Still, euro zone stock markets rose about 2 percent, with the main Spanish stock index up 3.9 percent. Yields on sovereign debt retreated, with the 10-year Spanish debt at 6.657 percent.
But there’s a hitch, and it’s German
The German central bank, to be precise.
From the London Telegraph:
Germany’s Bundesbank said on Friday it remained opposed to bond-buying by the ECB, dampening a market rally triggered by Mario Draghi’s pledge to do whatever it takes within the central bank’s mandate to preserve the euro.
ECB president Mario Draghi had raised expectations in the market that the central bank could announce that it will start buying bonds again under its controversial Securities Market Programme (SMP).
“The Bundesbank continues to view the SMP in a critical fashion,” a Bundesbank spokesman said.
She said the bank had not changed its positions on bond purchases of the Eurosystem or bond purchases by the EFSF rescue fund.
“The Bundesbank has repeatedly expressed in the past that it views bond purchases critically because they blur the line between monetary and fiscal policy.”
More from Agence France Presse, which opens with a quote from a Bundesbank official:
“Our opinion regarding the SMP programme has not changed,” the spokesman told AFP, referring to a programme for buying up the sovereign bonds of debt-wracked eurozone countries that are finding it difficult to drum up financing in capital markets.
The ECB first launched its bond-buying blitz under the Securities Market Programme (SMP) in 2010 and the move was criticised by the Bundesbank from the start, even leading its then chief Axel Weber to resign.
Bundesbank officials argue the programme is tantamount to so-called monetary financing, where the central bank effectively prints money to pay off a country’s debt, something which is expressly forbidden under the ECB’s statutes.
At the same time, the Bundesbank saw as “unproblematic” the possibility that the eurozone’s bailout fund, the EFSF, could purchase the debt, because the EFSF “is not a central bank,” the spokesman said.
Nevertheless, the German central bank would be opposed to awarding a banking licence to either the EFSF, which is a temporary mechanism, or its successor the ESM. A banking licence would allow the bailout funds to borrow money from the ECB.
Share and share alike, say economists
No, they’re not talking about sharing the wealth. It’s debt that shoiuld be spread out across the continent, or so a group of notable talking heads is declaring.
The eurozone faces economic disaster unless its financially stronger states and its central bank commit to bearing a larger share of the region’s debt burden, leading global economists including two advisors to the German government said.
“We believe that … Europe is sleepwalking towards a disaster of incalculable proportions… The sense of a never-ending crisis, with one domino falling after another, must be reversed,” the Institute for New Economic Thinking (INET), backed by veteran investor George Soros, wrote in its report.
Policymakers must tackle two problems separately – dealing with the legacy costs of the “initially flawed design” of the eurozone, and fixing the structure of the bloc itself.
Among their recommendations, the economists called for an early partial mutualisation of the region’s debt – which Germany has refused to consider – and the eventual creation of a supranational financial watchdog with authority over national regulators.
They also urged the European Central Bank to become a lender of last resort in the longer term for states that meet budget targets, or allow the region’s ESM rescue fund to play that role and give it a banking license.
There’s only one problem: It’s all bullshit.
Sharing the debt burden isn’t a solution; it’s a delaying tactic. Designed to ensure the continuing flow of ever-mounting debt [compound interest, right?] to the hands of private investors for as long as possible, until every last bit of wealth has been extracted and all that’s left are the withered husks of former nation states and the immiserated peoples.
And just for the fun of it, consider the following charts of debt-to-GDP ratios ibn a few selected countries, courtesy of that wonderful chart repository at the Federal Reserve of St. Louis.
The whole charade is predicated on the impossible, the exponential growth of wealth to meet the insatiable demands of exponentially increasing debts that have reached unsustainable levels.
The one question is this: Which goes first? Our financial systems or our lives?
And now, on to Spain. . .
Spain cops to a jonesing for a bailout
For anyone unfamiliar with the term, “jonesing” is [or was] drug-addict-speak to craving for a fix.
The latter-day version of heroin is debt, and Spain finally asdmits to needing to take out more of it in order to keep the game going.
From Jan Strupczewski of Reuters:
Spain has for the first time conceded it might need a full EU/IMF bailout worth 300 billion euros ($366 billion) if its borrowing costs remain unsustainably high, a euro zone official said.
Economy Minister Luis de Guindos brought up the issue with German counterpart Wolfgang Schaeuble in a meeting in Berlin last Tuesday as Spain’s borrowing costs soared past 7.6 percent, the source said.
If needed, the money would come on top of the 100 billion euros already agreed to prop up Spain’s banking sector, stretching the euro zone’s resources to breaking point, and Schaeuble told de Guindos he was unwilling to consider a rescue before the currency bloc’s ESM bailout fund comes on line later this year.
“De Guindos was talking about 300 billion euros for a full program, but Germany was not comfortable with the idea of a bailout now,” the official told Reuters.
“Nothing will happen until the ESM is online. Once it is operational we will see what the borrowing costs for Spain are and maybe we will return to the question,” the official said.
Barclays pulls cash out of Spain, Portugal
Now there’s a vote of real confidence. The company that just apologized for the whole LIBOR thing is pulling capital out of of the Iberian Peninsula.
Barclays bank withdrew capital from its Spanish and Portuguese branches as a preventive measure in case the two countries should leave the euro, El Pais daily reported today, citing sources with the British bank.
Barclays took a number of measures to reduce the bridge between its assets and funding provided by the group. Up until today, London covered for the needs of its Madrid branch but this increased the risk of losses in case Spain and Portugal were to leave the eurozone, which is “significantly less likely” in Italy’s case, the bank said. The withdrawal of capital was one of the measures adopted together with funding cuts to the Spanish branch in six months, from 12.100 to 1.550 pounds – from 15.5 billion euros to 3.2 billion. The Spanish branch of the bank has demanded 8.2 billion euros in order to compensate for the cuts. A similar operation has been carried out in Portugal, where funding was brought down to 3.700 pounds from 6.900.
Spanish bank takes huge bubble hit
It’s not just a bag bank, it’s the eurozone’s leading financial titan.
From the London Telegraph’s Martin Roberts:
Santander has seen its profits halved in the first half of the year 2012 after writing down billions of euros off the value of property held on its books to meet government orders.
The move by the eurozone’s largest bank is a symptom of the malaise plaguing Spanish lenders since a property boom turned to bust in 2008.
Auditors have said Santander should not need any of the €100bn (£78bn) bail-out European ministers agreed to give Spain’s banks last month. But the cost of cleaning up others’ balance sheets has exacerbated fears the government’s finances may be unsustainable and recently pushed up its borrowing costs to levels which may force Spain to seek a full-blown rescue package the eurozone could ill afford.
Santander posted a net profit of €1.7bn for January to June, which was 51pc less than a year previously after it wrote down some €2.8bn to cover losses from bad loans and repossessions stemming from the property sector’s collapse. The bank’s net interest income, however, rose by 8.4pc to €15.4bn, and net loans to clients were up 5.8pc to €766m.
Unlike smaller Spanish banks, Santander can offset problems in Spain with subsidiaries up and down Latin America and has now met 70pc of write-downs it must make in 2012 to comply with government measures passed in March and May.
Spanish unemployment keeps rising
And that’s despite the early summer bump, the start of the season when Spain becomes Europe’s playground.
From the London Telegraph:
Spain’s unemployment rate rose to 24.63pc and 53pc among the young in the second quarter, despite the start of the tourist season.
The increase in the overall jobless numbers was smaller than in the first quarter, with the number of eligible people out of work rising to nearly 5.7 million people.
Between April and June, 53,500 people lost their jobs, compared with 365,900 in the first quarter, the national statistics office said.
The unemployment rate rose from 24.4pc recorded in the first quarter – already the highest in the industrial world – as Spain entered its third straight quarter of economic contraction.
Among those aged 16 to 24, the rate rose to 53.27pc from 52.01pc the previous quarter, reflecting the ongoing impact of Spain’s double-dip recession following the collapse of a construction boom in 2008.
The number of households in which all eligible members are unemployed rose by 9,300, reaching more than 1.73 million overall.
So Spain takes on more debt in hopes of staving off some of the misery of the moment, while adding to the weight of future misery certain to come as once again the economy simply can’t meet the burdens of that ever-accelerating debt.
Another austerian solution: Less democracy
Yep, one Spanish region has decided that cutting down the size of its legislature is another austerian quick fix.
The president of the government of Galicia, Alberto Nunez Feijo of the Pardido Popular, announced that the regional Parliament will lower by 14 the number of lawmakers, from 75 to 61, to cut public spending.
Feijo was quoted by the local press as assuring that the PP would approve the reform regardless of the opposition’s stance on the issue thanks to its absolute majority in the chamber. He said however that he hoped for an accord “at least with the PSOE”.
Lowering the number of MPs will not “totally change the rules of the game”, said the president, as it will maintain the minimum number of representatives per province, 10 MPs, under Galicia’s electoral law. Opposition groups, the Socialists and Galician National Bloc, oppose the reform.
Hey, why stop there? By that same reasoning, the best cure for austerity would be dictatorship, where you’ve got no legislators at all [unless you want to keep a few to rubber stamp the Caudillo’s diktats].
But then that’s already happening isn’t it? What use are legislatures when Toikarchs are calling the only shots that count?
Now, on to Greece. . .
No play, no pay, Troika tells Samaras
They really meant it with all those sound-bite lashings.
From Deutsche Presse-Agentur:
Greek Prime Minister Antonis Samaras was told by the country’s international lenders Friday that the country had no choice but to implement new cost-cutting reforms if it wanted to continue receiving further bailout funding.
International inspectors from the European Union, International Monetary Fund and European Central Bank arrived in Greece earlier this week to assess the country’s troubled austerity programme.
Samaras, whose conservative-led coalition government came to power last month, is under pressure to follow through with austerity commitments and find new areas to make cuts.
Government spokesman Simos Kedikoglou said in a statement that the EU/IMF inspectors had briefed the prime minister on initiatives “that must be taken to ensure that the national programme is brought back on track.”
It’s High Noon in the E.U. Corral
And it’s Greece confronting the Troika.
Here’s the take from Jan Strupczewski, John O’Donnell, and Luke Baker of Reuters:
European policymakers are working on “last chance” options to bring Greece’s debts down and keep it in the euro zone, with the ECB and national central banks looking at taking significant losses on the value of their bond holdings, officials said.
Private creditors have already suffered big writedowns on their Greek bonds under a second bailout for Athens sealed in February, but this was not enough to put the country back on the path to solvency and a further restructuring is on the cards.
The latest aim is to reduce Greece’s debts by a further 70-100 billion euros, several senior euro zone officials familiar with the discussions told Reuters, cutting its debts to a more manageable 100 percent of annual economic output.
This would require the European Central Bank and national central banks to take losses on their holdings of Greek government bonds, and could also involve national governments also accepting losses.
The favored option is for the ECB and national central banks to carry the cost, but that could mean that some banks and the ECB itself having to be recapitalized, the officials said.
Barroso to Greece: Deliver, deliver, deliver
From Athens News, a video of the speech delivered to the Greek people by European Commission President Jose Manuel Barroso, laying down the austerian line after his meeting yesterday with Prime Minister Antonis Samaras:
So what are Greeks to deliver?
Well, a cut of 150,000 more public worker jobs over the next three years for openers.
Greek Reporter’s A. Papapostolou writes about the response to the demands from Yiannis Panagopoulos, head of GSEE, a union representing workers in the corporate sector, who slammed the Troika’s Men in Black as charlatans:
The savings, to be fine-tuned by officials next week, will reportedly come from pensions, health support and benefits.
“We told them that if the measures reported in the newspapers are carried out, recession in 2013 will be over 5.5 percent and unemployment could approach 28 percent,” Panagopoulos said.
GSEE, an umbrella union with some 700,000 members, has pledged to mount a “dynamic” response against the cuts.
More from Agence France-Presse:
International auditors monitoring Greece’s compliance with its EU-IMF rescue programme would have failed their own evaluation, the leading Greek union said on Friday.
“Their programme has destroyed us, pushing the Greek economy into recession,” said Yiannis Panagopoulos, head of private sector union GSEE, labelling the auditors “charlatans”.
“If (the auditors) were civil servants and had to be evaluated, it is certain that they would have been fired,” he said after meeting with the EU-IMF mission.
Troika greenlights aid to stricken banks
Banks are essential to the game of keeping the euro alive, and while some are so broken that they’re simply written off, some of them have to keep going to keep those euros circulating.
And so a Troikarch gave its blessings to a selective Greek bank bailout.
From the BBC:
On Friday the European Commission gave “temporary” approval to state aid that injected 18bn euros into four struggling Greek banks – Alpha Bank, EFG Eurobank, Piraeus Bank and National Bank of Greece.
But the Commission said it was still investigating the aid, to ensure compliance with EU rules. The aid plugged a hole in the banks’ finances caused when private bondholders agreed to write off 107bn euros of Greek debt.
After talks with Commission President Jose Manuel Barroso, Mr Samaras said Greece’s three-party coalition had decided to press ahead with measures such as privatisation and changes to the public sector.
More on the bank bailout from ANSAMed:
The EU Commission gave its temporary green light to the recapitalization of the main Greek banks – Alpha Bank, EFG Eurobank, Piaeus Bank and National Bank of Greece – through the Hellenic financial stability fund.
Athens’ institutes of credit have experienced significant losses and a deterioration of their capital after participating in the exchange programme of Greek bonds, Brussels explained. With the recapitalization, it will instead be possible to bring the level of capital up in order for Greek banks to function on the market and bring up to 8 percent the Core-tier 1 ratio.
But the aid comes with strings, as Reuters reports:
The European Commission said on Friday it had approved the aid for six months, while it waits for the country’s authorities to present details of the conversion of the bridge recapitalisation into a final recapitalisation.
The EU watchdog said it would study the aid to see if it was in line with EU state aid rules.
Separately, the Commission also cleared 1.7 billion euros of public support to wind down Proton Bank. It will now investigate the restructuring plan for the new group created from the remains of that bank.
And a five-item multional close. . .
French want a vote on the Merkel mandate
A slight majority of voters say they want to decide on the package of measures that would strip eurozone member states of sovereignty over their national budgets.
A slim majority of French, 52%, want the new European Union budgetary treaty to go to a referendum, while 53% say they would vote yes, says a study by French market research group OpinionWay. EurActiv.fr reports.
The study, carried out with industry magazine Vêtements made in France, asked participants what their preferred ratification method was for the treaty.
Of the respondents 52% said they wanted a referendum, compared to 38% who wanted it to pass through parliament, and 10% who were unsure.
By contrast, 68% of the electorate of Jean-Luc Mélenchon, the leader of Left Front that includes the Communist Party of France, 72% of the Front National, and 43% of voters from the UMP, the party of former President Nicolas Sarkozy, said they would prefer a referendum.
At the very least, voters ought to decide on a measure that most vital of government decisions: Final say over how it allocates money.
British central bankster blames it all on pols
Yep, the banks were just hapless victims of pols and central banksters, doncha know?
From the London Telegraph’s Angela Monaghan:
Sir Mervyn King, governor of the Bank of England, has said for the first time that the financial crisis was the result of “major mistakes” by economic policymakers and not the bad behaviour of bankers.
He said it was “false” to suggest that the crisis was caused by the bad behaviour of bankers.
“Of course there was bad behaviour. But this was a crisis which emanated from major mistakes in macro economic policy around the world, and fundamentally the inability to successfully co-ordinate macro economic policy so that globally you wouldn’t get the imbalances, the capital flows, that created the difficulties in the banking system.
“We saw this going into the crisis, we kept meeting at the IMF, but we did nothing to solve it collectively, and I don’t think that this was a problem that could have been solved individually.”
Right/ It wasn’t their fault. It was just a coincidental simultaneous conflation of various and sundry trajectories.
Bankers just wouldn’t knowingly prey on people, right? [Cough] Right?
Irish bank prunes branches, takes hit
And they’re raising mortgage rates, too.
From Eoin Burke-Kennedy of the Irish Times:
Allied Irish Banks today announced plans for a major restructuring of its branch network as it posted an operating loss of €1.1 billion for the first six months of 2012.
The State-owned bank also announced a 0.5 per cent rise in its standard variable mortgage rate from September which is set to pile further pressure on struggling homeowners.
As part of an ongoing drive to cut costs, the bank is planning to close 67 branches and sub-offices in the Republic and Northern Ireland by the end of 2013. . .
A total of 51 locations will be closed from October under the plan, with the remaining 16 closing in 2013.
Siemens earnings dim as eurocrisis bites
Things aren’t looking so green these days for the Bavarian company that made a pile out of Greece with those bribe-enhanced and highly profitable contracts.
Take note that the company’s biggest drop in sales hit their renewable energy business, once again proving Kermit was right.
From Deutsche Welle:
German industrial conglomerate Siemens reported net earnings of 823 million euros ($996 million) in the months April through June – up from 462 million euros in the same quarter a year ago, but less than the 1.29 billion euros expected by analysts polled by FactSet.
Siemens, which is based in Munich, Germany, said that revenue rose to 19.54 billion euros from 17.84 billion in the second quarter of 2011 – a 10 percent increase, which it said resulted from a solid order backlog and positive currency effects.
However, orders were drying up, said Siemens Chief Executive Officer Peter Loescher when he released the latest figures Thursday, warning that it would be “more difficult” for Siemens to meet its full-year targets.
“We see growing reluctance among our customers regarding capital expenditures,” he said, adding that the “deceleration of the world economy” had increased in recent months.
As a result, new orders for the firm’s power plants, machines and vehicles declined by 23 percent in the second quarter, with orders for the firm’s renewable energies business having dropped the steepest at minus 66 percent.
Unskilled unemployment rate rises in Denmark
Not surprising in itself, though one of the reasons is interesting.
From Ray Weaver of the Copenhagen Post:
The financial crisis has swung a brutal scythe throughout the entire economy over the past five years, but it has been particularly hard on those without an education or job training. The number of untrained, unemployed Danes has risen significantly since 2007, according to new statistics from both Eurostat and Danmarks Statistik.
During the first quarter of 2007, 6.9 percent of Danes listed as unskilled were unemployed. This year, that number has nearly doubled to 13 percent, far above the national unemployment average of 8.2 percent reported by the EU, which uses a different method of calculation than Danmarks Statistik. According to its numbers, the national unemployment rate is just over six percent.
“Unskilled workers have clearly been hit hardest by the crisis,” Lars Andersen, head of Arbejdernes Erhvervsråd, an economic policy institute told public broadcaster DR. “The higher your education, the better your chances are of finding a job.”