Tag Archives: Antonis Samaras

The Week Ahead: Hold On To Your Hats!

When it comes to the global economy, it seems like the fun is just getting started: Regulators are now  calling for extra capital to be imposed on the largest banks, Bank for International Settlements urge economic growth to slow down in order to curb inflation, central bankers are screaming for rate hike and Greek deputy prime minister warns that rebels may block new economic reforms.

“You can’t ask for more taxes in an already overtaxed country, in a market that has been sucked dry, with economic activity at zero and a huge recession.”

Antonis Samaras

Yup! Just when you thought the Chinese was going to save the day, it turns out that it’s not that easy after all. No matter what the bureaucrats of Brussels asks for; the people of Greece may very well give them the middle finger. But that’s not all. The central bankers – who have declared the worst is over  every other week for two years – has suddenly discovered that it’s probably not.

Right now rather disturbing news reports are pouring in.

Here’s some of the headlines of the financial press at the moment:

FINANCIAL TIMES

REUTERS

AP

THE WALL STREET JOURNAL

  • French Banks Seek Greek Debt Rollover. French banks have proposed a plan to reinvest half the proceeds from maturing Greek governments bonds ahead of a meeting of key players, in efforts to encourage private investors to contribute to a new bailout for Greece.
  • Nokia, Siemens fail to secure investors. Nokia Corp and Siemens AG failed to secure a deal for investors for a controlling stake in their unprofitable joint venture.

DER SPIEGEL

THIS WEEKS NUMBERS

Well, I have a feeling we might get a surprise or two, also, during the week.

When it comes to the economic data, European investors will look closely at the PMI surveys, that will indicate whether global soft-patch continued into June.

Th week also sees a raft of data on inflation, the US housing market and consumer trends, plus business conditions in Japan.

Monday
A week in which market attention will remain firmly set on Greece starts with the publication of Italian wages data before attention shifts across the Atlantic to the US, where personal income and outlays numbers will be used to gauge the strength of the consumer sector.

 

 

 

 

Tuesday
Greece’s Parliament is scheduled to vote on its new package of austerity measures on Tuesday. The reforms are a requirement for the next tranche of the IMF/EU loans to be released in time for the funding of bonds in mid-July.
The day also features a number of key data releases, starting with Japanese retail sales numbers for May, Gfk consumer confidence in Germany, plus business confidence and producer price numbers for Italy.
In the UK, final gross domestic product (GDP) numbers for Q1 are released, as well as current account data. According to official estimates, the UK economy expanded at only a modest rate of 0.5% in the first quarter of 2011.
After cooling in May, German consumer price inflation is expected to quicken from an annual rate of 2.4% to 2.6%.
Weekly US Redbook store chain sales are published before the release of the S&P Case-Shiller home price index takes centre stage. The index of home prices in the nation’s largest cities fell below its April 2009 low towards the end of Q1, raising worries about a double-dip in house prices.

The US Conference Board publishes its June barometer of consumer sentiment. Confidence waned in May amid rising fuel and oil prices and concerns about the employment situation. This apprehension among consumers likely continued in June.

Wednesday
Preliminary industrial production numbers for Japan will be eagerly anticipated after trade data showed exports falling at a faster-than-expected rate.
French GDP data (final) for Q1 are released in advance of UK consumer credit, mortgage lending/applications and money supply numbers.
European Commission economic sentiment figures for June follow.
Weekly US mortgage applications data are released, as well as pending homes sales numbers, which plunged in April. However, there is evidence to suggest that temporary factors, such as bad weather, were behind the severity of the decline.

Thursday
The Gfk consumer confidence survey for the UK is published ahead of the Markit/JMMA Manufacturing PMI™ for June. The PMI™ pointed to renewed output growth in May, as easing supply chain pressures enabled firms to restart production lines.
Euro zone inflation comes under the spotlight with producer price data for France and the preliminary estimate of consumer price inflation for the single currency area as a whole. After dipping unexpectedly in May, a further easing in the rate of inflation will make a rate hike later in the year less likely. German unemployment numbers are also published for June.
The usual US weekly jobless claims date are accompanied by the Chicago PMI, which will be watched closely due to its good track record with the ISM manufacturing index, published Friday.

Markit’s release of Manufacturing PMIs for Asia follow, notably final data for China, where the flash HSBC PMI™ survey pointed to a stagnation of output and easing price pressures across the sector. HSBC PMI™ releases for South Korea and Taiwan will be monitored for trends in global trade flows.
The Markit Euro Zone Manufacturing PMI™ data follow last week’s flash estimate, which showed the region’s economic growth surge losing momentum at a worrying rate.
The publication of the Markit/CIPS UK Manufacturing PMI™ follows shortly after. May data signalled that manufacturing moved from rapid expansion to near-stagnation.
Italy publishes final GDP numbers for Q1 and jobs numbers before the unemployment rate for the euro zone is released.
The week ends in the US, where the University of Michigan consumer confidence index will shed light on consumer spending patterns. Construction spending numbers follow.

However, the ISM Manufacturing PMI will be the key release in the US; the headline index posted its lowest reading for 12-months in May, reflecting a marked slowdown in output and new order growth.

Friday
Friday starts with the release of unemployment, consumer price inflation and household spending numbers for Japan, plus the Bank of Japan’s quarterly survey of business conditions.

Now, hold on to your hats, and trade with attitude!

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IMF Will Force Greece Into Immediate Default Unless EU Agrees on Further Funding

According to Reuters, the IMF will make further release of financial aid under the current package dependent on a decision by the EU to secure funding for Greece for 2012 later. 

“We have violated all rules of law because we agreed that we really wanted to save the euro zone.”

Christine Lagarde

The EU leaders are all over the place discussing a possible so-called reprofiling of Greek debt, but a vote on a second loan package for Greece is not expected until the autumn. Greece will, however, run out of funding in July, which would mean that the country would immediately cease all public payments.

And the pressure is building in both Athens and in Brussels.

Reuters quotes the Dutch financial newspaper Het Financieele Dagblad that reports on the EU secretly preparing for a voluntary debt rescheduling – or reprofiling – despite increasingly dire warnings from the ECB and ratings agencies.

Moody’s warns that a reprofiling would constitute Greece to default.

Fitch also says that any maturity extension, including a voluntary one, would constitute a default.

And S&P is even more specific say that any changes to a bond that reduced its net present value would constitute default – leaving virtually no options.

No Consensus

One of the conditions for a new EU package is cross-party support in Greece.

But George  Papandreou could not get support from opposition leaders for his new austerity measures, the Greek newspaper Kathimerini reports.

The leader of the main conservative opposition New Democracy Antonis Samaras said he supports the privatisation plans but not the planned tax increases, calling for tax reduction instead.

Smaller parties were even more hostile towards the programme.

Greece’s creditors have been pressing the government to seek consensus for the deeply unpopular reforms before submitting to Parliament.

The government has a comfortable majority in Parliament and should be able to pass the reforms without the support of the opposition.

But EU officials including Olli Rehn says a certain degree of political consensus is necessary before agreeing on a new aid package, Reuters reports.

The European Christian Democrats, led by Angela Merkel, want to put pressure on Samaras to back a new IMF/EU programme, as they did in Portugal.

A Treuhand for Greece

Another proposal have also been put on the table by Jean-Claude Juncker, to set up a Treuhand-type privatisation agency for Greece.

The FT writes that the delay in the privatisation programme has pursued EU officials to press hard for a Treuhand solution, which would be an independent body, with oversight from the IMF and the EU.

According to the article, this was one of the central topics of the “secret” meeting in Luxembourg. a few weeks ago.

The Sisyphos of Our Time

Frankfurter Allgemeine Zeitung’s Athens correspondent Rainer Hermann reports on the newly promised additional consolidation measures in Greece.

He arrives at a depressing conclusion:

While acknowledging the efforts Prime Minister George Papandreou has undertaken Herman nevertheless sees parallels with the Greek mythology.

“The Greek government looks like Sisyphus”, Hermann writes.

“Whatever he did, he always had to start over again. This government, despite its good intentions, hardly has the power any more to accomplish what it has to undertake to safe Hellas.”

In Defence of the ECB

In his column in FT Deutschland, Wolfgang Münchau writes that he sides with the position of the ECB, specifically the demand to limit the degree to which politicians want to dump their own inability to solve the crisis onto the central bank. 

Adding that the ECB has acted flexibly in the past, as it is the job of a central bank to support the financial system in a liquidity crisis.

But as it is now becoming clearer that Greece faces problems with its solvency, the responsibility lies with politics, not with the central bank any more, Munchau points out. 

Meanwhile, German economic experts are going bananas over the euro rescues, and accuse the constitutional court of foot-dragging.

All Laws Have Been Violated

The German professors opposed to the EFSF accusing the constitutional court in Karlsruhe to drag its feet by not coming up with a decision on the constitutionality of the rescue fund, Süddeutsche Zeitung reports.

According to insiders more than 50 complaints have been introduced in Karlsruhe against the rescue of Greece and the creation of the EFSF.

But so far the court has not ruled and some of the opponents fear that further developments in the euro crisis will create a fait accompli which will make it impossible for the court to rule against the rescues. 

At the same time the court has almost no other choice than to rule that EU law was violated.

After all it was Christine Lagarde who told the Wall Street Journal recently:

“We have violated all rules of law because we agreed that we really wanted to save the euro zone.”

Legal experts agree that a negative ruling would prohibit Germany to continue to take part in the ongoing rescues.

One of the consequences would be that the bonds issued by the EFSF would immediately lose its triple-A-rating.

According to the Süddeutsche Zeitung, the court will rule before the summer break.

Welcome to yet another day of excitement in the Euro Zone Tivoli Park!

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Greek Opposition To Vote Against Bailout

The EU/IMF deal will find a majority in the Greek parliament, but last night’s decision by Antonis Samaras, leader of the opposition New Democracy, to vote against the IMF/EU package destroys any hopes of a lasting consensus for reform, the Greek newspaper Kathimerini reports.

“We do not deny financial support, necessitated more, but we disagree with the policy that led us thus far and the government’s economic strategy to address the crisis.”

Antonis Samaras


This signals a return to the politics as usual at a rather early stage in the adjustment process, and destroys any hope of a national consensus, which is so critical when it comes to the implementation of long-term adjustment programmes. The decision makes it very likely that Greece will not be able to maintain the commitments it made in its negotiations, except in the very short term.

The decision of the New Republic to vote against the funding agreement by the support mechanism in the euro area and the IMF announced late last night, the party president, Antonis Samaras.

“We do not deny financial support, necessitated more, but we disagree with the policy that led us thus far and the government’s economic strategy to address the crisis,” he said, according to Kathimerini.

After several hours of discussion  and continuous consultations, Mr. Samaras finally leaned towards a “no”.

In a statement last night he explained the reasons for its decision;

“We disagree with the policy that led us thus far and the government’s economic strategy to address the crisis.”

He accused the government  for wanting a vote of tolerance “for the record” and that it “seeks the complicity in a policy” which has led to mistakes, delays, bilingualism and the incredible escapades of the Greek government.

When it comes to impose the responsibilities for the use of IMF in handling of the government, he says that ” Greece certainly has a deficit problem, but similar to that which existed in many other countries in the euro zone.”

Mr. Samaras added, however, that the South West, regardless of its position, “will honor the money given juncture in Greece by the governments of our partners and the International Monetary Fundand that “we are bound by contracts signed by the Greek state, even when we disagree, we will do everything we can so money can be returned as agreed in the contracts. “Greece has dignity,” he underlined.

In conclusion he said that “Greece is in urgent need of politicians who do not bow their heads, or runs out in protest, but makes room for view outlets, which at critical moments know how to withstand pressure, but also knows to resist populism and solvents phenomena.”

Prime Minister George Papandreou and the government are waiting to manifest the concern of the current unrest, but the outcome of the battle will be tomorrow when the House is set to pass the EU/IMF agreement and the package of measures, Kathimerini writes.

See the report in Kathimerini for more details.

Meltdown Continues

Yesterday investors became more skeptical about Greece, about the spread of the crisis, and the world economy in general.

Equity markets had a rough day, southern European bond spreads were back up, as were CDS ratings of south European sovereigns, and the euro fell towards to $1.30, the weakest level in a year.

The latest rout was triggered by comments from Germany’s economics minister, who said that the finance package would last only 18 months, and by Germany’s finance minister, who warned the Greeks that a failure to meet the objectives would lead to bankruptcy.

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This is not what the market wants to hear now. The Greek two-year yield subsequently rose by 4.2% to 14.5%.

Portugal And Spain Next In Line

The crisis is currently spreading to Portugal, the next candidate for a combined IMF/EU programme.

A bewildered Jose Luis Zapatero gave an angry response to press reports which alleged that he was preparing a €280bn rescue package for the Spanish economy, according to El Pais.

Pointing towards the (still) relatively low level of Spanish debt-to-GDP ratio, he said the speculation was without foundation.

Investors are probably aware of the Spanish public deficit- and debt numbers. but it is the private debt, and the liabilities of a state-guaranteed banking they are worried about.

In an editorial, El Pais makes the point that the problem for Spain is not so much the actual numbers, but the perception that the country is not reforming, especially in the labor market.

Tano Santos in Nada es Gratis writes in a commentary that Spain needs to reboot its entire economic strategy to survive this crisis, something that is not possible with the present government, and especially not with Zapatero.

He makes the points that Spain needs an increase in potential GDP growth through reforms, the courage to close down banks, and restrictions on the expenditure of municipalities.

Another Time Bomb About To Explode

Wolfgang Munchau says in his FT Deutschland column that he is not certain about the actual status of the loan to Greece, and criticizes the EU and the German government for failing to come clean on this matter, and clarify the implications.

The financial markets believe – probably correctly – that the debt is junior. After all, one of the main goals of the package had been to stabilize markets. But if the debt is junior – and given a non-trivial probability of debt restructuring down the line – it is virtually guaranteed that only parts of the loan will be paid back.

Munchau assumes that the German government is deliberately hiding this fact in order to facilitate passage of the legislation, as the country’s financially illiterate MPs are unlikely to get bogged down in questions about the seniority of debt.

But this game of smoke and mirrors is hugely dangerous gamble, and could lead to massive political and legal backlash, once people (and constitutional court justices) realize that this is a fiscal transfer after all, contrary to what Merkel has been saying.

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