Tomorrow's meeting to discuss the second Greek bail-out has been called off amid accusations that a top politician in the debt-stricken country has failed to sign off agreed austerity measures....Tomorrow, Samaras is expected to deliver a letter agreeing to adhere to the Troika (German) plan. And pigs may fly!Which will it be:
1.- The letter does not arrive in time (lost in the mail)
2.- A further letter is dispatched but to the wrong address
3.- The letter arrives but is ambiguous and is rejected by the EU - (my most likely outcome)
I think the letter is not ever written but there is enough talk about it for the can to travel down the road for another day......The head of the eurozone countries has downgraded an eurozone finance ministers meeting on Wednesday, saying Greece has not yet given the necessary assurances about its austerity plan. Ministers, who had demanded Greece find an extra 325m euros of savings, had been set to meet in Brussels. But Eurogroup President Jean-Claude Juncker said the talks would be replaced by a conference call. He said technical work with Greece was still needed "in a number of areas". .... Finance ministers had not received assurances from leaders of Greek political parties on a programme of proposed cuts, Mr Juncker was quoted as saying by Reuters news agency. He said that "against this background, I have decided to convene ministers to a conference call tomorrow in order to discuss the outstanding issues". There is pressure on Greece to make progress, as the country will not be able to pay debts due on 20 March unless it can qualify for more bailout funds by satisfying its European partners. By that date Greece needs to repay 14.5bn euros to lenders. When and if eurozone ministers are convinced Greece is making progress on cuts, and if the German parliament agrees to the bailout (as it must under national law), then any new bailout could be signed off in early March. Meanwhile, an official report on Tuesday showed that the decline of the Greek economy accelerated in the final three months of 2011.
2.- A further letter is dispatched but to the wrong address
3.- The letter arrives but is ambiguous and is rejected by the EU - (my most likely outcome)
I think the letter is not ever written but there is enough talk about it for the can to travel down the road for another day......The head of the eurozone countries has downgraded an eurozone finance ministers meeting on Wednesday, saying Greece has not yet given the necessary assurances about its austerity plan. Ministers, who had demanded Greece find an extra 325m euros of savings, had been set to meet in Brussels. But Eurogroup President Jean-Claude Juncker said the talks would be replaced by a conference call. He said technical work with Greece was still needed "in a number of areas". .... Finance ministers had not received assurances from leaders of Greek political parties on a programme of proposed cuts, Mr Juncker was quoted as saying by Reuters news agency. He said that "against this background, I have decided to convene ministers to a conference call tomorrow in order to discuss the outstanding issues". There is pressure on Greece to make progress, as the country will not be able to pay debts due on 20 March unless it can qualify for more bailout funds by satisfying its European partners. By that date Greece needs to repay 14.5bn euros to lenders. When and if eurozone ministers are convinced Greece is making progress on cuts, and if the German parliament agrees to the bailout (as it must under national law), then any new bailout could be signed off in early March. Meanwhile, an official report on Tuesday showed that the decline of the Greek economy accelerated in the final three months of 2011.
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Greek, Italian and Spanish bonds attracted lower interest rates at auctions on Tuesday morning, as the European Central Bank's injection of cheap loans into the banking system continued to ease the sovereign debt crisis. Italy's treasury sold €6bn of three- and five-year bonds, at the top of its planned range, at lower interest rates than the government has had to offer for nearly a year. The yield on the three-year November 2014 bond fell to 3.41%, well below the 4.83% reached in mid-January, and the lowest since March 2011, before the country became the focus of the European sovereign debt crisis over the summer. The lower yields were achieved despite a widely expected cut to Italy's A3 rating by Moody's on Monday night, which followed similar decisions by Standard & Poor's and Fitch Ratings in January. Greece sold €1.3bn of three-month bills at a slightly lower yield than the previous auction in January. The bills were snapped up at an average 4.61% yield, compared with 4.64% a month ago. Debt issued by the eurozone's weakest states has been sold at rates more favourable to governments, particularly for short-term loans, since the ECB's €500bn long-term refinancing operation (LTRO) in late December.
Italy's GDP numbers are out and worse than expected:
The economy shrank by 0.7pc in the last quarter of 2011, meaning the country is in recession after it contracted 0.2pc in the thid quarter.
08.50 The rumour mill this morning is spinning with talk that a growing number of European players want to push Greece out of the eurozone, as observed by Ambrose Evans-Pritchard (see 06.50 post).
However FT commentator Martin Wolf writes this morning that ther is a bigger question here - what is the future for the eurozone as a whole if Greece does go? He writes:
The eurozone is in a form of limbo: it is neither so deeply integrafted that break-up is inconceivable, nor so lightly integrated that break-up is tolerable. Indeed the most powerful guarantee of its survival is the costs of breaking it up. Maybe that will prove sufficient.
Yet if the eurozone is to be more than a grim marriage sustained by the frightening costs of dividing up assets and liabilities, it has to be built on something vastly more positive than that. Given the economic divergences and political frictions revelaed so starkly by this crisis, is that now possible? That is the most difficult question of all
9.12am: Holland has also fallen back into recession. Like Italy, it shrank by 0.7% in the last three months of 2011, following a 0.4% contraction in Q3.
9.03am: Breaking -- Italy has tumbled back into recession.
Italian GDP fell by 0.7% in the last quarter of 2011 , even worse than the 0.5% contraction expected by City analysts. It follows a 0.2% decline in the third quarter, so Italy has now been shrinking for six months.
8.52am: Profits at French bank BNP Paribas have been hit by the eurozone crisis. It reported this morning that net earnings halved in the last quarter of 2011, partly due to writedowns on its Greek bonds.
BNP Paribas has cut the value of its Greek sovereign bonds by 70% – in line with the haircut that will probably be taken by Athens' creditors.
But at €765m, its earnings were better than City analysts had expected. There's a good write-up on Businessweek.
German GDP fell by 0.2% in the last three months of 2011, according to its Federal Statistics body this morning.
Trade and private consumption both fell during the quarter, which might dent claims that Germany is immune from the eurozone crisis. However, the data was still slightly better than analysts had expected.
Christian Schulz of Berenberg Bank blamed the eurocrisis for hurting the German economy – retail sales and industrial production both suffered.
Arnd Schäfer of WestLB suggested that German consumers had cut back last November when the debt crisis was raging (that was the month in which the prime ministers of Greece and Italy were both replaced).
Economists are generally confident, though, that Germany will return to growth in this quarter – thus avoiding a technical recession
he surprising news this morning is that the French economy grew by 0.2% in the last three months of 2011, defying predictions that it would shrink by 0.2%. The figures have been warmly welcomed by finance minister Francois Baroin, who declared:
Each of the three main components of the economy -- foreign trade, household consumption and investment -- had a positive contribution in the last quarter of 2011.
This strengthens the government's forecast for 0.5% percent (growth) this year.
Speaking of France, it appears that Nicolas Sarkozy has joined Twitter this morning, using @nicolassarkozy. Interesting timing – he's expected to kick off his re-election bid tonight.
There's a busy morning ahead -- with eurozone GDP, UK unemployment and the Bank of England's quarterly inflation report all coming up. Here's the agenda
• Italian GDP for Q4 2011 - 9am GMT
• UK unemployment data - 9.30am GMT
• Eurozone GDP for Q4 2011 - 10am GMT / 11am CET
• BoE quarterly inflation report - 10.30am
• Eurozone finance ministers conference call - 5pm GMT
As I have argued previously, this is complete nonsense. The UK government is in a position to break this stranglehold imposed by the ratings agencies. Since the Lisbon Treaty allows Central banks to lend to "publicly-owned credit insitutions" (such as RBS), it is perfectly possible for the Bank of England to print all the money needed to pay off the entire national debt, and lend it to the government via RBS, who could then reimburse all the banks. The tax payer would then "owe" the money to the Bank of England, and if the money didn't get paid back, it would not be a problem.
Since much of the "money" that they banks"lent" was money that the banks did not have to lend (they just created it out of thin air), paying off the debt would just lead to the "money" disappearing in a puff of spoke.
Unlike the totally stupid Quantatitive Easing (another £50 billion announced on friday) and the hundreds of billions of euros that will no doubt be printed for the banks at the next feeding frenzy organised by the ECB for the 29th of February, paying off debt this way is not inflationary.
So why don't we do it? Because the banks will fight like wildcats to keep the gravy train on the rails. They make huge amounts of money from the interest payments that governements have to pay on debt - around 4.25% of total European GDP on the current figures. The system is clearly stupid and needs to be dismantled.
Robert Miller with the main City and business news as the number of people out of work in the UK rises by 48,000 to hit 2.67m according to the Office for National Statistics; Brent crude hits $118 a barrel on security fears in the Straits of Hormuz and a strike at Yemen's flagship Masila field; Business Bullet's share tip Domino's Pizza makes steady progress and lifts the final dividend by almost 21pc and, despite an apparent air of calm, if Greece does exit the Eurozone global markets will fall dramatically.
In this EU-dictatorship led by not only non-elected but outvoted Eurocrats like Barosso and Rumpy, each member nation can still leave on its own sovereign decision this community. And what is the reality: they queue up and jostle to receive an entrance and then they are closely hugging to the spender nations , eager not to lose the place in the center of EU- activities.
can picture a scene where the Eurozone (Germany) force Greece out, and the following week the UN commences a massive humanitarian operation in Greece to bring in food and needed medical supplies, complete with US Carriers in the Med and NATO hospital ships and supply ships, scenes of children being rescued and given medical treatment while Eurozone countries stand by, possibly contributing thru NATO, possibly not.
That would go down well on the news for the image of the Eurozone. Providing it was covered.
The $3bn Athens debt hole that spookily turned out to be the same old $400m pinhole...Berlin's delaying tactics piling up - and the Bundesbank was clearly behind the bondholders' 'story'.
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The Greek people should take matters into their own hands. They should leave the ez now. Its going to fail anyway so they have little to lose in leaving this hopeless currency. That way they maintain their dignity - they may be poor (we all are really) but they will hold on to their dignity. They will have their own currency and be in a position to exercise their own agenda without being told what to do by eu bureaucrats. The future might be brighter for Greece if she leaves now rather than later. Greece holds all the best cards here. If she defaults - which she should - then French and German banks go down. And all those arms sales by these countries to Greece. Stop that and Germany and France are in deep recession for a long time. Go for it Greece. You have the power - if only you knew it
Sir Mervyn King, governor of the Bank of England, has confirmed that Britain has drawn up contingency plans for a Greek default.
At a press conference to discuss the Bank of England's new quarterly inflation report, King refused to go into details, telling reporters:
As you would expect, the government and the Bank together have been discussing a range of policy options and devising contingency plans.
The governor also warned that Britain's GDP growth, and contraction, will probably fluctuate in 2012 due to the effect of the Jubilee Holiday (marking Queen Elizabeth's 60 years on the throne).
So there'll be two QE2's on the governor's agenda this year.....
Despite some recent improved Eurozone surveys and evidence that Germany is returning to growth, we doubt that the Eurozone will be able to avoid further contraction in the first quarter and very possibly the second as well in the face of tighter credit conditions, a further tightening in fiscal policy in many countries, the ongoing pressures facing consumers (high and rising unemployment, and still squeezed purchasing power) and limited global growth.
Meanwhile, the Eurozone sovereign debt crisis is likely to continue to weigh down on confidence and fuel uncertainty, thereby holding back business investment.
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