"All over Europe the lights are going out." . . .
http://www.telegraph.co.uk/finance/financialcrisis/9332338/Angela-Merkel-Germany-cannot-save-the-euro-on-its-own.html
Angela Merkel: Germany cannot save the euro on its own
Germany cannot save the euro single-handedly, Angela Merkel has warned, expressing her growing anger over British, American and G20 demands that she does more to tackle the eurozone debt crisis.
German Chancellor Angela Merkel gives a speech on Thursday at the Bundestag (lower house of parliament) in Berlin. Photo: AFP
5:47PM BST 14 Jun 2012
"The German Chancellor is furious that France and Italy, countries that she regards as shirking their responsibility to cut their high levels of national debt, has rallied the G20 behind their calls for eurobonds and EU-funded bank rescues.
"All eyes are on Germany," she told German MPs on Thursday. "But we also know that Germany's power is not infinite. So our responsibility as Europe's largest economy is to deploy our strength credibly."
Chancellor Merkel has expressed her fury at suggestions, backed by Britain and America, that trillions of euros in debts run up by France, Italy and Spain should be shared across the eurozone as eurobonds, with Germany picking up most of the bill as the EU's largest and most successful economy.
She is also incensed that France, which blocked German proposals to increase EU powers over national borrowing levels, is pushing hard, with Italy and the G20's support, for the eurozone to rescue French and Italian banks without the cheap, subsidised EU loans appearing on their budget balance sheets.
Mrs Merkel told her MPs that she would refuse the demands and tell the G20 at a meeting in Mexico next Monday that Germany would not take on the "Herculean task" unless there was a global effort.
The G20 summit meets in the Pacific coastal resort of Los Cabos the day after Greece votes in June 17 elections that could lead to the highly indebted country leaving the euro and defaulting on €240bn (£194.8bn) in EU and IMF loans.
A Spanish bank bailout, using EU funds, of up to €100bn to rescue its banks was announced last weekend in a bid to insulate the eurozone against financial contagion from the political chaos that is expected to follow the Greek vote.
But markets have rejected the Spanish bailout, pushing the cost of Spanish borrowing to euro-era highs and threatening to take the EU single currency's debt crisis into a dangerous new phase.
Germany regards the Spanish bailout as being too late, after Spain resisted strict German conditions on the loan for months, and as another ill thought out "quick fix" that has made the eurozone's crisis even worse.
Mrs Merkel is personally angry after being assured by the European Central Bank that massive "LTRO" liquidity operations early this year, cheap bank loans worth over €1 trillion, would prevent a new banking crisis for three years.
"She was reluctantly convinced that the effect of the liquidity operations would last for years but it lasted six months before being absorbed into failed or failing banks," said a senior European official.
German finance officials note that since 2010 various eurozone counter crisis measures - including LTRO and bailouts - have seen "risk mutualisation" of €2 trillion in debt, with Germany liable for the lion's share.
The German government was aghast last month when PIMCO, a leading investment house, announced that it had stopped buying Germany's sovereign bonds because it was concerned over the burden of its eurozone obligations.
Mrs Merkel has flatly ruled out calls by Francois Hollande, the French President and Mario Monti, the Italian Prime Minister, for Germany to underwrite joint euro-area debt.
"All resources, all measures, all packages will end up being smoke and mirrors if it becomes clear in the end that they extend beyond Germany's capacity," she said.
The Chancellor has told the French and Italian leaders that they are "out their minds" to suggest that Germany shares their debts without either France or Italy surrendering sovereignty to the EU.
Germany's "precondition" for any form of debt sharing is that France and Italy are forced to pay back 20pc of all debt over 60pc of national GDP every year, a requirement blocked by a Paris veto earlier this year.
"It's our obligation today to do what has been neglected, to break the vicious circle of generating ever more debt and breaking the rules," said Mrs Merkel."
A Spanish bank bailout, using EU funds, of up to €100bn to rescue its banks was announced last weekend in a bid to insulate the eurozone against financial contagion from the political chaos that is expected to follow the Greek vote.
But markets have rejected the Spanish bailout, pushing the cost of Spanish borrowing to euro-era highs and threatening to take the EU single currency's debt crisis into a dangerous new phase.
Germany regards the Spanish bailout as being too late, after Spain resisted strict German conditions on the loan for months, and as another ill thought out "quick fix" that has made the eurozone's crisis even worse.
Mrs Merkel is personally angry after being assured by the European Central Bank that massive "LTRO" liquidity operations early this year, cheap bank loans worth over €1 trillion, would prevent a new banking crisis for three years.
"She was reluctantly convinced that the effect of the liquidity operations would last for years but it lasted six months before being absorbed into failed or failing banks," said a senior European official.
German finance officials note that since 2010 various eurozone counter crisis measures - including LTRO and bailouts - have seen "risk mutualisation" of €2 trillion in debt, with Germany liable for the lion's share.
The German government was aghast last month when PIMCO, a leading investment house, announced that it had stopped buying Germany's sovereign bonds because it was concerned over the burden of its eurozone obligations.
Mrs Merkel has flatly ruled out calls by Francois Hollande, the French President and Mario Monti, the Italian Prime Minister, for Germany to underwrite joint euro-area debt.
"All resources, all measures, all packages will end up being smoke and mirrors if it becomes clear in the end that they extend beyond Germany's capacity," she said.
The Chancellor has told the French and Italian leaders that they are "out their minds" to suggest that Germany shares their debts without either France or Italy surrendering sovereignty to the EU.
Germany's "precondition" for any form of debt sharing is that France and Italy are forced to pay back 20pc of all debt over 60pc of national GDP every year, a requirement blocked by a Paris veto earlier this year.
"It's our obligation today to do what has been neglected, to break the vicious circle of generating ever more debt and breaking the rules," said Mrs Merkel."
http://ftalphaville.ft.com/blog/2012/06/14/1044481/snb-remains-determined-to-keep-buying-your-euro/?updatedcontent=1
SNB remains DETERMINED to keep buying your euro!
From the Swiss National Bank this morning:The Swiss National Bank (SNB) will maintain the minimum exchange rate of CHF 1.20 per euro and will enforce it with the utmost determination. It remains prepared to buy foreign currency in unlimited quantities for this purpose. Even at the current rate, the Swiss franc is still high. Another appreciation would have a serious impact on both prices and the economy in Switzerland. The SNB will not tolerate this. If necessary, it stands ready to take further measures at any time.The SNB’s inflation forecast continues to be benign:
For 2012, the forecast shows an inflation rate of –0.5%. For 2013, the SNB is expecting inflation of 0.3% and for 2014, of 0.6%. Consequently, in the foreseeable future, there is no risk of inflation in Switzerland.And the euro/swiss franc did basically nothing in response… which is kinda the point. No-one expected any real change here.
So, it looks like that Swiss mountain may just keep building and we look forward to the next look inside that foreign exchange reserve vault.
*cough* SFr304bn already, up SFr65bn in May *cough*
http://ftalphaville.ft.com/blog/2012/06/14/1045391/placement-of-a-member-state-under-legal-protection/
“Placement of a Member State under legal protection”
Amazing what sometimes comes out of the European Parliament.
Which may be just as well, given this particular proposal. Hat-tip to the Societe Generale fixed income team for spotting it.
They said that it “continues a continental European tradition of simply outlawing unwelcome matters”…
More seriously, the concept here would depart from the basic principles of sovereign debt restructuring pretty squarely, even if it apparently wouldn’t apply until 2017. (Assuming it survives the Council.)
It looks like bankruptcy protection for sovereign debtors on the European Commission’s terms. What exactly creditors would do in this period – versus getting to talk to their sovereign debtor about a restructuring – isn’t clear.
It doesn’t sound good for bondholders who are already aware of European officialdom’s less than principled approach to the Greek PSI. The part on debt “being extinguished” if creditors fail to contact the Commission reads like a license for eurozone sovereigns to write down small-time or foreign bondholders (who might well be out of the loop) by the full 100 per cent. Heady, but not exactly realistic, stuff. Meanwhile the bit about declaring (CDS) credit events “inoperative” is… cute.
Time to read the 2004 Principles for Stable Capital Flows and Fair Debt Restructuring again, we think.
When a restructuring becomes inevitable, debtors and creditors should engage in a restructuring process that is voluntary and based on good faith…
Structured, early negotiations with a creditor committee should take place when a default has occurred in order to ensure that the terms for amending existing debt contracts and/or a voluntary debt exchange are consistent with market realities…
Greece is insolvent. There is no authority to declare it but Greece.
Debt slavery is not an option. Debtors prison is not available.
Default.
http://www.nytimes.com/2012/06/14/world/europe/greeks-dread-future-as-their-world-deteriorates.html?pagewanted=1&_r=1&hp
"ATHENS — Anyplace else, they might be signs of progress: Traffic moves faster on once clogged streets. Cigarette smoking has dropped sharply. Far less garbage heads for landfills each day. But this is Athens, and the statistics are grim reminders of a middle-class society in rapid decline. Many fear that elections, including voting scheduled for Sunday, offer no clear route out of a deepening political and economic crisis. From its wealthy northern suburbs to the concrete blocks of downtown, there is a sense of an endgame in Athens.
“It’s the last days of Pompeii,” said Aris Chatzistefanou, a co-director of “Debtocracy,” a provocative 2011 documentary about the Greek crisis, as he stood, drink in hand, outside a cafe in Exarchia, a thrumming graffiti-filled neighborhood whose night life remains a rare pocket of defiant joy amid the unremitting gloom.
For many Greeks, the question is not which party will win. The next months and years will be difficult no matter which government is in charge. Increasingly, they wonder whether they themselves — and their country — will emerge from the crisis with a secure future. Giorgos, a 27-year-old economics major who did not want to reveal his last name, said the sense of uncertainty was oppressive.
“There is a depression in the Greek people, in all my friends,” said Giorgos, who has put off plans to open a frozen yogurt shop. “They keep saying: ‘I can’t take it. There’s depression about our jobs, depression on the news, depression about the economic situation, depression in our family, depression and fighting among friends.’ ”
He had just returned from a day trip to Munich, where like many people in the heavily indebted countries, he had opened a bank account. “I don’t want to transfer all my money, but if something goes wrong here, I don’t want to be poor just in one day,” he said.
In the Athens Metro, posters that read “Apocalypse,” advertising a staged rendition of the Book of Revelation on the island of Patmos, capture the air of desperation. In the gleaming Eleftheroudakis bookshop downtown, copies of “Living in the End Times” by Slavoj Zizek, the Slovenian cultural critic, are on prominent display.
A clerk said books on economics and do-it-yourself guides were selling briskly, as were escapist thrillers and philosophy, especially works by Arthur Schopenhauer, known for his pessimism and his conviction that human experience is not rational or understandable.
Saddled with debts to foreign lenders, Greece is in its fifth consecutive year of recession. The uncertainty, political and economic, has brought the economy to a standstill. Private sector salaries dropped 22.5 percent in 2011, according to the Organization for Economic Cooperation and Development. New figures released last week show unemployment at 22 percent, rising to nearly 30 percent for Greeks 25 to 34 years old.
The feeling that the country is about to undergo an even greater economic upheaval is inescapable. Highly educated young people are desperate to emigrate. Families are putting their property up for sale to pay debts. Banks long ago stopped lending. Casual conversations between friends end in tears.
Mr. Chatzistefanou, the documentary maker, is among a faction of Greeks who argue that Greece should voluntarily abandon the euro and return to the drachma, its original currency. Polls have consistently shown that more than 70 percent of Greeks disagree with him.
Polls show that Syriza, the leftist party that staunchly rejects the terms of the bailout that averted a Greek bankruptcy but imposed severe budget cuts and structural changes, is neck and neck with its conservative rival, New Democracy, raising fears that Greece will leave the euro. (By law the last polls were taken June 1, two weeks before elections.)
In a news conference on Tuesday, Syriza’s leader, Alexis Tsipras, said the party did not intend to “bully” Greece’s foreign lenders. “We will go there to convince them that a euro zone country is falling apart,” he said.
There is no guarantee that the parliamentary elections on Sunday will clear up the fog that has enveloped the country since the inconclusive elections on May 6. Uncertain of their futures, Greeks have put off all kinds of decisions. “As if it weren’t bad already because of the recession, things have been completely frozen since the day elections were called,” said Leftheris Potamianos, a real estate agent. “If the market could speak, it would beg for a government.”
As elections near, the country is becoming more politically polarized between left and right. Since last week, Greece has been abuzz with talk of how Ilias Kasidiaris, the spokesman for the neo-Nazi, anti-immigrant Golden Dawn party, physically assaulted two left-wing lawmakers, both women, on live television, tossing water in one’s face and giving the other a series of solid swats to the face.
He then evaded arrest for several days, prompting critics to suggest complicity between the hard-right vigilante group and the Greek police. (The police have denied any such links.) In a bizarre twist on Monday, Mr. Kasidiaris sued the two lawmakers he had attacked, saying he had been provoked. Still, daily life marches on. Outside a dissolved Parliament, the guards goose-step in their kilts and shoes with pom-poms. Tourists traipse up to the Acropolis. Cafes are full. Temperatures are rising, and shops display a vast array of suntan lotions. A clerk said that sales were generally down but that sunblock was drawing people in.
“The beach is the only thing we are left with,” said a clerk in the Hondos Center department store. “It’s free.”
For others, it is soccer. In the opening match of the Euro 2012 on Friday, Greece, the European Union’s fastest-shrinking economy, scored an equalizer to tie with Poland, its fastest-growing economy. Fans gathered in a shopping mall to watch, raising their fists in despair at a missed penalty kick. Greece’s coach put his hands to his face in a gesture that captured the national mood. (On Tuesday, Greece lost to the Czech Republic.)
The crisis continues to erode the economy and living standards. The Greek news media reported a 27 percent drop in garbage collections in the greater Athens area, and a precipitous decline in smoking, with consumption dropping to 2.3 million cigarettes in 2011, from 3.1 million in 2007. Mass transit use has dropped by double digits.
“In the beginning you panic, and then you realize that you can live with much less,” said Nikos Hlepas, a professor of public administration at the University of Athens, who said his salary had been sharply reduced. “No restaurants, no opera. You visit your friends and you cook much more. It has its positive aspects. You don’t use your car. You don’t take trips.” After several tax increases, gasoline costs around $8.20 a gallon.
In the Athens meat market on a recent morning, Yiannoula and Tasos Siskos, 52 and 57 and both unemployed, said they had taken the subway in from the suburbs to save money. “It’s our first time here,” Ms. Siskos said. “It’s cheaper than from the supermarket.” She was a seamstress and he was in construction, but their year of unemployment benefits had run out. “We have a mortgage, but we stopped paying,” she said.
Asked if she was worried about the future, Ms. Siskos rolled her eyes and let out a long, high-pitched “oooooh,” an affirmative that transcended language.
The recession has also hit the upper tiers. The car market, fueled by too-easy credit in the past, has collapsed. With the downturn and steep tax increases on large-cylinder cars, luxury cars are selling at bargain-basement rates. At the Fast and Fashion car dealership in Athens, Dimitris Karanastasis, 31, pointed across the showroom to a black Porsche 911 Turbo. “In 2008, we sold this car for $210,000,” he said. “Now the customer brought it back to sell it for $97,000.”
Greeks seem resigned to the fact that their economy is moving backward, although whether to the levels of the pre-boom 1990s, 1970s or 1950s remains to be seen. Asked what he thought, Mr. Karanastasis shrugged and cited a Greek expression. “Make me an oracle and I’ll make you rich,” he said."
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