Risk sharing: an effective anti-crisis instrument.

Strasbourg, 19 April 2012 - "The sooner we put into operation risk-sharing instruments, the quicker the recovery of countries worst hit by the financial crisis, such as Greece," said Danuta Hübner, Chairwoman of the Regional Development Committee in the European Parliament and author of a report on risk-sharing instruments adopted today in plenary...."Austerity packages in economies most strongly hit by the crisis have not generated growth because of dysfunctional banking sectors and high risk aversion. There is an urgent need therefore to unlock EIB loans and guarantees to enable private sector involvement in important growth and jobs-creating projects, especially those co-financed by EU cohesion policy. And this is what the risk-sharing instrument is about," said Danuta Hübner MEP. The aim of the instrument is to increase the involvement of the private sector in funding important projects in EU crisis-hit countries. Part of the risk associated with lending to banks will be covered, in collaboration with the European Commission (EC) and the European Investment Bank, in order to maintain the involvement of private investors in implementing cohesion policy programmes. Countries eligible for support are Ireland, Greece, Portugal and Romania. These Member States can transfer part of their allocation of EU regional funding to the EC to use in the risk-sharing scheme. The EC then concludes a risk-sharing partnership with the European Investment Bank, with the aim of encouraging private investors to back projects partly funded by the European Regional Development Fund and Cohesion Fund. Risk-sharing will not result in any change in the overall allocation under cohesion funding for 2007-2013.

The Romanian prime minister has announced he and his government will resign immediately to protect the stability of the country. Emil Boc said on Monday he was resigning "to ease the social situation" – referring to weeks of protests in Romania over austerity measures he introduced in 2010. Boc, who became prime minister in 2008, urged Romania's feuding politicians to be mature and rapidly vote for a new government. He defended his record, saying he had taken "difficult decisions thinking about the future of Romania, not because I wanted to, but because I had to". He added that the International Monetary Fund had forecast growth of up to 2% this year – lower than expected, but higher than the European Union average. Romania signed up for a $26bn (£16bn) loan with the IMF, the EU and the World Bank in 2009 to help pay salaries and pensions, after the economy shrank by more than 7%. In 2010, the government increased sales tax from 19% to 24% and cut public workers' salaries by a quarter to reduce the budget deficit. In January, Romanians staged weeks of protests to express anger at cronyism and a perception that the government was not interested in the problems of ordinary people in this country with a population of 22 million. They protested against low living standards, widespread corruption and the passage of some laws without a parliamentary debate. "I know that I made difficult decisions, but the fruits have begun to appear," Boc said in a statement. "The most important thing is the economic stability of the country," he said, adding, "In times of crisis, the government is not in a popularity contest, but is saving the country."

The Summit = "the hot air baloon"

Summit finished - WHAT A JOKE !! WHAT A PILE OF B.S !!! - So, Sarkozy is off to Paris, turning his attention no doubt to other worries, like fighting an election. The big thing to come from his statement is that a deal on new balanced budget rules has been signed. By everyone except the UK and the Czech Republic, that is. So it's a treaty of 25... Sarkozy added that it would be unreasonable to put Greece in "wardenship", where all of its budget decisions must be given the OK by Germany and/or France. He's been asked if the treaty will be ratified in France before the election. He points out that during an election the Parliament doesn't sit, so it could be tricky. Sarkozy hopes for a deal on Greek debt, which he describes as a "thorn in our side", within days - but points out that it wasn't the aim of this meeting. We've gone to questions already. He sounds like a teacher, criticising the press pack because the same journalists always put their hands up first. First up is a question about why the Czech Republic felt it couldn't sign the treaty: The Czech PM told us that for constitutional reasons he did not feel he could accede to that future treaty. I'm not sufficiently familiar with the ins and outs of what's going on in Prague to understand why what was acceptable in December is not acceptable now. It will be a treaty among 25.

DAVOS - Hopes that Germany might crumble, and agree to the sort of things that would help resolve the crisis – a bigger firewall, some form of debt Maturalization, bolder central bank intervention – have been further dashed here. Angela Merkel, the German Chancellor, has been as defiant as ever. Of course, any kid with an O level in economics will know that if you lend countries money so that they can buy from you, sooner, or later, you will come unstuck. And the euro and Germany is coming unstuck big time. So much so, the last I heard was that no German banks were lending to any country other than Germany - nice!
Therefore, why Germany is refusing to accept the inevitable outcome of its failed economic practices is beyond any reasonable comprehension. I guess, the only reason could be that, if it agrees the countries can't pay back their debt and the troikas are not that stupid to bailout Germany's debtors so that they can pay their debts to Germany giving it an unfair advantage over us (who are also owed), then Germany itself will have to give one hell of a Barber of Seville haircut to its euro zone debtors - basically all the euro (and non-euro) using EU member states which were all practically bankrupt when they were admitted to the suicide pact called the EU.
The question we have to ask is what happens after Greece defaults, it's never going to be able to pay off it's loans no matter how many times the money markets threaten to break someone's legs. There will come a point where people will turn around and say no and then those put in power by the money markets will be run out of town.It also doesn't make a whole bit of difference if the whole of EuroZone is rated below AAA by Standard and Poor. The crisis is too deep and will be too long lasting for any of the measures now being talked about to effective. I am wondering what will their approach be after Obama is re elected, probably more of the same I expect. As this recession continues into a long term depression I am wondering how long it will take for Joe public to realize they have been had over all the deficit, debt reduction bull. Because any QE here or in the US doesn't kick start the economy but goes into the pockets of the very people who caused the crisis in the first place.

Headlines ...lies and stupid "IDIOTS" like Rehn blowing wind !

• Spanish unemployment reaches 5.3m, or 22.8%, raising the prospect that Spain could ask Brussels for a softening of its deficit targets
• EU commissioner Ollie Rehn says a Greece deal is 'very close' with another meeting of the Greeks and creditors tonight
• A sharp fall in business lending in the eurozone has increased fears of a second credit crunch
• Portuguese bond yields have continued to rise on fears that the indebted country may need a second international bailout

Fitch cut the “issuer default ratings” at the banks to “reflect challenges faced by the sector as a whole”. The ratings agency said: “These challenges result from both economic developments as well as a myriad of regulatory changes”. Credit ratings of the world’s biggest lenders have come under pressure as weak economic growth and concerns about whether European politicians have done enough to end the Eurozone debt crisis. Long-term issuer default ratings for Bank of America, Citigroup and Goldman Sachs were cut to A from A+. Barclays, Deutsche Bank and Credit Suisse were downgraded to A from AA- while BNP Paribas fell to A+ from AA-. Meanwhile, Germany’s attempt to save the Eurozone was hanging in the balance as Hungary and the Czech Republic claimed it would be damaging and protesters in Warsaw demanded Poland stands firm against Angela Merkel. Hungarian prime minister Viktor Orban said that central Europe had the potential to become the most competitive region in Europe. “The only kind of co-operation we can have with the eurozone is one which does not damage Hungary’s competitiveness,” he said. Poles marched under banners that read: “We want sovereignty, not the euro.” They were protesting against the Brussels deal that could see EU countries, including those outside the eurozone, face penalties for breaking tough centralized spending laws. Britain used its veto in Brussels, sparking an intense backlash. Ireland and Sweden are also nervous about the fiscal pact, but Germany and France still expect the other 26 members, minus the UK, to approve it. Mario Draghi, the head of the European Central Bank (ECB), doused the other big hope, for radical ECB support, warning that the bond-buying program was “neither eternal nor infinite”. He said there was little he could do to restore growth.

Christine Lagarde, the head of the International Monetary Fund (IMF), said the debt crisis is not yet over: “No country or region is immune. All must take action to boost growth. Work must start in the eurozone countries and must continue relentlessly. The risks of inaction include protectionism, isolation and other elements reminiscent of the 1930s depression.”

A bit sarcastic !...but realistic

Well : Do to the tremendous success of the summit : Moody's has downgraded the debt of BNP Paribas, Societe Generale, and Credit Agricole - warning their creditworthiness is being damaged by the fragile operating environment for European banks. "The probability that the will face further funding pressures has risen in line with the worsening European debt crisis." The agency cut its ratings on the long-term debt of BNP and Credit Agicole by one notch to Aa3, concluding reviews that began in June and were continued in September. Societe Generale's long-term debt was cut by one notch to A1. The downgrades were driven by the increasing difficulties the banks were having in raising funding and the worsening economic outlook, Moody's said. The news comes a day after the European Banking Authority (EBA), warned the region's banks must find €114.7bn of extra capital in order to withstand the euro zone debt crisis and restore investor confidence. Moody's said its ratings did take into account the fact that all three French banks were likely to benefit from state support if the crisis deepened. "Liquidity and funding conditions have deteriorated significantly ," said Moody's, adding that the banks have historically relied on wholesale funding markets.

"I say - The chapter on Euro should be closed asap."

During the last two weeks fears about the future of the eurozone have intensified as government borrowing costs for Italy and Spain, two of the region's highly indebted nations, have spiralled to unsustainable levels. Borrowing costs among stronger countries including France have also risen. However. in the past two weeks there has been a 93% increase in the number of transactions where people transferred money out of euro bank accounts into UK sterling accounts. The figure, from foreign exchange company World First, represents an increase to almost 300 transactions in the past fortnight compared with 154 over the same two-week period last year. Most of World First's customers are based in Italy, Spain and France, and the typical minimum transaction value is at least €1,000 (£856). "It is clear that most people have had enough of hoping for the best with the situation in the euro zone and have decided to take some decisive action," said Jeremy Cook, chief economist at World First. "Now the crisis seems to be infecting the European core, as opposed to just the periphery, people are worried that a real collapse could be just around the corner," Mr. Cook added. I - the owner of this blog, - agree an would be more than happy if Europe closes the chapter on Euro !

And they shall vote until it passes..." how about that?!

Slovakia's parliamentarians failed to ratify the expansion of the €440bn (£385bn) European Financial Stability Facility (EFSF). Opposition politicians in Slovakia, which is the only member of the eurozone not to have ratified the changes, have said they will approve the EFSF - but not without the removal of prime minister Iveta Radicova and her government. Richard Sulik, the rebel leader of the coalition's minority member, the Freedom and Solidarity Party, abstained from the vote. He told the parliament: "I'd rather be a pariah in Brussels than have to feel ashamed before my children, who would be deeper in debt should I back raising the volume of funding in the EFSF bail-out mechanism." Separately, the troika auditors - officials from the European Union, the European Central Bank and the International Monetary Fund (IMF) - reported that Greece's fiscal targets for 2011 were "no longer within reach". After weeks of scrutiny, the officials said that the Greek "recession will be deeper than anticipated"; that there was "no evidence of improvement in investor sentiment"; and that the structural reforms, though taking place, were "uneven".

It is not for the first time Slovakia has been against major eurozone policies since it adopted the currency in 2009. Last year, it rejected providing its 800 million euro share of the 110 billion EU bailout plan for Greece. That rescue went ahead without Slovakia, but another exemption for the country would cast doubt over the eurozone's credibility and ability to function as a bloc.

Nonetheless, many analysts are surprised at the power the small country wields. As Greg Anderson of Citigroup put it: "it seems somewhat unfathomable that a country that has not been a member of EMU for even three years could be the one leading to its unravelling."Slovakia prepares for a fresh vote on the eurozone bail-out fund and international lenders buy time for a broader response to the debt crisis with hints that Greece is likely to get a key loan next month."

Europe's embattled leaders gave themselves a two-week deadline to resolve the single currency debt crisis on Monday by delaying a crucial summit. The European Council president, Herman van Rompuy, announced the delay after it became clear that EU leaders were struggling to agree on proposals to expand Europe's bailout fund, and on possible changes to Greece's second bailout. With international lenders also reportedly making slow progress assessing Greece's finances, the summit has been pushed back from next Monday to Sunday, 23 October. But with Slovakia's coalition government failing to reach agreement on the existing deal to give the eurozone rescue fund stronger powers, the eurozone still appeared disunited. The postponement came as George Osborne told MPs that Europe needed to take decisive action immediately as the eurozone was now the "epicentre" of this summer's turmoil on global stock markets. "We need a comprehensive solution which ringfences vulnerable eurozone countries, recapitalises Europe's banks and resolves the uncertainty about Greece," Osborne told the House of Commons. The chancellor added his voice to those calling for the European financial stability facility (EFSF) to be expanded further. "If you're trying to protect larger countries, then €440bn is sadly not enough." Osborne also revealed that prime minister David Cameron had discussed the crisis with Barack Obama on Monday afternoon, a sign that Europe's woes continue to dominate the international agenda. World stock markets rallied again as traders welcomed the bank recapitalisation plan agreed over the weekend by the German chancellor, Angela Merkel, and the French president, Nicolas Sarkozy.

Europe could melt down in two weeks — three tops — and take the world down with it, IMF adviser and Harvard economist Robert Shapiro says.
The fate of the industrial world's economy lies in European policymakers' hands.
"If they cannot address [the financial crisis] in a credible way I believe within perhaps 2 to 3 weeks we will have a meltdown in sovereign debt which will produce a meltdown across the European banking system," Shapiro tells the BBC, as reported by Zero Hedge. "We are talking about the largest banks in the world, the largest banks in Germany, the largest banks in France, that will spread to the United Kingdom, it will spread everywhere because the global financial system is so interconnected. All those banks are counterparties to every significant bank in the United States, and in Britain, and in Japan, and around the world."
Greece has been teetering on the brink of default for a while now, and European officials have been working with the country to keep it in the eurozone via aid packages. A default on its debts could damage the European banking system since banks across the continent are either directly or indirectly exposed to Greek debt.
U.S. banks exposed to Greek banks will feel the heat as well should Greece default and spark a crisis similar to the Lehman Brothers collapse in 2008.
"This would be a crisis that would be in my view more serious than the crisis in 2008," Shapiro adds.

Euro fear as Spain and Italy's debt ratings are downgradedBritish banks and building societies lose rating while pressure mounts on EU to restore faith in single currencyThe eurozone crisis intensified on Friday when Spain and Italy were downgraded by the ratings agency Fitch, heightening fears over the health of Europe's banks. Fitch's move came at the end of a day which had already seen 12 UK banks and building societies downgraded by the rival agency Moody's and amid speculation about co-ordinated European action to bolster the finances of the continent's banks by next weekend. The euro fell against most major currencies, piling fresh pressure on European politicians to restore confidence in the single currency. Germany's Angela Merkel said Europe needed to find a solution for its banks by 17 October. Analysts from Capital Economics estimate the total financial package may top €200bn (£172bn). Merkel and Nicolas Sarkozy of France are due to meet in Berlin on Sunday to discuss the crisis, with bank recapitalisation expected to be at the heart of their negotiations.

Ireland's central bank reportedly is printing Ireland's old currency in case the country leaves the eurozone. At least that's the rumor circulating in Dublin, notes Alan McQuaid, chief economist at Bloxham stockbrokers in that city. McQuaid, writing a guest commentary for The Guardian, says he's not sure if the rumor is true. But he does hope Ireland has contingency plans in case the euro disintegrates. Then again, given the record of European leaders, a lack of backup plan wouldn’t be surprising. As Greece struggles to remain solvent, the European monetary union is scrambling to stop the debt crisis from spreading. If the crisis does spread, Ireland might be next in line. Some pundits say Ireland should drop the euro. Being master of your own destiny does have appeal, McQuaid admits. If it returned to the punt, Ireland could boost exports by devaluing the currency and reduce its debt burden.

"Germany at war" to fulfill the RIBBENTROP - MOLOTOV pact provisions - European officials have confirmed that discussions are afoot to boost the eurozone bail-out fund's firepower as part of a grand plan to contain the region's sovereign debt crisis in Greece. Confirmation of the talks, however, sparked outrage in Germany, where opposition politicians threatened to derail the plans by voting against a key amendment to the bail-out fund this Thursday. The head of Germany's constitutional court also piled on the pressure by warning the government not to circumvent the law "by the back door". Despite the wrangling in Germany, markets across Europe staggered back to life on hopes that the crisis could be contained and the recovery restored. In the UK, the FTSE 100 rose 0.4pc to 5,089.37 after £78bn was wiped off shares last week. In France, the CAC 40 rose 1.75pc, and Germany's DAX recovered almost 4pc. Policymakers in Europe are working on a three-pronged plan to ringfence the euro crisis around Greece. Under the proposal, banks across the continent would be recapitalised with tens of billions of euros, the €440bn European Financial Stability Facility (EFSF) would be "leveraged up" through the European Central Bank (ECB) to provide €2 trillion of firepower, and Greece would be subjected to a managed default on 50pc of its debt but stay in the euro. Officials hope the move would restore confidence in Spain and Italy and calm nervous bond markets.
So far, Rusia took over the eurozone energy fields via the euro, that was implemented for this reason only, otherwise making no sense ...ca you imagine how hard would have been to take over the european economies one by one through their individual currencies ?

The trouble is the EU is run by unelected commissioners, the MEP's are just front men, window dressing to give the appearance of democracy. Have you not noticed how everything is impossed on us without debate? Even when stuff goes to national parliaments, it just gets nodded through, no one reads whats in front of them, thats the reason why every regulation fills thousands of pages! - While the eurozone was the focus of financial market fears about debt-strained countries, the problem was actually wider spread. "We have in front of us a global crisis of sovereign risk and we [the eurozone] are the epicenter of this global crisis," he said. He added that the current situation was more precarious than when Lehman Brothers collapsed and sent the global economy into a tailspin in late 2008, as there was no longer the belief in markets that key countries would not default on their debts. He also urged authorities to take decisive action to stem the current troubles, claiming that the risk to the eurozone financial system is growing. "Risks to the stability of the EU financial system have increased considerably," he said in a speech to the Bretton Woods committee in Washington, on the sidelines of the annual IMF meeting.

Recap of the day - sept. 23. 2011

Just a recap of the day

1. The G20 settled markets with a comminiques overnight on Thursday, pledging to "take all actions to preserve the stability of banking systems and financial markets as required".

2. In London the FTSE 100 opened up 1.2pc with banks rising strongly, but the bounce was shortlived. By 10.45am the index had tumbled through the psychologically important 5,000 level after reports that Greece saw orderly default as possible. The mood was darkened after an EU spokesman said there were not plan to further recapitalise eurozone bank - other than what has been done. This seems to contradict the thrust of the G20 statement.

3. By lunchtime the market was turning around after rumours of further ECB measures to support the eurozone economy. Sentiment was further boosted by comments from Osborne at the IMF annual meeting in Washington. He said Europe had until the G20 meeting in Cannes in November to solve the political crisis in the eurozone. This six-week deadline seemed to give investors hope that leaders understood the urgency of the eurozone's situation.

4. London's leading shares close up 0.5p on the day, but down 5.6pc on the week. Markets in Germany, France, Italy and Spain also rose, closign up 0.6pc, 1pc, 2.1pc and 1.36pc respectively. However, after European markets closed the Dow Jones and the S&P 500 seemed to be trading sideways as nerves returned.

Signs of stress were once again evident in the bond markets on fears the crisis would rapidly spread, with yields on Italian and Spanish government debt climbing closer to the dreaded 6pc level widely seen as the point of no return. The euro weakened to a near seven-month low against the dollar, falling 1.2pc to $1.3631. Sterling fell to a nine-month low against the dollar. Greece must demonstrate that it can hit its deficit reduction targets but the deeper-than-expected recession, sluggish privatisation programme and the authorities' failure to collect taxes is jeopardising its efforts. Proposing roughly 100,000 job cuts by 2015, Mr Traa said: "This will inevitably require the closure of inefficient state entities as well as reductions in the excessively large public sector workforce and generous public sector wages, which in some cases are above those of the equivalent private sector workers." Rejecting a new property tax, he added: "This will neither be economically or politically sustainable." Better would be a "much stronger resolve to tackle the problem of tax evasion". Mr Venizelos accepted that Greece had "delayed" major structural reforms and that the tax collection system was ineffective. Preparing the country for more austerity, he said: "We cannot go forward without the true implementation of major structural reforms."

I am a strong believer that good reasons, arguments, and evidence are what matter, not credentials. So the short answer to “when should we trust an expert simply because they are an expert?” is “never.” We should always ask for reasons before we place trust. Hannes Alfvén was a respected Nobel-prizewinning physicist; but his ideas about cosmology were completely loopy, and there was no reason for anyone to trust them. An interested outsider might verify that essentially no working cosmologists bought into his model. But a “good reason” might reasonably take the form “look, this is very complicated and would take pages of math to make explicit, but you see that I’ve been doing this for a long time and have the respect of my peer group, which has a long track record of being right about these issues, so I’m asking you to go along this time.” In the real world we don’t have anything like the time and resources to become experts in every interesting field, so some degree of trust is simply necessary. When deciding where to place that trust, we rely on a number of factors, mostly involving the track record of the group to which the purported expert belongs, if not the individual experts themselves. So my advice to economists who want more respect from the outside world would be: make it much more clear to the non-expert public that you have a reliable, agreed-upon set of non-obvious discoveries that your field has made about the world. People have tried to lay out such discoveries, of course — but upon closer inspection they don’t quite measure up to Newton’s Laws in terms of reliability and usefulness.

Poland is urging Greece to seek help from the Paris Club - the informal group of creditors which has organised agreements worth $553 billion since it was founded in 1956. Poland's economy minister (also previous prime minister of Poland, and Brigadier General in the country's volunteer fire service), Waldemar Pawlak, said today: Where the Greek debt is concerned, it is necessary to call on the broad institutional experience of groups like the Paris Club which has carried out restructuring in several dozen countries. Good solutions are required and they've proven themselves. There should be no political declarations about Greece going into a controlled default because this leads only to destabilising. Instead, public and private institutions should lead restructuring in order to stabilise the Greek situation in a civilised manner.

Franco-German summit in focus - Traders said that a public holiday in Italy – the source of much of the fear that swept markets in recent days – had helped to steady investors' nerves. However, the picture could change on Tuesday when Nicolas Sarkozy and Angela Merkel will hold crucial discussions on the future of the eurozone. The talks, taking place in Paris, will consider how the two biggest eurozone economies can prevent the region's debt crisis escalating further. Failure to agree clear plans could prompt another sell-off in the financial markets, traders believe. "If nothing is agreed tomorrow then we could see another market wobble," said Michael Hewson, analyst at CMC Markets. "I'm afraid we'll see more delays and more prevarication … and the markets are losing patience." One option to resolve the euro crisis would be for weaker countries to issue "eurobonds", backed by the rest of the community. France and Germany, though, have indicated that eurobonds are not on the agenda this week. Hewson warned that the financial markets are currently "in the eye of the storm", suggesting that Monday's placid scenes may be short-lived.

The ECB's U-turn on buying Spanish and Italian bonds may suggest that the eurozone's financial establishment is edging towards fiscal union. But don't confuse a shuffle, performed over a weekend in the midst of a crisis, with the real thing. German public opinion will continue to dictate chancellor Angela Merkel's freedom to act. Will the ECB “sterilize” its purchases?... So far, the ECB has said it isn’t printing euros to run its secondary-market bond buying program (which has been going for more than a year for Greece, Ireland and Portugal). That’s because for every euro it spends on government bonds, it vacuums up a euro–thus there’s no net increase in liquidity. Up to now, the ECB has done this every week by taking in deposits; the volume is now at €74 billion. Can the ECB continue to do this if the volume is several times bigger? We are somewhere in Act IV or V of the euro-zone debt drama, but, lo!, the European Central Bank has descended, deus ex machine, to buy Italian and Spanish bonds. This is a major, major development. Here are three things to consider. How long will it last?.... The ECB very much did not want this role of crisis-fighter of last resort. For months, it had agitated for euro-zone governments to seize the mantle. The governments’ attempt, at the July 21 summit, was judged too little by markets, and the rout of Italy commenced. The governments then made clear they weren’t interrupting their August holidays to do anything else before the fall, and so the crisis was left to the folks in Frankfurt. Look for them to try hard come September to hand it off to Paris, Berlin and Brussels. This is the crux of the euro-zone tug-of-war: Do the governments of the strong countries tax their citizens to pay for the rescue? Or does the ECB create euros to pay for it?