New EC Thread
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Re: New EC Thread
Panda Sat 1 Dec - 16:58
Banks: Banking union comes a step closer
30 November 2012
PresseuropEl País
On November 29, the European Parliament adopted a draft text on banking union within the eurozone, giving the European Central Bank (ECB) the role of sole supervisor of around 6000 European banks. The text provides "full powers" to the ECB, says El País, adding that the ECB will supervise national banks, those which have asked for help and those whose problems could pose a systemic risk to the entire sector.
As for regional banks, they fall under the control of national banking authorities, but the ECB may exercise control "should it deem it appropriate". The proposal, which was voted on by the Commission for Economic and Monetary Affairs, has been rejected by the British and German conservatives, with Germany wary of the Landsbanken regional banks, which are under the control of the European supervisor.
The bill passed by Parliament will be debated first by Finance Ministers on December 4. Regarding when the bank might undertake its new duties, continues El Pais, ECB President –
30 November 2012
PresseuropEl País
On November 29, the European Parliament adopted a draft text on banking union within the eurozone, giving the European Central Bank (ECB) the role of sole supervisor of around 6000 European banks. The text provides "full powers" to the ECB, says El País, adding that the ECB will supervise national banks, those which have asked for help and those whose problems could pose a systemic risk to the entire sector.
As for regional banks, they fall under the control of national banking authorities, but the ECB may exercise control "should it deem it appropriate". The proposal, which was voted on by the Commission for Economic and Monetary Affairs, has been rejected by the British and German conservatives, with Germany wary of the Landsbanken regional banks, which are under the control of the European supervisor.
The bill passed by Parliament will be debated first by Finance Ministers on December 4. Regarding when the bank might undertake its new duties, continues El Pais, ECB President –
Mario Draghi has said that the ECB will be ready in January 2014, which is an ambitious but feasible date, despite the obstacles set by Germany. But for that to work, this requires a decision at the December summit.
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Re: New EC Thread
Panda Sun 2 Dec - 8:57
The 'Real' Deal Between Brussels And Greece
The latest agreement between eurozone ministers and the IMF on Greece's national debt amounts to a "stealth debt forgiveness".
5:43pm UK, Tuesday 27 November 2012
An agreement on reducing Greece's debt has been clinched
The latest agreement between eurozone ministers and the IMF on Greece's national debt amounts to a "stealth debt forgiveness".
5:43pm UK, Tuesday 27 November 2012
An agreement on reducing Greece's debt has been clinched
Ed Conway
Economics Editor
More from Ed | Follow Ed on Twitter
On the basis that if Jean-Claude Juncker denies something, it's probably true, it's worth examining the deal cranked through in Brussels last night to "save" Greece.
Mr Juncker and his fellow eurocrats insist it doesn't involve any debt forgiveness.
And that's odd, since the more one examines it, the more that is precisely what this looks like.
As a result of this deal, eurozone governments (in other words taxpayers) will have to take a hit on the billions of euros of loans they've given to Greece. Whatever name you give to it, euro member states will forfeit a hefty chunk of cash. Dario Perkins at Lombard Street Research (LSR) reckons it amounts to a potential 12bn euros (£9.7bn).
Here's the simple version of the story. Euro governments will voluntarily allow the Greeks to pay lower rates on their bail-out loans. They will also donate (not loan) Greece the proceeds they earn from the European Central Bank's bond-buying programme. Greece will not have to pay as much cash back and the lenders will not get as much cash back.
Were this a private sector loan agreement, the probability is it would be regarded as a technical default.
But this being Brussels, that simple story has been shrouded with just enough complexity to bamboozle the majority of outsiders into believing it really is a pain-free solution.
The IMF and eurozone deal will release much-needed aid for Greece
Here, for those with the sanity to avoid the communique, is how it works.
The interest rate on the original loans to Greece will be lowered by 100 basis points (bps), which will save the Greek government/cost eurozone governments 4.2bn euros (£3.4bn) by 2020 (the sums here are from LSR – don’t expect anything as blunt in the numbers from the Eurogroup).
The guaranteed fee costs paid by Greece on its European Financial Stability Facility loans will by cut by 10bps (around 600m euros/ £484m).
The maturity on bilateral and EFSF loans will be doubled from 15 to 30 years, with a deferral of 10 years on EFSF loans. Paying the loans off slower will save Greece large sums, although that depends on whether the deferred interest payments are accrued – the communique is unclear on this.
EU member states will return Greece the profits they make on Greek bond purchases under the SMP. LSR reckon this is worth around 7bn euros (£5.7bn).
Greece will now get the latest tranche of its bail-out cash (remember, the stuff above refers to previous bail-out money), worth 43.7bn euros (£35.3bn).
It will also be allowed to buy back some of its debt at a knock-down price - although there is a big question about where it will actually get the cash to do that, probably the EFSF.
There is also a bigger question about how much Greek government debt is actually out there to be bought, since most of it is already owned by the very European institutions who would be lending Greece the money to buy it back. According to Raoul Ruparel of Open Europe, probably only about 10% of the country's bonds could be eligible for purchase.
IMF managing director Christine Lagarde arrives at the latest meeting
Meanwhile, the Eurogroup deferred the existing target for Greece to get back to a 4.5% of GDP primary surplus (eg when debt payments are ignored) from 2014 to 2016.
The special escrow account into which Greece must pay its debt repayments will be strengthened, but, crucially, there's no specific effort to try to recoup the billions of euros the euro members will forgo as a result of all of the above.
The upshot of all of this, according to the communique, will be to get the country's net debt down to 124% by 2020, which is lower than the 120% target Christine Lagarde had been arguing for previously.
But while the International Monetary Fund boss might be disappointed about that, she can at least be reassured that the IMF won't lose any money as a result of Monday's deal.
The entire 12bn euros (£9.7bn) or so hit will be absorbed by European governments, since they recognise that to allow the IMF to lose any money would cripple the credibility of the institution entirely.
Anyway, when you run through all of the above it's hard to escape the conclusion that what was agreed was a kind of stealth debt forgiveness.
Greece is so deeply mired in the credit quagmire, and so trapped in a depression worse than the Great Depression, that, eventually, its lenders will probably have to go the whole hog and write off principle amounts of debt.
But for the time being, the best they can do is to subtly reduce the interest and maturity element of what is owed.
The subtlety is necessary here because to have completely forgiven the debt ahead of the German election would have been political suicide for Chancellor Angela Merkel.
And, on balance, you have to say that what was agreed was, at least, a step in the right direction.
As I've written before, at some point Greece's enormous debts will have to be written off - whether through agreement or default.
The sooner Europe faces up to that, the better.
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Re: New EC Thread
Panda Sun 2 Dec - 14:17
Youth: Let’s create an employment Erasmus scheme!
29 November 2012Les Echos Paris
British musicians Miss Dynamite (5th L) and Charlie Simpson (6th L) join unemployed young people outside a job centre in central London during a photocall for the Battlefront Campaign, raising awareness of youth unemployment
AFP
The financial crisis has left behind 14 million young Europeans with neither employment nor training, yet nobody is mentioning them in the talks over the EU budget. What if a little money was spent on bringing them into the world of work through the Union, wonders a French consultant.
Edouard Tétreau
Thanks to the subprime crisis, you may have heard of the American “Ninjas” (“no income, no jobs, no assets”). Have you heard of Europe's Neets?
The Neet is between 15 and 29 years old, and has got nowhere: no job, no education, no vocational training. You don't have to look far to spot a Neet among his family, friends or neighbourhood: there are 14 million of them in Europe. One youth in six.
The Neet, though, has begun to get expensive: €153 billion every year in lost economic revenues, according to a study by the European agency Eurofound. This is more than the annual European Union budget of €142 billion.
Budget farce
Have Europe's Neets been following the recent farcical discussions that have broken down over the EU's budget for the next six years? Do they know that Europe's Brussels, contrary to what one might believe in these times of crisis and austerity, is immensely rich? So rich that it plans to hand out rather freely no less than €1,000 billion over the next six years?
That's €420 billion for agriculture, and €300 billion for “cohesion for growth and employment”, which are in fact transfers from rich areas to poorer regions. And too bad if, 15 French regions have a per capita GDP lower than that of Greece, and, the €350 billion poured in over the last six years has had doubtful effects on cohesion (see Greece), growth (a fall of 0.3 per cent expected in 2012) and employment (25 million unemployed in the EU).
There is also €58 billion for “Europe, a global player” – although Europe, owing to the absence of a European defence policy, has been markedly absent in resolving any of the recent conflicts and disputes around the globe (in Libya, Syria, Israel-Palestine, and Iran). And let's not overlook the €56 billion for the European Union's administrative expenses.
Another fiscal policy is indeed possible. It would be to stop subsidising the past mistakes of the Union and to focus finally on its future: on its youth, and primarily the Neets.
Abolish Erasmus?
It has escaped no one that, in defending their national interests or bureaucracies, the leaders of the Union have been mulling over abolishing the Erasmus programme outright – the only real, concrete, tangible and successful pan-EU project of recent years.
Since its inception in 1987, Erasmus, has allowed three million European students to study in one of the other countries of the Union, helped by a very modest grant of €250 a month, per student. This has helped to foster a European spirit and European reality, which is quite a contrast to the retrograde steps we are witnessing today, such as the withdrawal behind national borders, the lack of projects for the new generation, and short-term management of financial emergencies. Since it started, Erasmus has cost €4.1 billion – less than the payment errors in implementing the European Union budget in 2011 (€4.9 billion).
The time has come not to bury Erasmus, but to strengthen it by proposing an Erasmus programme for employment. This programme could subsidise, at the level of social security outlays, one million fixed-term contracts a year in the private sector – real jobs in the market economy.
Speculate to accumulate
Each year it would give one million young Europeans the opportunity first of all to work, and then to work in another EU country. This means travelling, learning to work in another culture and in another language. Forget narrow nationalism and fatal protectionism and let European businesses thrive, rather than their bureaucracies. Assuming an average annual salary of €20,000 and social contributions through a payroll tax of 40 per cent, we are looking at a grant programme of € 8 billion annually. Is it too much to ask that six per cent of the European Union's budget be spent on such an investment?
It would prove the advocates of austerity and keeping a tight rein on the EU budget right. This budget of €1,000 billion is a slap in the face to states, households and businesses trying drastically to reduce their deficits and their spending. If it is an investment that we must preserve and build on, it is an investment in our future. To create an Erasmus employment project would give hope to European youth, create a growth dynamic for everyone in Europe and strengthen the European Union spirit. The programme would also boost the competitiveness of European businesses by reducing the costs of hiring new personnel. And finally, it would bring some legitimacy back to the European institutions of today, so far removed from the realities of businesses and of ordinary people.
29 November 2012Les Echos Paris
- Comment43
British musicians Miss Dynamite (5th L) and Charlie Simpson (6th L) join unemployed young people outside a job centre in central London during a photocall for the Battlefront Campaign, raising awareness of youth unemployment
AFP
The financial crisis has left behind 14 million young Europeans with neither employment nor training, yet nobody is mentioning them in the talks over the EU budget. What if a little money was spent on bringing them into the world of work through the Union, wonders a French consultant.
Edouard Tétreau
Thanks to the subprime crisis, you may have heard of the American “Ninjas” (“no income, no jobs, no assets”). Have you heard of Europe's Neets?
The Neet is between 15 and 29 years old, and has got nowhere: no job, no education, no vocational training. You don't have to look far to spot a Neet among his family, friends or neighbourhood: there are 14 million of them in Europe. One youth in six.
The Neet, though, has begun to get expensive: €153 billion every year in lost economic revenues, according to a study by the European agency Eurofound. This is more than the annual European Union budget of €142 billion.
Budget farce
Have Europe's Neets been following the recent farcical discussions that have broken down over the EU's budget for the next six years? Do they know that Europe's Brussels, contrary to what one might believe in these times of crisis and austerity, is immensely rich? So rich that it plans to hand out rather freely no less than €1,000 billion over the next six years?
That's €420 billion for agriculture, and €300 billion for “cohesion for growth and employment”, which are in fact transfers from rich areas to poorer regions. And too bad if, 15 French regions have a per capita GDP lower than that of Greece, and, the €350 billion poured in over the last six years has had doubtful effects on cohesion (see Greece), growth (a fall of 0.3 per cent expected in 2012) and employment (25 million unemployed in the EU).
There is also €58 billion for “Europe, a global player” – although Europe, owing to the absence of a European defence policy, has been markedly absent in resolving any of the recent conflicts and disputes around the globe (in Libya, Syria, Israel-Palestine, and Iran). And let's not overlook the €56 billion for the European Union's administrative expenses.
Another fiscal policy is indeed possible. It would be to stop subsidising the past mistakes of the Union and to focus finally on its future: on its youth, and primarily the Neets.
Abolish Erasmus?
It has escaped no one that, in defending their national interests or bureaucracies, the leaders of the Union have been mulling over abolishing the Erasmus programme outright – the only real, concrete, tangible and successful pan-EU project of recent years.
Since its inception in 1987, Erasmus, has allowed three million European students to study in one of the other countries of the Union, helped by a very modest grant of €250 a month, per student. This has helped to foster a European spirit and European reality, which is quite a contrast to the retrograde steps we are witnessing today, such as the withdrawal behind national borders, the lack of projects for the new generation, and short-term management of financial emergencies. Since it started, Erasmus has cost €4.1 billion – less than the payment errors in implementing the European Union budget in 2011 (€4.9 billion).
The time has come not to bury Erasmus, but to strengthen it by proposing an Erasmus programme for employment. This programme could subsidise, at the level of social security outlays, one million fixed-term contracts a year in the private sector – real jobs in the market economy.
Speculate to accumulate
Each year it would give one million young Europeans the opportunity first of all to work, and then to work in another EU country. This means travelling, learning to work in another culture and in another language. Forget narrow nationalism and fatal protectionism and let European businesses thrive, rather than their bureaucracies. Assuming an average annual salary of €20,000 and social contributions through a payroll tax of 40 per cent, we are looking at a grant programme of € 8 billion annually. Is it too much to ask that six per cent of the European Union's budget be spent on such an investment?
It would prove the advocates of austerity and keeping a tight rein on the EU budget right. This budget of €1,000 billion is a slap in the face to states, households and businesses trying drastically to reduce their deficits and their spending. If it is an investment that we must preserve and build on, it is an investment in our future. To create an Erasmus employment project would give hope to European youth, create a growth dynamic for everyone in Europe and strengthen the European Union spirit. The programme would also boost the competitiveness of European businesses by reducing the costs of hiring new personnel. And finally, it would bring some legitimacy back to the European institutions of today, so far removed from the realities of businesses and of ordinary people.
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Re: New EC Thread
Panda Sun 2 Dec - 16:30
12:25PM GMT 02 Dec 2012
41 Comments
After being vehemently opposed to accepting a "haircut", Mrs Merkel said in an interview with Bild am Sonntag that it could be considered from 2014 if Athens' financial situation improves.
"If Greece can get by on its income one day again without taking on new debt, then we must look at and assess the situation. That won't be the case before 2014/15 if everything goes according to plan," she told the paper.
Opposition politicians have accused Merkel of playing down the need for a write-down of Greek debt holdings by public institutions such as other eurozone governments and the European Central Bank because of federal elections expected to take place on September 22, 2013.
In the Bild interview, Mrs Merkel contested the charge that she had refused a "haircut" because of the looming elections.
"The current aid programme for Greece runs until 2014. For the achievement of certain budgetary goals we have given the Greeks two years more time until 2016," she said.
Related Articles
Many in Germany consider a write-down of Greek debt holdings inevitable, which would mean German taxpayers footing part of the bill.
Norbert Barthle, budgetary spokesman for Mrs Merkel's Christian Democratic Union, told German radio last week: "It could be the case, according to the current planning, that a haircut could occur in 2020."
But on Friday, Finance Minister Wolfgang Schaeuble said speculation on a "haircut" sent "the wrong incentive" to Greece because it reduced the pressure on the Athens government to enact structural economic reforms.
He has previously said that the "haircut" under consideration by the International Monetary Fund would not be possible for legal reasons.
Some eurozone states however have said they would "not exclude" the possibility of writing off some debt from 2015 onwards.
After marathon talks early last week, finance ministers from the 17 eurozone countries agreed to release €43.7bn (£35.4bn) in emergency aid for Greece.
They also said in their statement that ministers would "consider further measures and assistance" for the debt-wracked country once the books were back in the black.
Mrs Merkel also said she favoured considering tougher sanctions for indebted eurozone states.
"In the long term I am definitely of the opinion that we consider how we develop legal procedures for states which do not comply with their commitments," she said.
If Greece were to have to leave the euro against its will, the consequences would be far costlier than the path that has been taken, Merkel warned. "We should avoid all uncertainties," she added.
Merkel also told Bild that she understood the scepticism of many of her compatriots over Greece but that she saw a determination in Athens to reorganise the country and that rescuing Greece from economic collapse was in Germany's best interests.
On Friday she secured the vote from German lawmakers to release the €43.7bn in aid to Athens
Source: AFP
41 Comments After being vehemently opposed to accepting a "haircut", Mrs Merkel said in an interview with Bild am Sonntag that it could be considered from 2014 if Athens' financial situation improves.
"If Greece can get by on its income one day again without taking on new debt, then we must look at and assess the situation. That won't be the case before 2014/15 if everything goes according to plan," she told the paper.
Opposition politicians have accused Merkel of playing down the need for a write-down of Greek debt holdings by public institutions such as other eurozone governments and the European Central Bank because of federal elections expected to take place on September 22, 2013.
In the Bild interview, Mrs Merkel contested the charge that she had refused a "haircut" because of the looming elections.
"The current aid programme for Greece runs until 2014. For the achievement of certain budgetary goals we have given the Greeks two years more time until 2016," she said.
Related Articles
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02 Dec 2012
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02 Dec 2012
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02 Dec 2012
Mark Carney attacked bankers' windfall pay agreements
01 Dec 2012
Many in Germany consider a write-down of Greek debt holdings inevitable, which would mean German taxpayers footing part of the bill.
Norbert Barthle, budgetary spokesman for Mrs Merkel's Christian Democratic Union, told German radio last week: "It could be the case, according to the current planning, that a haircut could occur in 2020."
But on Friday, Finance Minister Wolfgang Schaeuble said speculation on a "haircut" sent "the wrong incentive" to Greece because it reduced the pressure on the Athens government to enact structural economic reforms.
He has previously said that the "haircut" under consideration by the International Monetary Fund would not be possible for legal reasons.
Some eurozone states however have said they would "not exclude" the possibility of writing off some debt from 2015 onwards.
After marathon talks early last week, finance ministers from the 17 eurozone countries agreed to release €43.7bn (£35.4bn) in emergency aid for Greece.
They also said in their statement that ministers would "consider further measures and assistance" for the debt-wracked country once the books were back in the black.
Mrs Merkel also said she favoured considering tougher sanctions for indebted eurozone states.
"In the long term I am definitely of the opinion that we consider how we develop legal procedures for states which do not comply with their commitments," she said.
If Greece were to have to leave the euro against its will, the consequences would be far costlier than the path that has been taken, Merkel warned. "We should avoid all uncertainties," she added.
Merkel also told Bild that she understood the scepticism of many of her compatriots over Greece but that she saw a determination in Athens to reorganise the country and that rescuing Greece from economic collapse was in Germany's best interests.
On Friday she secured the vote from German lawmakers to release the €43.7bn in aid to Athens
Source: AFP
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Re: New EC Thread
Badboy Sun 2 Dec - 20:55
NOT SURE IF ALREADY MENTIONED,IT IS SAID THAT BANKS LIKE GOLDMAN SACHS AND OTHERS TOOK POSITIONS SEVERAL YEARS AGO KNOWING GREECE WAS IN SERIOUS FINANCIAL TROUBLE OR SOMETHING.
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Re: New EC Thread
malena stool Sun 2 Dec - 22:32
Well, that's Greece under the jackboot then....Panda wrote:12:25PM GMT 02 Dec 2012
After being vehemently opposed to accepting a "haircut", Mrs Merkel said in an interview with Bild am Sonntag that it could be considered from 2014 if Athens' financial situation improves.
"If Greece can get by on its income one day again without taking on new debt, then we must look at and assess the situation. That won't be the case before 2014/15 if everything goes according to plan," she told the paper.
Opposition politicians have accused Merkel of playing down the need for a write-down of Greek debt holdings by public institutions such as other eurozone governments and the European Central Bank because of federal elections expected to take place on September 22, 2013.
In the Bild interview, Mrs Merkel contested the charge that she had refused a "haircut" because of the looming elections.
"The current aid programme for Greece runs until 2014. For the achievement of certain budgetary goals we have given the Greeks two years more time until 2016," she said.
Related Articles
Why George Osborne will not hit his self-imposed fiscal targets
02 Dec 2012
Osborne: Plan B would be a 'complete disaster'
02 Dec 2012
George Osborne will miss key austerity target
02 Dec 2012
Mark Carney attacked bankers' windfall pay agreements
01 Dec 2012
Many in Germany consider a write-down of Greek debt holdings inevitable, which would mean German taxpayers footing part of the bill.
Norbert Barthle, budgetary spokesman for Mrs Merkel's Christian Democratic Union, told German radio last week: "It could be the case, according to the current planning, that a haircut could occur in 2020."
But on Friday, Finance Minister Wolfgang Schaeuble said speculation on a "haircut" sent "the wrong incentive" to Greece because it reduced the pressure on the Athens government to enact structural economic reforms.
He has previously said that the "haircut" under consideration by the International Monetary Fund would not be possible for legal reasons.
Some eurozone states however have said they would "not exclude" the possibility of writing off some debt from 2015 onwards.
After marathon talks early last week, finance ministers from the 17 eurozone countries agreed to release €43.7bn (£35.4bn) in emergency aid for Greece.
They also said in their statement that ministers would "consider further measures and assistance" for the debt-wracked country once the books were back in the black.
Mrs Merkel also said she favoured considering tougher sanctions for indebted eurozone states.
"In the long term I am definitely of the opinion that we consider how we develop legal procedures for states which do not comply with their commitments," she said.
If Greece were to have to leave the euro against its will, the consequences would be far costlier than the path that has been taken, Merkel warned. "We should avoid all uncertainties," she added.
Merkel also told Bild that she understood the scepticism of many of her compatriots over Greece but that she saw a determination in Athens to reorganise the country and that rescuing Greece from economic collapse was in Germany's best interests.
On Friday she secured the vote from German lawmakers to release the €43.7bn in aid to Athens
Source: AFP
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Re: New EC Thread
Panda Sun 2 Dec - 22:43
Badboy wrote:NOT SURE IF ALREADY MENTIONED,IT IS SAID THAT BANKS LIKE GOLDMAN SACHS AND OTHERS TOOK POSITIONS SEVERAL YEARS AGO KNOWING GREECE WAS IN SERIOUS FINANCIAL TROUBLE OR SOMETHING.
Hi Badboy this is the 6th year Greece has been in recession and owes millions to various banks which it can never hope to repay when the EU and IMF are calculating a GDP of 120% in 2020!!!!!! Greece should have been allowed to default 3 yrs ago it is just staving off the inevitable. If Greece defaults it means the Country will never be able to borrow money, Argentina defaulted but survived.
My personal opinion is that Greece WILL default owing far more money than it did 3 years ago , the EURO is proving to be a drawback and may well collapse and Countries go back to their old currence which they have much more control over.
On the News yesterday it was reported that Student Loans in the US total over $1 trillion!!!!! how is that ever going to be repaid when the Students can't get jobs.???
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Re: New EC Thread
Panda Sun 2 Dec - 22:56
malena, the whole Euro crisis is a bl***y mess , how can these so called Leaders assume that by lending Greece another E43 million by 2020 their GDP will be 124% when the target is 3%??????
I just explained a little bit to Badboy and obviously all this is being done to stave off the collapse of the Euro which was an ill conceived plan from day 1 because the ECB was only meant to concentrate on the interest Rate. I think if the EU had instead a Common Market and Defence Force, that would have been enough, but No......every aspect of our lives is now governed by this indecisive, backwardlooking monstrosity the EU has become.
I just explained a little bit to Badboy and obviously all this is being done to stave off the collapse of the Euro which was an ill conceived plan from day 1 because the ECB was only meant to concentrate on the interest Rate. I think if the EU had instead a Common Market and Defence Force, that would have been enough, but No......every aspect of our lives is now governed by this indecisive, backwardlooking monstrosity the EU has become.
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Re: New EC Thread
Panda Mon 3 Dec - 5:23
French bank governor calls for London to be sidelined
London should be stripped of its status as Europe's main financial hub and sidelined to allow the eurozone to “control” transactions within the 17-nation bloc, the governor of the Bank of France has said.
Christian Noyer told the Financial Times that there was “no rationale” for allowing the euro area’s financial hub to be “offshore”. Photo: Rex Features
By Szu Ping Chan
11:32PM GMT 02 Dec 2012
116 Comments
Christian Noyer told the Financial Times that there was "no rationale" for allowing the eurozone's financial centre to be "offshore".
"Most of the euro business should be done inside the euro area. It's linked to the capacity of the central bank to provide liquidity and ensure oversight of its own currency," he told the Financial Times in an interview.
"We're not against some business being done in London, but the bulk of the business should be under our control. That's the consequence of the choice by the UK to remain outside the euro area."
Mr Noyer's broadside is one of several outspoken public attacks that have been launched by French leaders on Britain.
Shortly before Standard and Poor's stripped France of its AAA credit rating in January, Mr Noyer said that Britain's rating should be cut before that of France as the UK had "as much debt, more inflation, less growth than us".
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Jean–Pierre Jouyet, the head of the French financial regulator, has also described the right–wing of British politics as "the world's stupidest".
EU leaders meet on Tuesday to try to broker a deal on giving the European Central Bank (ECB) sweeping powers to supervise lenders.
The move, which will not include Britain, will be the first step towards creating a banking union under which eurozone countries would eventually provide a common fiscal backstop.
While George Osborne, Britain's Chancellor, backs a union in principle, he has pressed for safeguards to stop the new bloc from forcing its rules on non-members.
Andrea Enria, the head of the European Banking Authority (EBA), has also urged leaders to protect countries outside a union from being sidelined.
Since the creation of the single currency, The City of London has served as Europe's main financial centre.
More than 40pc of euro foreign-exchange transactions are conducted in the British capital, a bigger share than the rest of the eurozone combined.
Set up to coordinate the supervision of banks in response to the financial crisis, the London-based EBA is run by regulators from across the EU and is seen as a possible counterweight to the ECB's new supervisory role.
====================================
"We're not against some business being done in London, but the bulk of the business should be under our control. That's the consequence of the choice by the UK to remain outside the euro area."
Well if this doesn't prompt a Referendum , nothing will. Britain had been recognised as an International Banking Centre for Centuries, although it's image has been tarnished by the LIBOR crisis .
London should be stripped of its status as Europe's main financial hub and sidelined to allow the eurozone to “control” transactions within the 17-nation bloc, the governor of the Bank of France has said.
Christian Noyer told the Financial Times that there was “no rationale” for allowing the euro area’s financial hub to be “offshore”. Photo: Rex Features
By Szu Ping Chan
11:32PM GMT 02 Dec 2012
116 Comments Christian Noyer told the Financial Times that there was "no rationale" for allowing the eurozone's financial centre to be "offshore".
"Most of the euro business should be done inside the euro area. It's linked to the capacity of the central bank to provide liquidity and ensure oversight of its own currency," he told the Financial Times in an interview.
"We're not against some business being done in London, but the bulk of the business should be under our control. That's the consequence of the choice by the UK to remain outside the euro area."
Mr Noyer's broadside is one of several outspoken public attacks that have been launched by French leaders on Britain.
Shortly before Standard and Poor's stripped France of its AAA credit rating in January, Mr Noyer said that Britain's rating should be cut before that of France as the UK had "as much debt, more inflation, less growth than us".
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Jean–Pierre Jouyet, the head of the French financial regulator, has also described the right–wing of British politics as "the world's stupidest".
EU leaders meet on Tuesday to try to broker a deal on giving the European Central Bank (ECB) sweeping powers to supervise lenders.
The move, which will not include Britain, will be the first step towards creating a banking union under which eurozone countries would eventually provide a common fiscal backstop.
While George Osborne, Britain's Chancellor, backs a union in principle, he has pressed for safeguards to stop the new bloc from forcing its rules on non-members.
Andrea Enria, the head of the European Banking Authority (EBA), has also urged leaders to protect countries outside a union from being sidelined.
Since the creation of the single currency, The City of London has served as Europe's main financial centre.
More than 40pc of euro foreign-exchange transactions are conducted in the British capital, a bigger share than the rest of the eurozone combined.
Set up to coordinate the supervision of banks in response to the financial crisis, the London-based EBA is run by regulators from across the EU and is seen as a possible counterweight to the ECB's new supervisory role.
====================================
"We're not against some business being done in London, but the bulk of the business should be under our control. That's the consequence of the choice by the UK to remain outside the euro area."
Well if this doesn't prompt a Referendum , nothing will. Britain had been recognised as an International Banking Centre for Centuries, although it's image has been tarnished by the LIBOR crisis .
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Re: New EC Thread
Panda Mon 3 Dec - 14:53
Debt crisis: Spain requests €39.5bn bailout from EU - live
Spain has requested a €39.5bn bailout for its struggling banking sector, which is likely to be approved later today at a meeting of eurozone finance ministers in Brussels.
Image 2 of 2
Spain has requested a €39.5bn bailout of its banking sector Photo: Reuters
Image 2 of 2
Eurozone finance ministers are meeting today to discuss the Greek debt buy-back deal and a bailout for Cyprus. Photo: Alamy
By Matthew Sparkes
2:15PM GMT 03 Dec 2012
113 Comments
runUpdate = true;
90000
2012-12-03 14:46:47.0
http://www.telegraph.co.uk/finance/debt-crisis-live/9718188/Debt-crisis-Spain-requests-39.5bn-bailout-from-EU-live.html?service=artBody
This page will automatically update every 90 secondsOn Off
• Spain requests €39.5bn bailout for banking sector
• Greece's investors to take up to 70pc haircut on bonds
• Haldane: children, grandchildren will pay for financial crisis
• Banks take £4.4bn from BoE under Funding for Lending
• Eurozone finance ministers meet to discuss Greek debt
• Noyer: London should be stripped of role as financial hub
Latest
14.46 Italian Prime Minister Mario Monti says that the difference between Italian and German bond yields was still too high, despite today's fall. But he added that it was "good to see it on a downward trend".
14.15 Business Insider has a short story online warning people not to confuse this request for a full bailout, as taken by Greece et al. "Chase this at your own peril," warns Michael Block of Phoenix Partners.
Just for clarity: This bailout is intended to prop-up the country's ailing banks, and the cash will go straight onto their balance sheets. What this latest development isn't, is an admission from Spain that it can't pay its bills and needs an EU cash injection to fund healthcare, public sector wages etc. Having said that, many people believe that this is on the horizon.
13.39 Europe's markets are still buoyant after the Spanish bailout request. Michael Hewson, senior analyst at CMC markets, said:
It was really only a matter of time... before the request came. Obviously it's positive news, there's nothing negative coming out, so in the absence of negative news I think the bias is definitely to the upside.
The FTSE 100 is up 0.32pc, the CAC is 1pc higher and the DAX has risen 0.93pc.
Spain's IBEX is alone in having reacted badly to the bailout news, falling back through the day's opening price having previously made strong gains - that's down to big falls in the share price of the affected banks.
13.19 Spain has officially requested a banking bailout in the last few minutes. They want €37bn to recapitalise its four biggest struggling lenders - Bankia, Catalunya Bank, NCG Banco and Banco de Valencia - and another €2.5bn for the "bad bank" that's being used to absorb and quarantine toxic assets.
The cash needs to be paid by December 12, says the Spanish finance ministry, and the payment is likely to be approved later today at a meeting of eurozone finance ministers in Brussels. Some of that cost will inevitably fall on the UK taxpayer.
Twitter: Reuters Top News - FLASH: Spain makes formal request for EU bank bailout funds; aid to be disbursed around December 12 - statement
13.11 Andy Haldane, the Bank of England's director of financial stability,is speaking on Radio 4's The World at One. The programme's editor, Nick Sutton, is tweeting the key lines:
Twitter: Nick Sutton - Andy Haldane: "in terms of the loss of incomes and outputs this is as bad as a world war - that's the scale we're talking about" #wato
Twitter: Nick Sutton - Haldane: "there's every reason why the general public ought to deeply upset by what has happened and angry." #wato http://t.co/keML3edy
Twitter: Nick Sutton - Haldane: "if we're fortunate the costs of this crisis will be paid for by our children..." #wato
Twitter: Nick Sutton - Haldane: "...More likely it will still be being paid for by our grandchildren" #wato http://t.co/keML3edy
Spain has requested a €39.5bn bailout for its struggling banking sector, which is likely to be approved later today at a meeting of eurozone finance ministers in Brussels.
Image 2 of 2
Spain has requested a €39.5bn bailout of its banking sector Photo: Reuters
Image 2 of 2
Eurozone finance ministers are meeting today to discuss the Greek debt buy-back deal and a bailout for Cyprus. Photo: Alamy
By Matthew Sparkes
2:15PM GMT 03 Dec 2012
113 Comments runUpdate = true;
90000
2012-12-03 14:46:47.0
http://www.telegraph.co.uk/finance/debt-crisis-live/9718188/Debt-crisis-Spain-requests-39.5bn-bailout-from-EU-live.html?service=artBody
This page will automatically update every 90 secondsOn Off
• Spain requests €39.5bn bailout for banking sector
• Greece's investors to take up to 70pc haircut on bonds
• Haldane: children, grandchildren will pay for financial crisis
• Banks take £4.4bn from BoE under Funding for Lending
• Eurozone finance ministers meet to discuss Greek debt
• Noyer: London should be stripped of role as financial hub
Latest
14.46 Italian Prime Minister Mario Monti says that the difference between Italian and German bond yields was still too high, despite today's fall. But he added that it was "good to see it on a downward trend".
14.15 Business Insider has a short story online warning people not to confuse this request for a full bailout, as taken by Greece et al. "Chase this at your own peril," warns Michael Block of Phoenix Partners.
Just for clarity: This bailout is intended to prop-up the country's ailing banks, and the cash will go straight onto their balance sheets. What this latest development isn't, is an admission from Spain that it can't pay its bills and needs an EU cash injection to fund healthcare, public sector wages etc. Having said that, many people believe that this is on the horizon.
13.39 Europe's markets are still buoyant after the Spanish bailout request. Michael Hewson, senior analyst at CMC markets, said:
It was really only a matter of time... before the request came. Obviously it's positive news, there's nothing negative coming out, so in the absence of negative news I think the bias is definitely to the upside. The FTSE 100 is up 0.32pc, the CAC is 1pc higher and the DAX has risen 0.93pc. Spain's IBEX is alone in having reacted badly to the bailout news, falling back through the day's opening price having previously made strong gains - that's down to big falls in the share price of the affected banks.
13.19 Spain has officially requested a banking bailout in the last few minutes. They want €37bn to recapitalise its four biggest struggling lenders - Bankia, Catalunya Bank, NCG Banco and Banco de Valencia - and another €2.5bn for the "bad bank" that's being used to absorb and quarantine toxic assets.
The cash needs to be paid by December 12, says the Spanish finance ministry, and the payment is likely to be approved later today at a meeting of eurozone finance ministers in Brussels. Some of that cost will inevitably fall on the UK taxpayer.
Twitter: Reuters Top News - FLASH: Spain makes formal request for EU bank bailout funds; aid to be disbursed around December 12 - statement
13.11 Andy Haldane, the Bank of England's director of financial stability,is speaking on Radio 4's The World at One. The programme's editor, Nick Sutton, is tweeting the key lines:
Twitter: Nick Sutton - Andy Haldane: "in terms of the loss of incomes and outputs this is as bad as a world war - that's the scale we're talking about" #wato
Twitter: Nick Sutton - Haldane: "there's every reason why the general public ought to deeply upset by what has happened and angry." #wato http://t.co/keML3edy
Twitter: Nick Sutton - Haldane: "if we're fortunate the costs of this crisis will be paid for by our children..." #wato
Twitter: Nick Sutton - Haldane: "...More likely it will still be being paid for by our grandchildren" #wato http://t.co/keML3edy
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Re: New EC Thread
Panda Mon 3 Dec - 16:47
Debt crisis: Angela Merkel does not rule out Greek haircut in the future
German Chancellor Angela Merkel has not ruled out a so-called "haircut", or write-down, of Greek debt in the next few years, marking an apparent softening in position.
In the Bild interview, Mrs Merkel contested the charge that she had refused a "haircut" because of the looming elections. Photo: Getty Images
12:25PM GMT 02 Dec 2012
63 Comments After being vehemently opposed to accepting a "haircut", Mrs Merkel said in an interview with Bild am Sonntag that it could be considered from 2014 if Athens' financial situation improves.
"If Greece can get by on its income one day again without taking on new debt, then we must look at and assess the situation. That won't be the case before 2014/15 if everything goes according to plan," she told the paper.
Opposition politicians have accused Merkel of playing down the need for a write-down of Greek debt holdings by public institutions such as other eurozone governments and the European Central Bank because of federal elections expected to take place on September 22, 2013.
In the Bild interview, Mrs Merkel contested the charge that she had refused a "haircut" because of the looming elections.
"The current aid programme for Greece runs until 2014. For the achievement of certain budgetary goals we have given the Greeks two years more time until 2016," she said.
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Many in Germany consider a write-down of Greek debt holdings inevitable, which would mean German taxpayers footing part of the bill.
Norbert Barthle, budgetary spokesman for Mrs Merkel's Christian Democratic Union, told German radio last week: "It could be the case, according to the current planning, that a haircut could occur in 2020."
But on Friday, Finance Minister Wolfgang Schaeuble said speculation on a "haircut" sent "the wrong incentive" to Greece because it reduced the pressure on the Athens government to enact structural economic reforms.
He has previously said that the "haircut" under consideration by the International Monetary Fund would not be possible for legal reasons.
Some eurozone states however have said they would "not exclude" the possibility of writing off some debt from 2015 onwards.
After marathon talks early last week, finance ministers from the 17 eurozone countries agreed to release €43.7bn (£35.4bn) in emergency aid for Greece.
They also said in their statement that ministers would "consider further measures and assistance" for the debt-wracked country once the books were back in the black.
Mrs Merkel also said she favoured considering tougher sanctions for indebted eurozone states.
"In the long term I am definitely of the opinion that we consider how we develop legal procedures for states which do not comply with their commitments," she said.
If Greece were to have to leave the euro against its will, the consequences would be far costlier than the path that has been taken, Merkel warned. "We should avoid all uncertainties," she added.
Merkel also told Bild that she understood the scepticism of many of her compatriots over Greece but that she saw a determination in Athens to reorganise the country and that rescuing Greece from economic collapse was in Germany's best interests.
On Friday she secured the vote from German lawmakers to release the €43.7bn in aid to Athens
Source: AFP
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Re: New EC Thread
Panda Tue 4 Dec - 9:47
Greece: Papandreou at the top of “Lagarde list”?
3 December 2012
PresseuropLes Echos, To Vima
“The 'Lagarde List' has prompted another furore,” announces Les Echos reporting allegations in the Greek press that the country’s former prime minister, socialist George Papandreou's mother holds the biggest Swiss bank account on the “Lagarde List.”
Les Echos continues –
=============
No wonder Greece is in such a state, incapable of getting the rich to pay their Taxes, the Shipowners are the worst, threatening to take their ships elsewhere......they don't pay a penny tax claiming they provide the income .
3 December 2012
PresseuropLes Echos, To Vima
“The 'Lagarde List' has prompted another furore,” announces Les Echos reporting allegations in the Greek press that the country’s former prime minister, socialist George Papandreou's mother holds the biggest Swiss bank account on the “Lagarde List.”
Les Echos continues –
According to the weekly To Vima, a highly placed official in the Greek ministry of finance told the judge investigating the list that Margaret Papandréou, aged 89, is the owner of an account containing €550 million registered with the Genevan branch of HSBC. The newspaper adds that the account is in the name of employee working for a Greek fund administrator based in Tel-Aviv. The Papandreou family have rejected the allegations and announced that they will sue for libel. In response to this threat, To Vima argues that the Papandreou family would do better to reflect on exactly why the list disappeared when George Papandreou was in office. At the time, his finance minister said the list had been mislaid!
…the 2,000 Greeks with Swiss bank accounts who feature on the List, which was obtained by French authorities from a former employee of HSBC and passed on to Greece in 2010, have yet to be prosecuted.
=============
No wonder Greece is in such a state, incapable of getting the rich to pay their Taxes, the Shipowners are the worst, threatening to take their ships elsewhere......they don't pay a penny tax claiming they provide the income .
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Re: New EC Thread
Panda Tue 4 Dec - 15:48
As if Italy hasn't got enough to cope with,!!
£10 million of Tuscan wine poured away in 'Mafia-style' attack
Skulduggery amid the gently rolling vineyards of Tuscany has sent at least £10 million worth of one of Italy’s most celebrated red wines gurgling down the drain.
A Tuscan vineyard between Castellina and Poggibonsi in Italy Photo: ALAMY
By Nick Squires, Rome
2:27PM GMT 04 Dec 2012
Saboteurs broke into the cellars of the Case Basse winery in the middle of the night, turned on the taps of the giant wooden casks in which the wine was maturing and allowed 60,000 litres of prized Brunello di Montalcino to pour onto the ground.
The huge lake of wine represented 80,000 bottles, each of which can sell for 170 euros or more – a total value of more than 13 million euros.
The nocturnal raiders did no other damage to the estate’s “cantina”, nor did they steal anything, deepening the mystery and suggesting that it was less a random episode of vandalism and more a deliberate act of spite.
The raid wiped out the last six vintages of the 6.5 hectare vineyard in the hills of southern Tuscany.
Gianfranco Soldera, who worked as an insurance broker in Milan before buying the estate in 1972, said he had no idea who might have been behind the raid on Monday night.
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His family described it as “a mafia-style attack”.
“We cannot come to terms with what happened,” Mauro Soldera, his son, told Corriere della Sera newspaper.
“We’ve never been involved in controversy and we’ve never received threats. We’ve suffered a serious blow, not just in economic terms, but we will not give up. The estate will survive, we have the strength and the courage not to quit.”
Case Basse is a small but highly acclaimed producer of Brunello di Montalcino, making around 15,000 bottles a year, which sell for up to 170 euros a bottle.
The wine has to be matured in barrels for at least four years before it can be sold under the Brunello di Montalcino name, so the vineyard will have nothing to sell until 2016 at the earliest.
The sabotage is being investigated by Carabinieri police from nearby Montalcino, a town popular with British summer tourists which is dominated by a 14th century fortress.
Fabrizio Bindocci, the president of the Brunello di Montalcino Consortium, said the sabotage would shock all 250 producers of the esteemed red in Tuscany.
Donatella Cinelli Colombini, the vice-president of the consortium, said: “I cannot think of a similar incident in this region in living memory. It is a dismaying affair.”
£10 million of Tuscan wine poured away in 'Mafia-style' attack
Skulduggery amid the gently rolling vineyards of Tuscany has sent at least £10 million worth of one of Italy’s most celebrated red wines gurgling down the drain.
A Tuscan vineyard between Castellina and Poggibonsi in Italy Photo: ALAMY
By Nick Squires, Rome
2:27PM GMT 04 Dec 2012
Saboteurs broke into the cellars of the Case Basse winery in the middle of the night, turned on the taps of the giant wooden casks in which the wine was maturing and allowed 60,000 litres of prized Brunello di Montalcino to pour onto the ground.
The huge lake of wine represented 80,000 bottles, each of which can sell for 170 euros or more – a total value of more than 13 million euros.
The nocturnal raiders did no other damage to the estate’s “cantina”, nor did they steal anything, deepening the mystery and suggesting that it was less a random episode of vandalism and more a deliberate act of spite.
The raid wiped out the last six vintages of the 6.5 hectare vineyard in the hills of southern Tuscany.
Gianfranco Soldera, who worked as an insurance broker in Milan before buying the estate in 1972, said he had no idea who might have been behind the raid on Monday night.
Related Articles
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20 Oct 2012
Italian council dismissed over 'mafia infiltration'
10 Oct 2012
His family described it as “a mafia-style attack”.
“We cannot come to terms with what happened,” Mauro Soldera, his son, told Corriere della Sera newspaper.
“We’ve never been involved in controversy and we’ve never received threats. We’ve suffered a serious blow, not just in economic terms, but we will not give up. The estate will survive, we have the strength and the courage not to quit.”
Case Basse is a small but highly acclaimed producer of Brunello di Montalcino, making around 15,000 bottles a year, which sell for up to 170 euros a bottle.
The wine has to be matured in barrels for at least four years before it can be sold under the Brunello di Montalcino name, so the vineyard will have nothing to sell until 2016 at the earliest.
The sabotage is being investigated by Carabinieri police from nearby Montalcino, a town popular with British summer tourists which is dominated by a 14th century fortress.
Fabrizio Bindocci, the president of the Brunello di Montalcino Consortium, said the sabotage would shock all 250 producers of the esteemed red in Tuscany.
Donatella Cinelli Colombini, the vice-president of the consortium, said: “I cannot think of a similar incident in this region in living memory. It is a dismaying affair.”
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Re: New EC Thread
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Hedge Funds Win as Europe Will Pay More for Greek Bonds
By Jesse Westbrook & Chris Larson - Dec 4, 2012 11:04 AM GMT
Hedge funds invested in Greek debt are poised to be winners after European policy makers flinched and raised the price for how much the recession-stricken country would pay to buy back its bonds.
Hedge funds drove up prices for Greek sovereign debt last week after determining that European finance ministers would back off a pledge to pay no more than about 28 percent of face value to retire the nation’s bonds. Money managers correctly wagered that not enough bondholders would participate at that level to get the deal done. That would put at risk bailout funds that Greece needs to stave off economic collapse.
Enlarge image
Hedge Funds Betting on Greek Buyback Gain as Europe Pays More
Angelos Tzortzinis/AFP via Getty Images
Greek Finance Minister Yannis Stournaras arrives for a press conference at the Finance Ministry in Athens on Nov. 28, 2012.
Greek Finance Minister Yannis Stournaras arrives for a press conference at the Finance Ministry in Athens on Nov. 28, 2012. Photographer: Angelos Tzortzinis/AFP via Getty Images
7:11
Dec. 4 (Bloomberg) -- Riccardo Barbieri, chief European economist at Mizuho International Plc, talks about the Greek debt buyback and European bond spreads. He speaks with Manus Cranny on Bloomberg Television's "The Pulse." (Source: Bloomberg)
Transactions involving Greek bonds “increased by the day” after it became clear that the buyback was going to happen, with hedge funds accounting for most of the purchases, said Zoeb Sachee, the London-based head of European government bond trading at Citigroup Inc.
“If all goes according to plan, everybody wins,” Sachee said. “Hedge funds must have bought lower than here. If it isn’t successful, Greece risks default and everybody loses.”
Euro-area finance ministers meeting last night in Brussels expressed confidence that Greece will pull off the transaction. The country said yesterday it would put 10 billion euros ($13.1 billion) toward repurchasing outstanding bonds with a face value of 62 billion euros. The country and its European backers agreed to pay prices ranging from an average minimum of 32.1 percent of face value to an average maximum of 34.1 percent in an auction that will run until Dec. 7, based on information in a statement from Greece’s debt agency.
Debt Buyers
Some hedge funds began buying Greek bonds after a debt swap in March, the biggest sovereign restructuring ever. They bet that prices and yields reflected an erroneous view that the country was headed to default. Traders at firms including Dan Loeb’s Third Point LLC determined that other investors were too concerned about the risk of Greece dropping the euro, especially after European Central Bank President Mario Draghi’s July 26 pledge to protect the currency bloc.
Hedge funds that joined Third Point in investing in Greek debt include Louis Bacon’s Moore Capital Management LLC, David Tepper’s Appaloosa Management LP and Jeffrey Tannenbaum’s Fir Tree Partners Inc., according to two people with knowledge of the matter who asked not to be identified because the firms are private. Tepper didn’t return a phone call and spokesmen for the other funds declined to comment on the buyback.
‘Satisfactory Conditions’
“I’m confident it will go well,” French Finance Minister Pierre Moscovici told reporters yesterday. “It seems to be happening under satisfactory conditions.”
The buyback was approved by the euro finance chiefs last week as the linchpin of a debt-reduction scheme after Germany rejected the writeoff of official loans as a way of easing the Greece’s financial plight. The aim was to cut its debt to 124 percent of gross domestic product in 2020 from a projected 190 percent in 2014. At the time, officials said they expected to pay no more for the bonds than the closing price on Nov. 23.
A market rally made it difficult to stick to that pledge. Greek bonds rose for a third day yesterday, pushing the 10-year yield below 15 percent for the first time since the nation’s debt was restructured in March. The price has more than doubled since a post-restructuring low of 13.3 percent on May 31.
“The official sector continues to demonstrate its total misunderstanding of how markets operate,” said Adelante Asset Management Ltd. Chief Investment Officer Julian Adams, whose London-based firm holds Greek bonds. “The whole saga has been a textbook case of how not to do this sort of thing.”
The Greek 10-year bond yield climbed 11 basis points today to 15 percent at 12:36 p.m. in Athens.
‘Done Well’
The buyback will be done through a so-called Dutch auction in which investors will be able to specify the price, within a set range, at which they are willing to sell the securities. The intention is to retire the bonds issued when Greece restructured its privately held debt nine months ago.
Hedge funds hold Greek bonds valued at as much as 22 billion euros, according to Nomura Holdings Inc. economist Dimitris Drakopoulos.
If Greece offers to pay hedge funds about 34 percent of face value, it’s likely that the firms will agree to sell bonds valued at about 8 billion euros, Drakopoulos wrote in a report yesterday. As a result, Greece could retire at least 28 billion euros of debt, with the remaining sales coming from Greek banks, Cypriot lenders and European Union state banks, he said.
Hedge funds had almost no incentive to participate at Nov. 23 closing prices, according to Drakopoulos.
Those that bought earlier may be rewarded.
“We have obviously done quite well on this,” said Hans Humes, president of New York-based hedge fund Greylock Capital Management LLC, which owns Greek bonds. “To the extent that we can use the buyback as a partial exit from our position that is great.”
By Jesse Westbrook & Chris Larson - Dec 4, 2012 11:04 AM GMT
Hedge funds invested in Greek debt are poised to be winners after European policy makers flinched and raised the price for how much the recession-stricken country would pay to buy back its bonds.
Hedge funds drove up prices for Greek sovereign debt last week after determining that European finance ministers would back off a pledge to pay no more than about 28 percent of face value to retire the nation’s bonds. Money managers correctly wagered that not enough bondholders would participate at that level to get the deal done. That would put at risk bailout funds that Greece needs to stave off economic collapse.
Enlarge image
Hedge Funds Betting on Greek Buyback Gain as Europe Pays More
Angelos Tzortzinis/AFP via Getty Images
Greek Finance Minister Yannis Stournaras arrives for a press conference at the Finance Ministry in Athens on Nov. 28, 2012.
Greek Finance Minister Yannis Stournaras arrives for a press conference at the Finance Ministry in Athens on Nov. 28, 2012. Photographer: Angelos Tzortzinis/AFP via Getty Images
7:11
Dec. 4 (Bloomberg) -- Riccardo Barbieri, chief European economist at Mizuho International Plc, talks about the Greek debt buyback and European bond spreads. He speaks with Manus Cranny on Bloomberg Television's "The Pulse." (Source: Bloomberg)
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Transactions involving Greek bonds “increased by the day” after it became clear that the buyback was going to happen, with hedge funds accounting for most of the purchases, said Zoeb Sachee, the London-based head of European government bond trading at Citigroup Inc.
“If all goes according to plan, everybody wins,” Sachee said. “Hedge funds must have bought lower than here. If it isn’t successful, Greece risks default and everybody loses.”
Euro-area finance ministers meeting last night in Brussels expressed confidence that Greece will pull off the transaction. The country said yesterday it would put 10 billion euros ($13.1 billion) toward repurchasing outstanding bonds with a face value of 62 billion euros. The country and its European backers agreed to pay prices ranging from an average minimum of 32.1 percent of face value to an average maximum of 34.1 percent in an auction that will run until Dec. 7, based on information in a statement from Greece’s debt agency.
Debt Buyers
Some hedge funds began buying Greek bonds after a debt swap in March, the biggest sovereign restructuring ever. They bet that prices and yields reflected an erroneous view that the country was headed to default. Traders at firms including Dan Loeb’s Third Point LLC determined that other investors were too concerned about the risk of Greece dropping the euro, especially after European Central Bank President Mario Draghi’s July 26 pledge to protect the currency bloc.
Hedge funds that joined Third Point in investing in Greek debt include Louis Bacon’s Moore Capital Management LLC, David Tepper’s Appaloosa Management LP and Jeffrey Tannenbaum’s Fir Tree Partners Inc., according to two people with knowledge of the matter who asked not to be identified because the firms are private. Tepper didn’t return a phone call and spokesmen for the other funds declined to comment on the buyback.
‘Satisfactory Conditions’
“I’m confident it will go well,” French Finance Minister Pierre Moscovici told reporters yesterday. “It seems to be happening under satisfactory conditions.”
The buyback was approved by the euro finance chiefs last week as the linchpin of a debt-reduction scheme after Germany rejected the writeoff of official loans as a way of easing the Greece’s financial plight. The aim was to cut its debt to 124 percent of gross domestic product in 2020 from a projected 190 percent in 2014. At the time, officials said they expected to pay no more for the bonds than the closing price on Nov. 23.
A market rally made it difficult to stick to that pledge. Greek bonds rose for a third day yesterday, pushing the 10-year yield below 15 percent for the first time since the nation’s debt was restructured in March. The price has more than doubled since a post-restructuring low of 13.3 percent on May 31.
“The official sector continues to demonstrate its total misunderstanding of how markets operate,” said Adelante Asset Management Ltd. Chief Investment Officer Julian Adams, whose London-based firm holds Greek bonds. “The whole saga has been a textbook case of how not to do this sort of thing.”
The Greek 10-year bond yield climbed 11 basis points today to 15 percent at 12:36 p.m. in Athens.
‘Done Well’
The buyback will be done through a so-called Dutch auction in which investors will be able to specify the price, within a set range, at which they are willing to sell the securities. The intention is to retire the bonds issued when Greece restructured its privately held debt nine months ago.
Hedge funds hold Greek bonds valued at as much as 22 billion euros, according to Nomura Holdings Inc. economist Dimitris Drakopoulos.
If Greece offers to pay hedge funds about 34 percent of face value, it’s likely that the firms will agree to sell bonds valued at about 8 billion euros, Drakopoulos wrote in a report yesterday. As a result, Greece could retire at least 28 billion euros of debt, with the remaining sales coming from Greek banks, Cypriot lenders and European Union state banks, he said.
Hedge funds had almost no incentive to participate at Nov. 23 closing prices, according to Drakopoulos.
Those that bought earlier may be rewarded.
“We have obviously done quite well on this,” said Hans Humes, president of New York-based hedge fund Greylock Capital Management LLC, which owns Greek bonds. “To the extent that we can use the buyback as a partial exit from our position that is great.”
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EU crisis: Outlook mixed for Europe’s party politics
4 December 2012Financial Times London
A polling station for the Democratic Party second round of primary elections. Rome, 2 December 2012
By picking Pierluigi Bersani as the centre-left Democratic Party’s candidate for premier, Italian voters have challenged the notion that the eurozone crisis is uprooting the established party political systems of southern Europe.
Tony Barber
Pierluigi Bersani, 61, is a former communist of working-class origins who in Sunday’s primary election relied on his loyal trade union base to defeat Matteo Renzi, the mayor of Florence and upstart 37-year-old challenger.
With opinion polls estimating the Democratic party’s national support at 30 per cent, far ahead of its rivals, it seems that Mr Bersani is well-placed to become prime minister of a left-leaning coalition government after parliamentary elections expected in March.
Both in Italy and across the Mediterranean, however, the outlook for the traditional parties is more mixed than Mr Bersani’s success implies. The most suggestive development in Italian politics remains the decomposition of the centre-right forces that have dominated the national stage since 1994. Former prime minister Silvio Berlusconi’s People of Liberty party, once known as Forza Italia, is in headlong retreat. Much of its support is leaking to the idiosyncratic, “a plague on both your houses” Five-Star Movement of comedian Beppe Grillo.
But the appeal of political iconoclasm has its limits, even in a country whose party elites are as discredited as in Italy for bringing their country to the edge of financial disaster. Immediately after the second world war, an anti-establishment party known as Uomo Qualunque (Common Man) stormed on to the scene, winning well over 1m votes in the 1946 and 1948 elections and gaining a couple of dozen seats in parliament.
Staying power?
Yet qualunquismo vanished almost as fast as it appeared, swamped by Christian Democrats on the right and communists on the left. The question is whether Mr Grillo’s movement will outlast the inevitable revival of Italy’s centre-right after Mr Berlusconi finally bows out.
Greece offers the clearest example of the collapse of the established order. Until the 2009 debt crisis, politics had been controlled since the end of military rule in 1974 by two parties: conservative New Democracy and socialist Pasok. But in a general election six months ago, the combined vote of these two parties was barely 42 per cent.
Pasok, in particular, with a mere 12.3 per cent, looked like a spent force. Voters flocked instead to Syriza, a more explicitly leftwing alternative. But apart from the obvious fact that the electorate was voicing its rage at Greece’s descent into the abyss, one reason why the mainstream parties haemorrhaged support was that they had much less patronage to offer in exchange for votes.
The party systems constructed in Spain and Portugal after the democratic transitions of the 1970s are, for the moment, holding up better than in Greece. At national level – though not at regional level in Spain – the contest is largely between one big party on the right and one on the left. Change is blocked by the highly centralised nature of these parties and by the power of party leaderships to hand-pick candidates at election time, with no input from ordinary party members or voters.
Rajoy support in free fall
Yet there are shades of difference between Spain and Portugal. Whilst the popularity ratings of Mariano Rajoy, the centre-right prime minister, are in free fall, Spanish citizens evince no more liking for Alfredo Pérez Rubalcaba, leader of the Socialist opposition. Even among his own party’s voters, there is a striking absence of faith that Mr Rubalcaba would govern Spain more effectively than Mr Rajoy.
If Spain displays some conditions essential for a reshaping of the party system, this appears less true for Portugal.
There, the ruling centre-right Social Democrats and opposition Socialists retain their ability to frame the attitudes of a people who often seem more politically passive than their Spanish cousins. In 1975, when Portugal held its first free election in five decades, turnout was 92 per cent. But in last year’s national election it was 58 per cent.
It is a sobering thought that, even in an age of crisis, young people born into a democratic society vote less than their parents, who experienced authoritarianism first-hand.
On the web
France
Chaos in Sarkozy’s party
Le Figaro, France's largest conservative daily, has described the situation as a “live suicide broadcast.” Since November 18, the UMP (Union for a Popular Movement) has been tearing itself apart in public. On that day, party militants voted for a new president for the party of former French President Nicolas Sarkozy. The result was very tight, and the two candidates are now disputing the count and accusing each other of fraud.
Jean-François Copé, secretary general of the party, has been named winner by two internal committees. François Fillon, former Prime Minister under Sarkozy, is contesting that outcome and has formed a splinter group in the National Assembly. Neither former Prime Minister Alain Juppé nor Sarkozy himself, who were both called in to try to help find a solution, have succeeding in breaking the deadlock, which Fillon has now pushed into the hands of the courts.
“We must tell this exemplary tale that is emerging everywhere: in 'postdemocratic' regimes, where elections are only a front and most of the power has gone elsewhere,” writes journalist Philippe Thureau-Dangin in Le Monde –
4 December 2012Financial Times London
A polling station for the Democratic Party second round of primary elections. Rome, 2 December 2012
By picking Pierluigi Bersani as the centre-left Democratic Party’s candidate for premier, Italian voters have challenged the notion that the eurozone crisis is uprooting the established party political systems of southern Europe.
Tony Barber
Pierluigi Bersani, 61, is a former communist of working-class origins who in Sunday’s primary election relied on his loyal trade union base to defeat Matteo Renzi, the mayor of Florence and upstart 37-year-old challenger.
With opinion polls estimating the Democratic party’s national support at 30 per cent, far ahead of its rivals, it seems that Mr Bersani is well-placed to become prime minister of a left-leaning coalition government after parliamentary elections expected in March.
Both in Italy and across the Mediterranean, however, the outlook for the traditional parties is more mixed than Mr Bersani’s success implies. The most suggestive development in Italian politics remains the decomposition of the centre-right forces that have dominated the national stage since 1994. Former prime minister Silvio Berlusconi’s People of Liberty party, once known as Forza Italia, is in headlong retreat. Much of its support is leaking to the idiosyncratic, “a plague on both your houses” Five-Star Movement of comedian Beppe Grillo.
But the appeal of political iconoclasm has its limits, even in a country whose party elites are as discredited as in Italy for bringing their country to the edge of financial disaster. Immediately after the second world war, an anti-establishment party known as Uomo Qualunque (Common Man) stormed on to the scene, winning well over 1m votes in the 1946 and 1948 elections and gaining a couple of dozen seats in parliament.
Staying power?
Yet qualunquismo vanished almost as fast as it appeared, swamped by Christian Democrats on the right and communists on the left. The question is whether Mr Grillo’s movement will outlast the inevitable revival of Italy’s centre-right after Mr Berlusconi finally bows out.
Greece offers the clearest example of the collapse of the established order. Until the 2009 debt crisis, politics had been controlled since the end of military rule in 1974 by two parties: conservative New Democracy and socialist Pasok. But in a general election six months ago, the combined vote of these two parties was barely 42 per cent.
Pasok, in particular, with a mere 12.3 per cent, looked like a spent force. Voters flocked instead to Syriza, a more explicitly leftwing alternative. But apart from the obvious fact that the electorate was voicing its rage at Greece’s descent into the abyss, one reason why the mainstream parties haemorrhaged support was that they had much less patronage to offer in exchange for votes.
The party systems constructed in Spain and Portugal after the democratic transitions of the 1970s are, for the moment, holding up better than in Greece. At national level – though not at regional level in Spain – the contest is largely between one big party on the right and one on the left. Change is blocked by the highly centralised nature of these parties and by the power of party leaderships to hand-pick candidates at election time, with no input from ordinary party members or voters.
Rajoy support in free fall
Yet there are shades of difference between Spain and Portugal. Whilst the popularity ratings of Mariano Rajoy, the centre-right prime minister, are in free fall, Spanish citizens evince no more liking for Alfredo Pérez Rubalcaba, leader of the Socialist opposition. Even among his own party’s voters, there is a striking absence of faith that Mr Rubalcaba would govern Spain more effectively than Mr Rajoy.
If Spain displays some conditions essential for a reshaping of the party system, this appears less true for Portugal.
There, the ruling centre-right Social Democrats and opposition Socialists retain their ability to frame the attitudes of a people who often seem more politically passive than their Spanish cousins. In 1975, when Portugal held its first free election in five decades, turnout was 92 per cent. But in last year’s national election it was 58 per cent.
It is a sobering thought that, even in an age of crisis, young people born into a democratic society vote less than their parents, who experienced authoritarianism first-hand.
On the web
- Financial Times (€) en
- Le Monde article fr
- Charlemagne - The Economist's EU blog on 'Bersani's victory' en
France
Chaos in Sarkozy’s party
Le Figaro, France's largest conservative daily, has described the situation as a “live suicide broadcast.” Since November 18, the UMP (Union for a Popular Movement) has been tearing itself apart in public. On that day, party militants voted for a new president for the party of former French President Nicolas Sarkozy. The result was very tight, and the two candidates are now disputing the count and accusing each other of fraud.
Jean-François Copé, secretary general of the party, has been named winner by two internal committees. François Fillon, former Prime Minister under Sarkozy, is contesting that outcome and has formed a splinter group in the National Assembly. Neither former Prime Minister Alain Juppé nor Sarkozy himself, who were both called in to try to help find a solution, have succeeding in breaking the deadlock, which Fillon has now pushed into the hands of the courts.
“We must tell this exemplary tale that is emerging everywhere: in 'postdemocratic' regimes, where elections are only a front and most of the power has gone elsewhere,” writes journalist Philippe Thureau-Dangin in Le Monde –
British political scientist Colin Crouch analysed this phenomenon in the early 2000s to explain why, little by little, private interests and the power of lobbies, financiers, the media and other players have sapped democracy of its meaning and its substance – even in Europe, where Chancellor Angela Merkel herself has been called a post-democrat by philosopher Jürgen Habermas. In this post-democratic world, the politicians have a hard time respecting the separation of powers. As the era of coups d'Etat has ended, we have entered into the era of permanent coups de force.
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Re: New EC Thread
Panda Tue 4 Dec - 18:04
Analysts are suggesting Germany is heading for recession.
Portugal and Ireland are facing hard times, but the Dutch Finance Minister says both Countries have not adhered to the fiscal policy.
Cyprus is looking for a E17.5 billion bail out.
The ECB sees full implementation of Bank supervision by 2014 but Britain, Sweden and other non Euro Members do not want their Banks monitored.
There will be anarchy in Greece over the austerity measures and massive unemployment. Hedge Fund Managers holding Greek Bonds have accepted a lower yield to enable Greece to buy back and receive the E37.5 billion bail out
Now that Spain has to accept a bail out Rajoy will have to abide by austerity rules and Rajoy has become very unpopular although there is not any acceptable opposition.
Portugal and Ireland are facing hard times, but the Dutch Finance Minister says both Countries have not adhered to the fiscal policy.
Cyprus is looking for a E17.5 billion bail out.
The ECB sees full implementation of Bank supervision by 2014 but Britain, Sweden and other non Euro Members do not want their Banks monitored.
There will be anarchy in Greece over the austerity measures and massive unemployment. Hedge Fund Managers holding Greek Bonds have accepted a lower yield to enable Greece to buy back and receive the E37.5 billion bail out
Now that Spain has to accept a bail out Rajoy will have to abide by austerity rules and Rajoy has become very unpopular although there is not any acceptable opposition.
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Re: New EC Thread
Panda Wed 5 Dec - 8:08
Germany displaces China as US Treasury's currency villain
The US Treasury has issued a damning criticism of Germany’s chronic trade surplus in its annual report on worldwide exchange rate abuse, although it stopped short of labelling the country a currency manipulator.
The report said Germany's current account surplus is running at 6.3pc of GDP Photo: AP
By Ambrose Evans-Pritchard
6:53PM GMT 28 Nov 2012
732 Comments
Treasury officials told Congress that internal balances within the eurozone are disrupting the global trade structure, with almost nothing being done by north Europeans states to curb their huge surpluses.
The report said Germany’s current account surplus is running at 6.3pc of GDP, and Holland is even worse at 9.5pc. Yet the countries still cleave to fiscal austerity policies that constrict internal demand.
The EU’s new tool for cracking down on intra-EMU imbalances is "asymmetric" and does not give "sufficient attention to countries with large and sustained external surpluses like Germany".
While the eurozone as a whole is roughly in trade balance, the EMU regime of austerity in the South without offsetting stimulus in the North is creating a contractinary bias, holding back global recovery.
The US Treasury said eurozone surplus states have "available room" for fiscal stimulus but refuse to act, despite repeated pledges by EU leaders that more must be done to foster growth. "They have not yet made any concrete proposals capable of yielding meaningful near-term results."
Related Articles
Germany's permanent surplus is in stark contrast to the shift under way in Asia. China has "partially succeeded in shifting away from a reliance on exports for growth", and has slashed its surplus to 2.6pc from 10.1pc in 2007.
While the yuan remains "significantly overvalued", China’s has stopped building reserves to hold down its currency and has seen a 40pc appreciation against the dollar since 2005 in real terms. Double-digit wage growth is closing thecurrency gap by oither means.
A chart published in the report shows that Germany has overtaken China to become the biggest single source of global trade imbalance, alone accounting for a large chunk of the US deficit.
Switzerland is top sinner with a surplus of 13pc GDP, though the report says the country faces unique circumstances as a safe-haven battling deflation.
The Swiss National Bank has bought $230bn in foreign bonds since mid 2011 to hold the franc, more than China, Russia, Saudia Arabia, Brazil and India combined.
The US Treasury’s shift in focus away from China - and towards Germany’s disguised mercantilism - reflects mounting irritation in Washington over North Europe’s "free-rider" strategy, which relies on exploiting global demand rather than generating it at home.
The US Treasury said China still needs to do more to wean itself off investment - almost 50pc of GDP - and boost consumption instead. It called for a change in the tax structure, reform of the big state enterprises, and an end to financial controls that force up the savings rate. There is concern that China’s surplus will rise again over coming years unless Beijing pushes through radical reforms.
The tone of the report is conciliatory, a far cry from the hot rhetoric of the US election campaign. Republican candidate Mitt Romney had vowed to label China a currency manipulator from "day one", a move that would have entailed trade sanctions and an ugly turn in superpower relations.
A separate report from the International Monetary Fund said China’s excess credit growth and investment have moved into "dangerous territory" and has begun to impose major costs on China itself.
The country spending 10pc of GDP more on investment than the Asian tigers at the peak of the investment bubble before onset of the East Asian meltdown in the late 1990s.
The Fund said the excesses are unlikely to lead to the sort of sudden-stop crisis seen in Thailand, Indonesia and Korea during that episode, since those countries relied on dollar funding whereas China’s credit comes from internal savings, but there is disguised damage nevertheless. Rampant over-investment acts through complex channels as a transfer of income from families and small businesses to big state firms, distorting the whole economic system over time.
The IMF said there is little doubt that investment in plant and infrastructure has driven China’s great boom over the last thirty years but the law of diminishing returns is setting in.
"The marginal contribution of an extra unit of investment to growth has been falling, necessitating ever larger increases to generate an equal amount of growth. Now with investment to GDP already close to 50 percent, the current growth model may have run its course," it said.
The US Treasury has issued a damning criticism of Germany’s chronic trade surplus in its annual report on worldwide exchange rate abuse, although it stopped short of labelling the country a currency manipulator.
The report said Germany's current account surplus is running at 6.3pc of GDP Photo: AP
By Ambrose Evans-Pritchard
6:53PM GMT 28 Nov 2012
732 Comments Treasury officials told Congress that internal balances within the eurozone are disrupting the global trade structure, with almost nothing being done by north Europeans states to curb their huge surpluses.
The report said Germany’s current account surplus is running at 6.3pc of GDP, and Holland is even worse at 9.5pc. Yet the countries still cleave to fiscal austerity policies that constrict internal demand.
The EU’s new tool for cracking down on intra-EMU imbalances is "asymmetric" and does not give "sufficient attention to countries with large and sustained external surpluses like Germany".
While the eurozone as a whole is roughly in trade balance, the EMU regime of austerity in the South without offsetting stimulus in the North is creating a contractinary bias, holding back global recovery.
The US Treasury said eurozone surplus states have "available room" for fiscal stimulus but refuse to act, despite repeated pledges by EU leaders that more must be done to foster growth. "They have not yet made any concrete proposals capable of yielding meaningful near-term results."
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Germany's permanent surplus is in stark contrast to the shift under way in Asia. China has "partially succeeded in shifting away from a reliance on exports for growth", and has slashed its surplus to 2.6pc from 10.1pc in 2007.
While the yuan remains "significantly overvalued", China’s has stopped building reserves to hold down its currency and has seen a 40pc appreciation against the dollar since 2005 in real terms. Double-digit wage growth is closing thecurrency gap by oither means.
A chart published in the report shows that Germany has overtaken China to become the biggest single source of global trade imbalance, alone accounting for a large chunk of the US deficit.
Switzerland is top sinner with a surplus of 13pc GDP, though the report says the country faces unique circumstances as a safe-haven battling deflation.
The Swiss National Bank has bought $230bn in foreign bonds since mid 2011 to hold the franc, more than China, Russia, Saudia Arabia, Brazil and India combined.
The US Treasury’s shift in focus away from China - and towards Germany’s disguised mercantilism - reflects mounting irritation in Washington over North Europe’s "free-rider" strategy, which relies on exploiting global demand rather than generating it at home.
The US Treasury said China still needs to do more to wean itself off investment - almost 50pc of GDP - and boost consumption instead. It called for a change in the tax structure, reform of the big state enterprises, and an end to financial controls that force up the savings rate. There is concern that China’s surplus will rise again over coming years unless Beijing pushes through radical reforms.
The tone of the report is conciliatory, a far cry from the hot rhetoric of the US election campaign. Republican candidate Mitt Romney had vowed to label China a currency manipulator from "day one", a move that would have entailed trade sanctions and an ugly turn in superpower relations.
A separate report from the International Monetary Fund said China’s excess credit growth and investment have moved into "dangerous territory" and has begun to impose major costs on China itself.
The country spending 10pc of GDP more on investment than the Asian tigers at the peak of the investment bubble before onset of the East Asian meltdown in the late 1990s.
The Fund said the excesses are unlikely to lead to the sort of sudden-stop crisis seen in Thailand, Indonesia and Korea during that episode, since those countries relied on dollar funding whereas China’s credit comes from internal savings, but there is disguised damage nevertheless. Rampant over-investment acts through complex channels as a transfer of income from families and small businesses to big state firms, distorting the whole economic system over time.
The IMF said there is little doubt that investment in plant and infrastructure has driven China’s great boom over the last thirty years but the law of diminishing returns is setting in.
"The marginal contribution of an extra unit of investment to growth has been falling, necessitating ever larger increases to generate an equal amount of growth. Now with investment to GDP already close to 50 percent, the current growth model may have run its course," it said.
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Re: New EC Thread
Panda Wed 5 Dec - 18:24
European Union: Poverty on the rise
4 December 2012
PresseuropLa Vanguardia
La Vanguardia notes that Spain, with 27 per cent of its population – or 12.4 million people – on the edge of exclusion, ranks three points above the European average.
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4 December 2012
PresseuropLa Vanguardia
- One European out of four – or nearly 120 million people – "risks social exclusion," reports Spanish daily La Vanguardia, following the publication of a Eurostat survey, the EU-SILC, examining data on income, social inclusion and living conditions. The study shows that social exclusion rose by 1 per cent in 2011 compared to a year earlier. This, says the paper, –
Those countries with the highest percentage of risk of poverty or social exclusion are Bulgaria (49 per cent), followed by Romania and Latvia (40 per cent). Those with the lowest risk are the Czech Republic (15 per cent) and Sweden (16 per cent).
despite the fact reducing the number of people facing this threat is one of the EU's goals in its strategy for the decade.
La Vanguardia notes that Spain, with 27 per cent of its population – or 12.4 million people – on the edge of exclusion, ranks three points above the European average.
On La Vanguardia
The risk of poverty has continued to rise as a result of a crisis that strikes directly and broadly, at a large group of citizens who were until then, settled into the comfortable middle class.
Gotham1312205.12.2012 | 06:20Link
25% of Europe on the verge of poverty and the austerity camp isn't budging—they admit to no mistakes and refuse to abandon the imaginary economics of Reagan and Thatcher which they have sculpted into a new religion —turn around 180 degrees and spend public money on an economic stimulus for the lower and middle classes or Europe is doomed to a long and ugly break up. The 1% at the top ar busy killing the goose that laid the golden egg—you can't have a consumer driven service economy without jobs. Merkel is considered a success! It's so sad. Have they never read a history book—the poor riot, this leads to economic disaster and dictatorship. The elite are so embarrassingly obsessed with adliring their own careers—they have no sense of the scale of the matter.
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Unity is strength in Emilia-Romagna
Business is brisk in the area around Bologna, which has remained unaffected by the crisis. Order books are full and exports are on the rise for a dense network of engineering firms specialised in packaging systems, which local entrepreneurs argue owes much of its success to a sense of solidarity. Le Temps Geneva
EU crisis:
Outlook mixed for Europe’s party politics
By picking Pierluigi Bersani as the centre-left Democratic Party’s candidate for premier, Italian voters have challenged the notion that the eurozone crisis is uprooting the established party political systems of southern Europe. Financial Times London
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Re: New EC Thread
Panda Wed 5 Dec - 22:52
While corporate bond yields in Europe dropped to a record 2.13 percent last week, from 4.4 percent at the start of the year, according to Bank of America Merrill Lynch’s EMU Corporate Index, the price for easing Europe’s debt crisis is mounting.
The first tranche of as much as 39.5 billion euros ($52 billion) of a bailout for Spanish banks will be disbursed next week as European finance chiefs approve the latest 34.4 billion-euro payout to Greece. That’s on top of the 148.8 billion euros the nation’s already received, according to the Ministry of Finance in Athens.
Euro Breakup
Portugal will get a further 2.5 billion euros of its 78 billion-euro aid program in January, while Ireland has tapped 55.3 billion euros of its 67.5 billion-euro rescue fund. Cyprus is also negotiating a bailout.
Since July 26, when Draghi said he would do “whatever it takes” to save the 17-nation euro, the currency has appreciated versus each of its 16 major counterparts tracked by Bloomberg except the Norwegian krone. Odds on a euro breakup by the end of this year fell to 1.7 percent yesterday from 39.4 percent in June, data compiled by Dublin-based Intrade show. The probability of that happening by the end of 2013 has fallen to 33.3 percent from 57.6 percent.
The first tranche of as much as 39.5 billion euros ($52 billion) of a bailout for Spanish banks will be disbursed next week as European finance chiefs approve the latest 34.4 billion-euro payout to Greece. That’s on top of the 148.8 billion euros the nation’s already received, according to the Ministry of Finance in Athens.
Euro Breakup
Portugal will get a further 2.5 billion euros of its 78 billion-euro aid program in January, while Ireland has tapped 55.3 billion euros of its 67.5 billion-euro rescue fund. Cyprus is also negotiating a bailout.
Since July 26, when Draghi said he would do “whatever it takes” to save the 17-nation euro, the currency has appreciated versus each of its 16 major counterparts tracked by Bloomberg except the Norwegian krone. Odds on a euro breakup by the end of this year fell to 1.7 percent yesterday from 39.4 percent in June, data compiled by Dublin-based Intrade show. The probability of that happening by the end of 2013 has fallen to 33.3 percent from 57.6 percent.
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Re: New EC Thread
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Competition: Cartels, Europe’s shadowy offspring
5 December 2012Der Tagesspiegel Berlin
Belortaja
They sell cement, televisions or coffee. They drive up prices and cost consumers billions. Cartels act illegally, and yet seemingly having nothing to fear. In Europe, it turns out, price-fixing by cartels is a mere misdemeanour, like a traffic violation. Excerpts.
Harald Schumann
The upstanding businessmen usually get together at meetings of the Zentralverbands Elektrotechnik in Frankfurt. There they talk about new markets and technologies and whatever else is new in the business of power transformers, those huge devices made of magnets and wire coils without which there would be no electricity supply. But the really exciting stuff always comes at the end of the official programme, in the evenings or on joint excursions.
Then, as the investigators describe it, managing directors and heads of sales meet in “small groups” for “project-related discussions” that can work out to be highly lucratively. What comes up in the conversations are arrangements that secure for the supposed competitors additional hassle-free profits in double-digit millions. Agreements are made in detail on who should get which contract and, above all, at what price.
For at least five years, as established by officials of the Federal Cartel Office in Bonn, the Siemens Group, the Regensburg Starkstrom-Gerätebaupower (high-voltage current equipment manufacturing company), France's Alsthom and the Swiss electrical giant ABB have carved up the German market for transformers, wholly without competition, to rip off their customers, who have had to pay much more, had the providers been forced to compete.
The antitrust watchdog's investigation went on for four long years, and in September last year resulted in a package of fines. Overall, €24.3m in penalties were levied against the four companies and managers involved, and were paid into the national treasury.
Name and shame?
But there it ended. No one had to show up in court. None of those involved had their name published. In the media, not even a brief mention was made about the entire procedure.
That's the way it almost always is when cartels are broken up in Europe. Year after year, the competition authorities investigate hundreds of companies that violate the ban on cartels. Coffee and detergents, cement and chemicals, flat screen televisions and DVD players, glass and wire harnesses for cars, even fire engines and North Sea prawns – the list of industries creating cartels is almost unlimited.
Indeed, the cost of cartels to society are far higher than generally assumed. As the authorities have discovered, the cartels succeed in driving the prices of their products up by an average of 25 per cent and within four years are able to book a whole year's turnover as a windfall profit. Precise data, though, are by their nature, impossible to come by.
Cartels are the “children of darkness”, says Franz Jürgen Säcker, himself formerly an anti-trust judge and one of the leading experts in competition law at the Free University of Berlin. However, a nine-member team of economists from three European research institutes, in a study for the European Commission in 2007, calculated that the economic losses caused by cartels in Europe cost more than €260bn a year. That's 2.3 per cent of Europe's annual economic output, or double the annual budget of the European Union.
Toothless laws
This insight into the disastrous effects of the cartel business are nothing new. Walter Eucken, one of the pioneers of the West German economic system, considered the concentration of economic power by syndicates and cartels the fundamental problem of the pre-war economy. He therefore called for the state to enforce competition with an iron hand to keep prices down. In real life, however, little of that notion survived. Indeed, by 1957 the Bundestag had passed the first law against restraint of trade, and a European antitrust law was later included in the the EC Treaties. In practice, the laws against cartels remained toothless for decades, and whether the legislation actually works even now, remains a subject of controversy.
Doubt about the legislation nurtures the already high number of repeat offenders. American economists who analysed 283 cases of international cartels came up with some astonishing results. Between 1990 and 2005 the German chemical company BASF, for example, took part in 26 cartels. The French oil company Total was involved in 18 and Germany's Degussa in 13.
The official cartel busters cannot be accused in any way of any lack of zeal. Since the start of 2010 the European Commission has dealt with 15 major cases and imposed fines totalling almost €4bn on 112 companies. That amount, levied in just three years, was four times higher than the penalties paid throughout the entire 1990s.
The steep increase, however, is in no way due to greater powers having been given to the antitrust authorities, but to the introduction of a generous arrangement for giving state's evidence. Since 2004 companies and their managers that voluntarily reveal the existence of a cartel to the European Commission and give the necessary evidence escape without penalties, even if that company itself was the biggest beneficiary of the cartel.
Risk versus reward
What's more, the fines are limited to a maximum of 10 per cent of sales. How little that is, was made clear in 2002 by the exposure of a nationwide cement cartel. According to calculations of the cartel office, this brought its clients profits of around €2bn. All the same, the companies ended up paying only €400 million in fines.
Although cartels do enormous harm, the punishment meted out is at the level of fines for traffic violations. Their collusions are merely misdemeanours. In consequence, none of the perpetrators must appear personally before a court. The public usually does not even learn their names.
Things are rather different in the US. There, cartel members face long prison sentences, and in 2004 the maximum imprisonment was even extended to 10 years. Ireland and Britain have followed America's lead. The German federal government, though, does not want to hear of this. Speaking for Minister of the Economy Philipp Roesler, the Secretary of State declared that he considered the sanctions regime as “appropriate” and was “reluctant to turn EU antitrust legislation into criminal law”.
As many lawyers see it, that Germany of all countries continues to regard cartel offences as mere peccadillos is also rather questionable, as this generosity does not apply equally to everyone. Collusion in public tenders, or “bidding cartels”, is indeed indictable. “In that case, the State protects itself vigorously,” remarks Professor Säcker. German lawmakers must now ask themselves whether “collusion between local artisans truly deserves greater punishment than a global price-fixing agreement between multinational companies that causes billions in damage.”
On the web
European Commission
Record fines against screens cartel
On Wednesday, December 5, “the European Commission slapped a record fine of €1.47bn on seven companies that had fixed the price of cathode ray tubes for televisions and computer screens for nearly ten years” since the late 1990s, reports Le Figaro. The Parisian daily recalls that the Commission had carried out searches at the premises of these companies in late 2007, and emphasises that it is “the largest cumulative fine imposed so far by the Commission for cartel cases.”
The companies fined are LG Electronics, Philips, Samsung, Panasonic, MTPD (today a subsidiary of Panasonic), Toshiba and Technicolor. The Taiwanese Chunghwa Picture Tubes company, which revealed the existence of the cartel, escaped the fines.
5 December 2012Der Tagesspiegel Berlin
Belortaja
They sell cement, televisions or coffee. They drive up prices and cost consumers billions. Cartels act illegally, and yet seemingly having nothing to fear. In Europe, it turns out, price-fixing by cartels is a mere misdemeanour, like a traffic violation. Excerpts.
Harald Schumann
The upstanding businessmen usually get together at meetings of the Zentralverbands Elektrotechnik in Frankfurt. There they talk about new markets and technologies and whatever else is new in the business of power transformers, those huge devices made of magnets and wire coils without which there would be no electricity supply. But the really exciting stuff always comes at the end of the official programme, in the evenings or on joint excursions.
Then, as the investigators describe it, managing directors and heads of sales meet in “small groups” for “project-related discussions” that can work out to be highly lucratively. What comes up in the conversations are arrangements that secure for the supposed competitors additional hassle-free profits in double-digit millions. Agreements are made in detail on who should get which contract and, above all, at what price.
For at least five years, as established by officials of the Federal Cartel Office in Bonn, the Siemens Group, the Regensburg Starkstrom-Gerätebaupower (high-voltage current equipment manufacturing company), France's Alsthom and the Swiss electrical giant ABB have carved up the German market for transformers, wholly without competition, to rip off their customers, who have had to pay much more, had the providers been forced to compete.
The antitrust watchdog's investigation went on for four long years, and in September last year resulted in a package of fines. Overall, €24.3m in penalties were levied against the four companies and managers involved, and were paid into the national treasury.
Name and shame?
But there it ended. No one had to show up in court. None of those involved had their name published. In the media, not even a brief mention was made about the entire procedure.
That's the way it almost always is when cartels are broken up in Europe. Year after year, the competition authorities investigate hundreds of companies that violate the ban on cartels. Coffee and detergents, cement and chemicals, flat screen televisions and DVD players, glass and wire harnesses for cars, even fire engines and North Sea prawns – the list of industries creating cartels is almost unlimited.
Indeed, the cost of cartels to society are far higher than generally assumed. As the authorities have discovered, the cartels succeed in driving the prices of their products up by an average of 25 per cent and within four years are able to book a whole year's turnover as a windfall profit. Precise data, though, are by their nature, impossible to come by.
Cartels are the “children of darkness”, says Franz Jürgen Säcker, himself formerly an anti-trust judge and one of the leading experts in competition law at the Free University of Berlin. However, a nine-member team of economists from three European research institutes, in a study for the European Commission in 2007, calculated that the economic losses caused by cartels in Europe cost more than €260bn a year. That's 2.3 per cent of Europe's annual economic output, or double the annual budget of the European Union.
Toothless laws
This insight into the disastrous effects of the cartel business are nothing new. Walter Eucken, one of the pioneers of the West German economic system, considered the concentration of economic power by syndicates and cartels the fundamental problem of the pre-war economy. He therefore called for the state to enforce competition with an iron hand to keep prices down. In real life, however, little of that notion survived. Indeed, by 1957 the Bundestag had passed the first law against restraint of trade, and a European antitrust law was later included in the the EC Treaties. In practice, the laws against cartels remained toothless for decades, and whether the legislation actually works even now, remains a subject of controversy.
Doubt about the legislation nurtures the already high number of repeat offenders. American economists who analysed 283 cases of international cartels came up with some astonishing results. Between 1990 and 2005 the German chemical company BASF, for example, took part in 26 cartels. The French oil company Total was involved in 18 and Germany's Degussa in 13.
The official cartel busters cannot be accused in any way of any lack of zeal. Since the start of 2010 the European Commission has dealt with 15 major cases and imposed fines totalling almost €4bn on 112 companies. That amount, levied in just three years, was four times higher than the penalties paid throughout the entire 1990s.
The steep increase, however, is in no way due to greater powers having been given to the antitrust authorities, but to the introduction of a generous arrangement for giving state's evidence. Since 2004 companies and their managers that voluntarily reveal the existence of a cartel to the European Commission and give the necessary evidence escape without penalties, even if that company itself was the biggest beneficiary of the cartel.
Risk versus reward
What's more, the fines are limited to a maximum of 10 per cent of sales. How little that is, was made clear in 2002 by the exposure of a nationwide cement cartel. According to calculations of the cartel office, this brought its clients profits of around €2bn. All the same, the companies ended up paying only €400 million in fines.
Although cartels do enormous harm, the punishment meted out is at the level of fines for traffic violations. Their collusions are merely misdemeanours. In consequence, none of the perpetrators must appear personally before a court. The public usually does not even learn their names.
Things are rather different in the US. There, cartel members face long prison sentences, and in 2004 the maximum imprisonment was even extended to 10 years. Ireland and Britain have followed America's lead. The German federal government, though, does not want to hear of this. Speaking for Minister of the Economy Philipp Roesler, the Secretary of State declared that he considered the sanctions regime as “appropriate” and was “reluctant to turn EU antitrust legislation into criminal law”.
As many lawyers see it, that Germany of all countries continues to regard cartel offences as mere peccadillos is also rather questionable, as this generosity does not apply equally to everyone. Collusion in public tenders, or “bidding cartels”, is indeed indictable. “In that case, the State protects itself vigorously,” remarks Professor Säcker. German lawmakers must now ask themselves whether “collusion between local artisans truly deserves greater punishment than a global price-fixing agreement between multinational companies that causes billions in damage.”
On the web
European Commission
Record fines against screens cartel
On Wednesday, December 5, “the European Commission slapped a record fine of €1.47bn on seven companies that had fixed the price of cathode ray tubes for televisions and computer screens for nearly ten years” since the late 1990s, reports Le Figaro. The Parisian daily recalls that the Commission had carried out searches at the premises of these companies in late 2007, and emphasises that it is “the largest cumulative fine imposed so far by the Commission for cartel cases.”
The companies fined are LG Electronics, Philips, Samsung, Panasonic, MTPD (today a subsidiary of Panasonic), Toshiba and Technicolor. The Taiwanese Chunghwa Picture Tubes company, which revealed the existence of the cartel, escaped the fines.
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Euro blueprint gives Brussels economic sovereignty over members
Eurozone countries would lose the right to set their own budgets and end up surrendering economic sovereignty to Brussels under a blueprint to “complete” the European Union’s single currency.
Herman Van Rompuy expects the EU to have agreed an 'operational framework' to give the European Central Bank the role as single eurozone banking supervisor by March next year Photo: Bloomberg News
By Bruno Waterfield, in Brussels
3:52PM GMT 05 Dec 2012
598 Comments
A masterplan for “completion of economic and monetary union” has been set out in a confidential document to be discussed by EU leaders at a Brussels summit next week.
In the nine-page paper, seen by The Daily Telegraph, Herman Van Rompuy, the president of the European Council – the monthly summits of EU leaders – charts a series of steps from ongoing financial reforms to overall political union for the eurozone. “The general objective will be to aim for a progressive pooling of economic sovereignty at the European level,” the paper states.
Mr Van Rompuy expects the EU to have agreed an “operational framework” to give the European Central Bank (ECB) the role as single eurozone banking supervisor by March next year, despite continuing splits between France and Germany over the policy.
The EU president then sees a second phase to a full “banking union” with legislative proposals next year for a shared bank bail-out fund and a euro-wide deposit guarantee scheme, proposals that are even more controversial than giving the ECB a supervisory role.
Then, by 2014, the plan requires all eurozone countries to “enter into individual arrangements of a contractual nature with EU institutions on the measures and reforms they commit to undertake and on the means for their implementation”.
Related Articles
With banking union and binding contracts of fiscal policy, the basis will have been laid, according to the plan, for a move to “completion” of the euro which will “imply a change to the treaties” after 2014.
In the final stage, all eurozone countries will essentially surrender fiscal sovereignty with an “increasing degree of common decision-making on national budgets and an enhanced co-ordination of economic policies”.
The step-by-step “road map” will leave Britain isolated and is expected to trigger a fierce British EU referendum debate in the last half of 2014, just months before a general election.
Eurozone countries would lose the right to set their own budgets and end up surrendering economic sovereignty to Brussels under a blueprint to “complete” the European Union’s single currency.
Herman Van Rompuy expects the EU to have agreed an 'operational framework' to give the European Central Bank the role as single eurozone banking supervisor by March next year Photo: Bloomberg News
By Bruno Waterfield, in Brussels
3:52PM GMT 05 Dec 2012
598 Comments A masterplan for “completion of economic and monetary union” has been set out in a confidential document to be discussed by EU leaders at a Brussels summit next week.
In the nine-page paper, seen by The Daily Telegraph, Herman Van Rompuy, the president of the European Council – the monthly summits of EU leaders – charts a series of steps from ongoing financial reforms to overall political union for the eurozone. “The general objective will be to aim for a progressive pooling of economic sovereignty at the European level,” the paper states.
Mr Van Rompuy expects the EU to have agreed an “operational framework” to give the European Central Bank (ECB) the role as single eurozone banking supervisor by March next year, despite continuing splits between France and Germany over the policy.
The EU president then sees a second phase to a full “banking union” with legislative proposals next year for a shared bank bail-out fund and a euro-wide deposit guarantee scheme, proposals that are even more controversial than giving the ECB a supervisory role.
Then, by 2014, the plan requires all eurozone countries to “enter into individual arrangements of a contractual nature with EU institutions on the measures and reforms they commit to undertake and on the means for their implementation”.
Related Articles
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With banking union and binding contracts of fiscal policy, the basis will have been laid, according to the plan, for a move to “completion” of the euro which will “imply a change to the treaties” after 2014.
In the final stage, all eurozone countries will essentially surrender fiscal sovereignty with an “increasing degree of common decision-making on national budgets and an enhanced co-ordination of economic policies”.
The step-by-step “road map” will leave Britain isolated and is expected to trigger a fierce British EU referendum debate in the last half of 2014, just months before a general election.
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ECB Seen Refraining From Rate Cuts as Yields Sink on Bond Plan
By Stefan Riecher - Dec 6, 2012 12:00 AM GMT
The European Central Bank may refrain from cutting interest rates any further after its pledge to buy government bonds lowered borrowing costs and boosted confidence that the euro area can emerge from recession next year.
ECB policy makers meeting in Frankfurt today will hold the benchmark rate at a record low of 0.75 percent, according to 56 of 61 economists in a Bloomberg News survey. They will leave the rate there through 2013 and into 2014, a separate survey shows. A month ago, the median forecast was for a rate cut next year.
Enlarge image
ECB Seen Refraining From Rate Cuts as Yields Sink on Bond Plan
Simon Dawson/Bloomberg
A euro sign sculpture stands outside the headquarters of the European Central Bank (ECB) in Frankfurt, Germany.
A euro sign sculpture stands outside the headquarters of the European Central Bank (ECB) in Frankfurt, Germany. Photographer: Simon Dawson/Bloomberg
2:08
Dec. 5 (Bloomberg) -- Andrew Bosomworth, managing director at Pacific Investment Management Co., Joerg Kraemer, chief economist at Commerzbank AG, Julian Callow, chief international economist at Barclays Plc, and Sylvain Broyer, chief euro-region economist at Natixis, comment on European Central Bank interest-rate policy. They spoke Nov. 30 in Frankfurt on the sidelines of a meeting of the Shadow ECB Council, an independent, unoffical panel of economists. (Source: Bloomberg)
Italian and Spanish bond yields have plummeted since ECB President Mario Draghi promised to do whatever it takes to save the euro and announced an unlimited bond-purchase program. That’s helping to ease the strain on the euro region’s third- and fourth-largest economies and fueling optimism that the sovereign debt crisis can be contained, even after the 17-nation currency bloc slipped into recession.
“Economic confidence is slowly stabilizing and financial indicators point toward increasingly effective transmission of the very accommodative monetary policy stance to the real economy,” said Christian Schulz, senior economist at Berenberg Bank in London. “If economic growth returns next spring, as we expect, the ECB will not cut rates any further. Instead, it may be the first major western central bank to raise them again in late 2013.”
New Forecasts
The ECB will announce today’s rate decision at 1.45 p.m. Forty-five minutes later, Draghi holds a press conference at which he will unveil the ECB’s latest economic forecasts, including a first projection for 2014.
Separately, the Bank of England will keep its key rate at 0.5 percent today and refrain from expanding its asset-purchase program, another survey of economists shows. That decision is due at noon in London.
The euro region recorded a 0.1 percent contraction in the third quarter, putting it back into recession three years after it emerged from the last one. Economists said the ECB is likely to cut its economic forecast for next year from September’s prediction of 0.5 percent growth.
“The euro-area economy is worsening rapidly and that opens the door for rate cuts in 2013,” said Juergen Michels, chief euro-area economist at Citigroup Inc. in London. “We expect the ECB to lower its benchmark rate by two steps to 0.25 percent next year.”
Five economists in Bloomberg’s survey forecast the ECB will cut its key rate to 0.5 percent today.
Encouraging Signs
Still, the European Commission’s gauge of economic confidence unexpectedly rose in November after euro-area finance ministers eased the terms of Greece’s bailout to keep it in the monetary union. Spain’s 10-year bond yield dropped to 5.25 percent this week, the lowest since March, and Italy’s fell to a two-year low of 4.42 percent.
While the ECB may predict economic stagnation or even contraction next year, it will forecast growth of about 1 percent for 2014, said Marco Valli, chief euro-zone economist at UniCredit Global Research in Milan. The bank is unlikely to estimate inflation rates significantly below its 2 percent limit, Valli said.
“Although the recovery will be slow to gain momentum, the inflation projection at the policy-relevant horizon is going to be in line with the central bank’s definition of price stability,” he said. “We continue to forecast a steady refinancing rate for the foreseeable future, although the ECB’s easing bias is going to remain in place for several months to come.”
German Concerns
German inflation fears may also make policy makers think twice about cutting rates.
Bundesbank President Jens Weidmann was the only member of the ECB’s Governing Council to vote against Draghi’s bond- purchase plan, known as Outright Monetary Transactions, saying it is tantamount to printing money to finance governments and warning of the risk that it could fuel inflation.
Draghi has reiterated that the ECB stands ready to activate the program as soon as a country like Spain fulfills the pre- requisites of seeking aid from Europe’s bailout fund and signing up to conditions. At the same time, he’s sought to placate German concerns with assurances that the purchases won’t fuel inflation.
“A rate cut could further undermine support of inflation- averse Germans and thus be counterproductive,” said Schulz. “It is pivotal for the ECB to ensure strong OMT credibility. This means ensuring a maximum of support from Germany
By Stefan Riecher - Dec 6, 2012 12:00 AM GMT
The European Central Bank may refrain from cutting interest rates any further after its pledge to buy government bonds lowered borrowing costs and boosted confidence that the euro area can emerge from recession next year.
ECB policy makers meeting in Frankfurt today will hold the benchmark rate at a record low of 0.75 percent, according to 56 of 61 economists in a Bloomberg News survey. They will leave the rate there through 2013 and into 2014, a separate survey shows. A month ago, the median forecast was for a rate cut next year.
Enlarge image
ECB Seen Refraining From Rate Cuts as Yields Sink on Bond Plan
Simon Dawson/Bloomberg
A euro sign sculpture stands outside the headquarters of the European Central Bank (ECB) in Frankfurt, Germany.
A euro sign sculpture stands outside the headquarters of the European Central Bank (ECB) in Frankfurt, Germany. Photographer: Simon Dawson/Bloomberg
2:08
Dec. 5 (Bloomberg) -- Andrew Bosomworth, managing director at Pacific Investment Management Co., Joerg Kraemer, chief economist at Commerzbank AG, Julian Callow, chief international economist at Barclays Plc, and Sylvain Broyer, chief euro-region economist at Natixis, comment on European Central Bank interest-rate policy. They spoke Nov. 30 in Frankfurt on the sidelines of a meeting of the Shadow ECB Council, an independent, unoffical panel of economists. (Source: Bloomberg)
Italian and Spanish bond yields have plummeted since ECB President Mario Draghi promised to do whatever it takes to save the euro and announced an unlimited bond-purchase program. That’s helping to ease the strain on the euro region’s third- and fourth-largest economies and fueling optimism that the sovereign debt crisis can be contained, even after the 17-nation currency bloc slipped into recession.
“Economic confidence is slowly stabilizing and financial indicators point toward increasingly effective transmission of the very accommodative monetary policy stance to the real economy,” said Christian Schulz, senior economist at Berenberg Bank in London. “If economic growth returns next spring, as we expect, the ECB will not cut rates any further. Instead, it may be the first major western central bank to raise them again in late 2013.”
New Forecasts
The ECB will announce today’s rate decision at 1.45 p.m. Forty-five minutes later, Draghi holds a press conference at which he will unveil the ECB’s latest economic forecasts, including a first projection for 2014.
Separately, the Bank of England will keep its key rate at 0.5 percent today and refrain from expanding its asset-purchase program, another survey of economists shows. That decision is due at noon in London.
The euro region recorded a 0.1 percent contraction in the third quarter, putting it back into recession three years after it emerged from the last one. Economists said the ECB is likely to cut its economic forecast for next year from September’s prediction of 0.5 percent growth.
“The euro-area economy is worsening rapidly and that opens the door for rate cuts in 2013,” said Juergen Michels, chief euro-area economist at Citigroup Inc. in London. “We expect the ECB to lower its benchmark rate by two steps to 0.25 percent next year.”
Five economists in Bloomberg’s survey forecast the ECB will cut its key rate to 0.5 percent today.
Encouraging Signs
Still, the European Commission’s gauge of economic confidence unexpectedly rose in November after euro-area finance ministers eased the terms of Greece’s bailout to keep it in the monetary union. Spain’s 10-year bond yield dropped to 5.25 percent this week, the lowest since March, and Italy’s fell to a two-year low of 4.42 percent.
While the ECB may predict economic stagnation or even contraction next year, it will forecast growth of about 1 percent for 2014, said Marco Valli, chief euro-zone economist at UniCredit Global Research in Milan. The bank is unlikely to estimate inflation rates significantly below its 2 percent limit, Valli said.
“Although the recovery will be slow to gain momentum, the inflation projection at the policy-relevant horizon is going to be in line with the central bank’s definition of price stability,” he said. “We continue to forecast a steady refinancing rate for the foreseeable future, although the ECB’s easing bias is going to remain in place for several months to come.”
German Concerns
German inflation fears may also make policy makers think twice about cutting rates.
Bundesbank President Jens Weidmann was the only member of the ECB’s Governing Council to vote against Draghi’s bond- purchase plan, known as Outright Monetary Transactions, saying it is tantamount to printing money to finance governments and warning of the risk that it could fuel inflation.
Draghi has reiterated that the ECB stands ready to activate the program as soon as a country like Spain fulfills the pre- requisites of seeking aid from Europe’s bailout fund and signing up to conditions. At the same time, he’s sought to placate German concerns with assurances that the purchases won’t fuel inflation.
“A rate cut could further undermine support of inflation- averse Germans and thus be counterproductive,” said Schulz. “It is pivotal for the ECB to ensure strong OMT credibility. This means ensuring a maximum of support from Germany
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Debt Crisis: ECB slashes eurozone growth forecast - live
The European Central Bank has revised growth projections for euro-area GDP down, saying next year it will come between a 0.9pc fall and 0.3pc growth, compared with previous forecasts putting forecasts between a 0.4pc fall and1.4pc growth.
George Osborne, the Chancellor of the Exchequer. Photo: EDDIE MULHOLLAND
By Denise Roland
2:51PM GMT 06 Dec 2012
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• ECB cuts eurozone growth forecast
• Officials at ECB split over interest rate decision
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• Balls blames his stammer for stumbling performance
• S&P cuts Greek debt rating to 'selective default'
• Brussels eyes economic sovereignty over EU members
• ECB expected to hold interest rates later today• Fitch warning over UK's AAA credit rating
Latest
15.08 The US stock markets opened to mixed market sentiment as traders await news on a political deal as the fiscal cliff approaches.
The Dow Jones Industrial Average went up 0.04pc, while the S&P 500 slipped 0.03pc and the Nasdaq dropped 0.13pc.
15.00 EU president Herman Van Rompuy has called for greater economic and policy centralisation in the eurozone to strengthen the euro, in a paper prepared for next week's leaders summit. In what sounds like a move that would erode the sovereignty of individual member states, he said:
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The provisions for democratic legitimacy and accountability should ensure that the common interest of the union is duly taken into account; yet national parliaments are not in the best position to take it into account fully.
This implies that further integration of policy making and a greater pooling of competences at the European level should first and foremost be accompanied with a commensurate involvement of the European Parliament.
14.34 The centre-left Democratic Party (PD) in Italy said parliament should be dissolved if Berlusconi's centre-right party stages a second walk out as they did earlier today (11.50) as it would show a lack of confidence in the unelected technocrat leader Mario Monti, who was appointed last year to tackle the state of the country's economy.
14.12 Draghi admitted the ECB's decision to leave interest rates unchanged was not unanimous. He said:
There was a wide discussion, but in the end the prevailing consensus was to leave the rates unchanged.
14.08 Another question to Draghi on the single supervisory mechanism on what kind of agreement will be reached. He admitted that although one should aim for a single supervisor for all 6,000 euro-area banks, that in practice it wouldn't make a big difference if only the largest banks came under the mechanism.
13.56 Mario Draghi, President of the European Central Bank, has been asked whether he thinks the Single Supervisory Mechanism will face delays after eurozone states failed to reach an agreement on Tuesday. He said:
The political discussion has really just started, but I'm very confident we'll soon reach an agreement. The benefits of having a single supervisor are not disputed, it aims to break the link between the sovereigns and the banks to make banks reliable and trustworthy.
13.49 The European Central Bank has revised its eurozone GDP growth projection downwards, saying it is likely to contract in 2013 and grow 1.2pc in 2014.
13.01 The European Central Bank has held interest rates at 0.75pc, in line with most economists predictions. It appears to be waiting
12.31 Even in the worst depths of financial crisis, citizenship is not something which can be bought or sold, according to Bulgarian prime minister Rosen Plevneliev who today threw out parts of a new law which would grant citizenship to anyone investing one million leva (£400,000) in the country. He said:
This approach does not take into account the essence of citizenship as a political and legal tie of the person with the state from which ensue a series of rights and obligations.
The European Central Bank has revised growth projections for euro-area GDP down, saying next year it will come between a 0.9pc fall and 0.3pc growth, compared with previous forecasts putting forecasts between a 0.4pc fall and1.4pc growth.
George Osborne, the Chancellor of the Exchequer. Photo: EDDIE MULHOLLAND
By Denise Roland
2:51PM GMT 06 Dec 2012
209 Comments runUpdate = true;
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This page will automatically update every 90 secondsOn Off
• ECB cuts eurozone growth forecast
• Officials at ECB split over interest rate decision
• Osborne denies "sleight of hand" on 4G auction
• Balls blames his stammer for stumbling performance
• S&P cuts Greek debt rating to 'selective default'
• Brussels eyes economic sovereignty over EU members
• ECB expected to hold interest rates later today• Fitch warning over UK's AAA credit rating
Latest
15.08 The US stock markets opened to mixed market sentiment as traders await news on a political deal as the fiscal cliff approaches.
The Dow Jones Industrial Average went up 0.04pc, while the S&P 500 slipped 0.03pc and the Nasdaq dropped 0.13pc. 15.00 EU president Herman Van Rompuy has called for greater economic and policy centralisation in the eurozone to strengthen the euro, in a paper prepared for next week's leaders summit. In what sounds like a move that would erode the sovereignty of individual member states, he said:
Related Articles
The provisions for democratic legitimacy and accountability should ensure that the common interest of the union is duly taken into account; yet national parliaments are not in the best position to take it into account fully. This implies that further integration of policy making and a greater pooling of competences at the European level should first and foremost be accompanied with a commensurate involvement of the European Parliament.
14.34 The centre-left Democratic Party (PD) in Italy said parliament should be dissolved if Berlusconi's centre-right party stages a second walk out as they did earlier today (11.50) as it would show a lack of confidence in the unelected technocrat leader Mario Monti, who was appointed last year to tackle the state of the country's economy.
14.12 Draghi admitted the ECB's decision to leave interest rates unchanged was not unanimous. He said:
There was a wide discussion, but in the end the prevailing consensus was to leave the rates unchanged. 14.08 Another question to Draghi on the single supervisory mechanism on what kind of agreement will be reached. He admitted that although one should aim for a single supervisor for all 6,000 euro-area banks, that in practice it wouldn't make a big difference if only the largest banks came under the mechanism.
13.56 Mario Draghi, President of the European Central Bank, has been asked whether he thinks the Single Supervisory Mechanism will face delays after eurozone states failed to reach an agreement on Tuesday. He said:
The political discussion has really just started, but I'm very confident we'll soon reach an agreement. The benefits of having a single supervisor are not disputed, it aims to break the link between the sovereigns and the banks to make banks reliable and trustworthy. 13.49 The European Central Bank has revised its eurozone GDP growth projection downwards, saying it is likely to contract in 2013 and grow 1.2pc in 2014.
13.01 The European Central Bank has held interest rates at 0.75pc, in line with most economists predictions. It appears to be waiting
12.31 Even in the worst depths of financial crisis, citizenship is not something which can be bought or sold, according to Bulgarian prime minister Rosen Plevneliev who today threw out parts of a new law which would grant citizenship to anyone investing one million leva (£400,000) in the country. He said:
This approach does not take into account the essence of citizenship as a political and legal tie of the person with the state from which ensue a series of rights and obligations.
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Re: New EC Thread
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ECB: eurozone will not grow until 2014
The eurozone economy will not return to growth until 2014, the European Central Bank forecast on Thursday.
Mario Draghi, President of the European Central Bank, (ECB) addresses the media during a press conference on Thursday.
2:59PM GMT 06 Dec 2012
5 Comments
Mario Draghi, president of the ECB, told a news conference here that bank staff had slashed their growth projections for 2012 and 2013 and drawn up its initial forecast for 2014.
Mr Draghi said the central bank now expected the euro area economy to contract by 0.5pc in 2012 and again by 0.3pc in 2013, but return to growth of 1.2pc for 2014.
In September, the staff projections had foreseen a contraction of 0.4pc this year and growth of 0.5pc next year.
Mr Draghi noted that following a contraction of 0.2pc quarter on quarter in the second quarter of 2012, euro area gross domestic product declined by 0.1pc in the third quarter.
Furthermore, available statistics and indicators pointed to further weakness in activity in the fourth quarter and "over the shorter term, weak activity is expected to extend into next year," he said.
The eurozone economy will not return to growth until 2014, the European Central Bank forecast on Thursday.
Mario Draghi, President of the European Central Bank, (ECB) addresses the media during a press conference on Thursday.
2:59PM GMT 06 Dec 2012
5 Comments Mario Draghi, president of the ECB, told a news conference here that bank staff had slashed their growth projections for 2012 and 2013 and drawn up its initial forecast for 2014.
Mr Draghi said the central bank now expected the euro area economy to contract by 0.5pc in 2012 and again by 0.3pc in 2013, but return to growth of 1.2pc for 2014.
In September, the staff projections had foreseen a contraction of 0.4pc this year and growth of 0.5pc next year.
Mr Draghi noted that following a contraction of 0.2pc quarter on quarter in the second quarter of 2012, euro area gross domestic product declined by 0.1pc in the third quarter.
Furthermore, available statistics and indicators pointed to further weakness in activity in the fourth quarter and "over the shorter term, weak activity is expected to extend into next year," he said.
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ECB mulls negative rates as Europe's economic crisis deepens
The European Central Bank has slashed its eurozone growth forecasts and warned that recession will drag on into the middle of next year, sending the euro plunging below €1.30 to the dollar.
Mario Draghi struggled to explain why the ECB held its main interest rate at 0.75pc, even though it expects economic contraction of 0.3pc next year Photo: Reuters
By Ambrose Evans-Pritchard
7:42PM GMT 06 Dec 2012
88 Comments
Mario Draghi, the ECB’s president, said the governing council had discussed a cut in overnight deposit rate to below zero for the first time, and was "operationally ready" to do so if needed.
The comment sent the euro into a nosedive, dropping from $1.3075 to $1.2950 in just two hours. "A negative deposit rate is the mother of all sell signals for a currency," said Hans Redeker, currency chief at Morgan Stanley.
"You only do it if your purpose is to drive down the exchange rate to help exports. We know from Japan’s experience that you lose control of monetary policy if you go that route. We don’t think it will happen because the cost is too high, so we expect the euro to rebound."
Mr Draghi struggled to explain why the ECB held its main interest rate at 0.75pc, even though it expects economic contraction of 0.3pc next year, with inflation falling below its 2pc target. He said there had been a "wide discussion", a code term implying that several members pushed for a cut.
"It’s a dereliction of duty. If the outlook is so bad, get ahead of the situation and cut now," said Stephen Pope from the consultants Spotlight.
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The euro came under further pressure from the escalating crisis in Italy, where ex-premier Silvio Berlusconi withdrew support from the technocrat government of Mario Monti, vowing to fight further austerity. "The country is on the edge of the abyss: I can’t allow my country to plunge into an endless recessionary spiral," he said.
Mr Berlusconi hinted at a run for office early next year, despite a four-year prison conviction for fraud - still under appeal.
"The situation today is far worse than a year ago when I left the government. We have an extra million unemployed, the debt is rising, firms are closing, property is collapsing, and the car market is destroyed. We can’t keep going on like this," he said.
The rupture with Mr Monti is a stark reminder that Europe’s political crisis continues to fester as the region slides deeper into slump.
The yield on German 10-year Bunds fell to a five-month low of 1.29pc on save-haven flows, while Italy’s yields spiked to 4.55pc. The FTSE MIB index of Italian stock in Milan fell 1.4pc.
Mr Monti survived a senate vote on his fiscal package after Mr Berlusconi’s Liberty Party abstained, but his position is becoming untenable.
Mr Berlusconi has come close to calling for a break-up of EMU, saying repeatedly that Germany should leave the euro, and break the vicious cycle by allowing the Latin bloc to regain competitiveness.
Unlike Spain, Italy has already been through the brunt of its austerity so there are hopes that Italians will start to see some light at the end of the tunnel in mid-2013.
Views are polarized, however. Citigroup expects Italy to contract by 2.1pc this year, a further 1.2pc in 2013, and again by 1.5pc in 2014, with near zero growth in each year up to 2017.
"Italy’s primary budget surplus probably will be close to 3pc of GDP by end-2013, but the debt-to-GDP ratio is likely to go on rising due to the "snowball effect". Debt restructuring - probably through maturity extensions and coupon reductions - will probably be inevitable in 2015, once it becomes clear that austerity alone cannot restore fiscal sustainability," it said.
The International Monetary Fund expects Italy’s public debt to reach 128pc of GDP next year, 4pc of GDP higher than forecast as recently as April.
The IMF’s shifting forecast shows much damage the austerity policies are doing to Italy’s underlying economy, with the "fiscal mulitplier" much higher that originally thought. It is an open debate whether Italy’s is chasing its tail by tightening too hard.
Credit stress in the Club Med region is increasingly spreading to companies. The rating agency Moody’s warned that default risk is rising for any European firm exposed to the EMU periphery - including the UK groups Dixons and Imperial Tobacco, with large sales in Spain. "The North South gap is widening. Crucially, contagion could affect the stable areas if macro conditions worsen."
There have been 129 downgrades in Europe so far this year, against 47 upgrades, with fears that companies will struggle to repay $363bn of junk bonds coming due over the next four years, known as the "refinancing wall".
A separate report by Standard & Poor’s said "underlying economic realities" are catching up with Europe’s companies. "Although the intervention by the ECB appears to have averted the crisis by reducing the risk of a disorderly break-up of the euro, the hard grind of adjustment and austerity remain."
It warned of a coming wave of defaults in steel, refining, shipping, cars, and smaller mining groups, with 200 companies "vulnerable" as debt comes due in 2013 and 2014. Some 49 are likely to default by late next year. "Companies highly exposed to the periphery of the eurozone, will remain under the intense scrutiny of trade counterparties. We see little reason to expect the growing divide between the core and periphery of Europe to close up any time soon," it said.
S&P said Spanish companies now have to pay almost twice as much as German rivals to borrow, with the premium on five-year at a post-EMU high of 250 basis points.
Some Spanish firms are trying to diversify out of their home country as fast as possible or even reinvent themselves as non-Spanish groups. Inaer Aviation has switched its headquarters to London in the hope of obtaining cheaper credit. The technology group Abengoa is pushing 99pc of its investment over the next three years into ventures outside Spain.
The risk is that this exodus will create a self-fulfillng process, leaving Spain starved of investment and even less able to claw its way out of the EMU crisis.
Jean-Michel Six, S&P’s Europe economist, said EMU has degenerated into a "customs union", since the interbank market has been shut since 2011 in what amounts to a regime of "capital controls" within monetary union.
"There are two eurozones, a northern one and a southern one," he said.
The European Central Bank has slashed its eurozone growth forecasts and warned that recession will drag on into the middle of next year, sending the euro plunging below €1.30 to the dollar.
Mario Draghi struggled to explain why the ECB held its main interest rate at 0.75pc, even though it expects economic contraction of 0.3pc next year Photo: Reuters
By Ambrose Evans-Pritchard
7:42PM GMT 06 Dec 2012
88 Comments Mario Draghi, the ECB’s president, said the governing council had discussed a cut in overnight deposit rate to below zero for the first time, and was "operationally ready" to do so if needed.
The comment sent the euro into a nosedive, dropping from $1.3075 to $1.2950 in just two hours. "A negative deposit rate is the mother of all sell signals for a currency," said Hans Redeker, currency chief at Morgan Stanley.
"You only do it if your purpose is to drive down the exchange rate to help exports. We know from Japan’s experience that you lose control of monetary policy if you go that route. We don’t think it will happen because the cost is too high, so we expect the euro to rebound."
Mr Draghi struggled to explain why the ECB held its main interest rate at 0.75pc, even though it expects economic contraction of 0.3pc next year, with inflation falling below its 2pc target. He said there had been a "wide discussion", a code term implying that several members pushed for a cut.
"It’s a dereliction of duty. If the outlook is so bad, get ahead of the situation and cut now," said Stephen Pope from the consultants Spotlight.
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The euro came under further pressure from the escalating crisis in Italy, where ex-premier Silvio Berlusconi withdrew support from the technocrat government of Mario Monti, vowing to fight further austerity. "The country is on the edge of the abyss: I can’t allow my country to plunge into an endless recessionary spiral," he said.
Mr Berlusconi hinted at a run for office early next year, despite a four-year prison conviction for fraud - still under appeal.
"The situation today is far worse than a year ago when I left the government. We have an extra million unemployed, the debt is rising, firms are closing, property is collapsing, and the car market is destroyed. We can’t keep going on like this," he said.
The rupture with Mr Monti is a stark reminder that Europe’s political crisis continues to fester as the region slides deeper into slump.
The yield on German 10-year Bunds fell to a five-month low of 1.29pc on save-haven flows, while Italy’s yields spiked to 4.55pc. The FTSE MIB index of Italian stock in Milan fell 1.4pc.
Mr Monti survived a senate vote on his fiscal package after Mr Berlusconi’s Liberty Party abstained, but his position is becoming untenable.
Mr Berlusconi has come close to calling for a break-up of EMU, saying repeatedly that Germany should leave the euro, and break the vicious cycle by allowing the Latin bloc to regain competitiveness.
Unlike Spain, Italy has already been through the brunt of its austerity so there are hopes that Italians will start to see some light at the end of the tunnel in mid-2013.
Views are polarized, however. Citigroup expects Italy to contract by 2.1pc this year, a further 1.2pc in 2013, and again by 1.5pc in 2014, with near zero growth in each year up to 2017.
"Italy’s primary budget surplus probably will be close to 3pc of GDP by end-2013, but the debt-to-GDP ratio is likely to go on rising due to the "snowball effect". Debt restructuring - probably through maturity extensions and coupon reductions - will probably be inevitable in 2015, once it becomes clear that austerity alone cannot restore fiscal sustainability," it said.
The International Monetary Fund expects Italy’s public debt to reach 128pc of GDP next year, 4pc of GDP higher than forecast as recently as April.
The IMF’s shifting forecast shows much damage the austerity policies are doing to Italy’s underlying economy, with the "fiscal mulitplier" much higher that originally thought. It is an open debate whether Italy’s is chasing its tail by tightening too hard.
Credit stress in the Club Med region is increasingly spreading to companies. The rating agency Moody’s warned that default risk is rising for any European firm exposed to the EMU periphery - including the UK groups Dixons and Imperial Tobacco, with large sales in Spain. "The North South gap is widening. Crucially, contagion could affect the stable areas if macro conditions worsen."
There have been 129 downgrades in Europe so far this year, against 47 upgrades, with fears that companies will struggle to repay $363bn of junk bonds coming due over the next four years, known as the "refinancing wall".
A separate report by Standard & Poor’s said "underlying economic realities" are catching up with Europe’s companies. "Although the intervention by the ECB appears to have averted the crisis by reducing the risk of a disorderly break-up of the euro, the hard grind of adjustment and austerity remain."
It warned of a coming wave of defaults in steel, refining, shipping, cars, and smaller mining groups, with 200 companies "vulnerable" as debt comes due in 2013 and 2014. Some 49 are likely to default by late next year. "Companies highly exposed to the periphery of the eurozone, will remain under the intense scrutiny of trade counterparties. We see little reason to expect the growing divide between the core and periphery of Europe to close up any time soon," it said.
S&P said Spanish companies now have to pay almost twice as much as German rivals to borrow, with the premium on five-year at a post-EMU high of 250 basis points.
Some Spanish firms are trying to diversify out of their home country as fast as possible or even reinvent themselves as non-Spanish groups. Inaer Aviation has switched its headquarters to London in the hope of obtaining cheaper credit. The technology group Abengoa is pushing 99pc of its investment over the next three years into ventures outside Spain.
The risk is that this exodus will create a self-fulfillng process, leaving Spain starved of investment and even less able to claw its way out of the EMU crisis.
Jean-Michel Six, S&P’s Europe economist, said EMU has degenerated into a "customs union", since the interbank market has been shut since 2011 in what amounts to a regime of "capital controls" within monetary union.
"There are two eurozones, a northern one and a southern one," he said.
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