The Greek drama continues. We are still surprised people think the country will be saved. Beside the economic problems, the debt, no growth etc, there is a much bigger problem. The mentality of the Southern Europeans is the biggest enemy of reaching The agreement. People can not agree on sharing a parabolic antena, how do you expect to reach a deal on the future of the country. The blame game is on, and soon, the biggest enemy will be the creditors. Now, the country is blackmailed into war. Video with Eva Kaili, a Greek member of parliament below.
The French government and two state-controlled entities are in the home stretch to create a new municipal lender from the remains of troubled Franco-Belgian bank Dexia, but they have yet to agree on the price of a key asset, http://ftalphaville.ft.com/thecut/2012/02/06/868871/resolution-on-dexia-nears/
The European Banking Authority is to challenge a significant proportion of the capital restructuring plans put forward by the continent’s leading banks to meet tough new capital requirements, the FT reports http://ftalphaville.ft.com/thecut/2012/02/06/868711/eba-to-challenge-banks-capital-plans/
Carlyle Group has installed a leadership pairing at its Middle East and north African arm as the private equity group reframes its investment strategy, focusing on the region’s main growth markets in Turkey and the Gulf, http://ftalphaville.ft.com/thecut/2012/02/06/868721/carlyle-to-focus-on-turkey-and-saudi-arabia/
Banco Sabadell, the Spanish lender, has begun sounding out investors about a rights issue worth up to €1.2bn and has met investors in London ahead of finalising the rights issue launch, reports the FT, http://ftalphaville.ft.com/thecut/2012/02/06/868671/sabadell-poised-for-e1-2bn-rights-issue/
IBM and Procter & Gamble have sold bonds with the lowest interest payments on record for US marketed corporate issues, as investors accept low returns for the safety of owning debt from secure companies, http://ftalphaville.ft.com/thecut/2012/02/02/864831/highly-rated-us-industrial-bonds-set-records/
Britain faces spending cuts “almost without historical or international precedent” over the next few years and, painful as the squeeze has been so far, it amounts to less than a 10th of what is planned by the 2016/17 fiscal year, http://ftalphaville.ft.com/thecut/2012/02/02/864861/ifs-warns-on-scale-of-spending-cuts/
The bill to revamp City regulation includes a “gaping hole” that could prevent important warnings from reaching the chancellor of the exchequer , Ed Balls, Labour’s shadow chancellor, has told the FT. Mr Balls – an architect of the current regulatory system which dispersed power between the Treasury,http://ftalphaville.ft.com/thecut/2012/02/02/864631/balls-sees-gaping-hole-in-city-revamp/
Foreign first-time-buyers are clambering to get into the London office market as sovereign wealth funds and cash-rich individuals seek stable assets amid the uncertainty in the global financial markets. http://ftalphaville.ft.com/thecut/2012/02/02/864611/foreign-buyers-snap-up-london-office-space/
US state attorneys general have until Friday to join a potential national settlement of alleged foreclosure abuses, the WSJ says, citing a document. The deadline, set by negotiators trying to pull together an agreement with the federal government, http://ftalphaville.ft.com/thecut/2012/01/31/859291/friday-deadline-for-states-on-mortgage-settlement/
RBS is scrambling to overhaul its pay systems to head off a repeat of its executive pay fiasco, says the FT. Sir Philip Hampton, RBS’s chairman, and Penny Hughes, head of the board’s remuneration committee,http://ftalphaville.ft.com/thecut/2012/01/31/859251/rbs-in-talks-to-revise-bonus-system/
European banks are preparing to tap the ECB’s emergency funding scheme for up to twice as much as the ECB supplied in its debut €489bn auction last month, the FT says, citing three chief executives of unidentified eurozone banks who said they would increase their participation two- or threefold in the auction on February 29.http://ftalphaville.ft.com/thecut/2012/01/31/859091/banks-preparing-to-tap-ltro-more-on-second-round/
Twenty-five of the EU’s 27 countries have signed up to a German-inspired treaty enshrining tougher fiscal rules to help underpin the euro, with the Czech Republic announcing it would join the UK by not agreeing to the pact.http://ftalphaville.ft.com/thecut/2012/01/31/859031/merkel-victorious-on-fiscal-treaty/
From one of the free thinkers out there. By Mr Hudson;
What will their future be – and what is the government’s proper financial role?
As published in the Frankfurter Allgemeine Zeitung.
The inherently symbiotic relationship between banks and governments recently has been reversed. In medieval times, wealthy bankers lent to kings and princes as their major customers. But now it is the banks that are needy, relying on governments for funding – capped by the post-2008 bailouts to save them from going bankrupt from their bad private-sector loans and gambles.
Yet the banks now browbeat governments – not by having ready cash but by threatening to go bust and drag the economy down with them if they are not given control of public tax policy, spending and planning. The process has gone furthest in the United States. Joseph Stiglitz characterizes the Obama administration’s vast transfer of money and pubic debt to the banks as a “privatizing of gains and the socializing of losses. It is a ‘partnership’ in which one partner robs the other.”1 Prof. Bill Black describes banks as becoming criminogenic and innovating “control fraud.”2 High finance has corrupted regulatory agencies, falsified account-keeping by “mark to model” trickery, and financed the campaigns of its supporters to disable public oversight. The effect is to leave banks in control of how the economy’s allocates its credit and resources. (Full article here).
Federal Reserve officials are waiting to see how the economy performs before deciding whether to launch another bond-buying program, the WSJ says. The Fed meets again next Tuesday and Wednesday, and officials are preparing to roll out a new communications strategy that is on track to include two key elements: http://ftalphaville.ft.com/thecut/2012/01/20/842161/fed-holds-off-on-new-bond-buying/
The International Monetary Fund has slashed its global growth forecast for this year and exhorted the European Central Bank to boost liquidity to stave off a deeper eurozone crisis, The Telegraph says, http://ftalphaville.ft.com/thecut/2012/01/20/842011/imf-cuts-world-growth-forecast/
Italy’s banks, led by UniCredit, were the biggest users of the special three-year funding mechanism launched by the European Central Bank in December, according to a new research report, writes the FT. http://ftalphaville.ft.com/thecut/2012/01/20/842021/italy%e2%80%99s-banks-tap-ltro-for-e50bn/
Bank of America pledged to accelerate the pace of building capital buffers to absorb future shocks as its fourth-quarter results helped drive its battered share price to the best level since October, the FT reports. The bank reported improved fourth-quarter net income of $2bn, http://ftalphaville.ft.com/thecut/2012/01/20/841981/bofa-swings-to-2bn-profit-in-fourth-quarter/
Last week S&P downgraded credit ratings on several European countries. Today, the World Bank downgrades growth prospects of the World. While the economy is falling further, we have the central planners trying to ramp up asset prices. Things are getting rather interesting going forward. From the World Bank.
Developing countries should prepare for further downside risks, as Euro Area debt problems and weakening growth in several big emerging economies are dimming global growth prospects, says the World Bank in the newly-released Global Economic Prospects (GEP) 2012.
The Bank has lowered its growth forecast for 2012 to 5.4 percent for developing countries and 1.4 percent for high-income countries (-0.3 percent for the Euro Area), down from its June estimates of 6.2 and 2.7 percent (1.8 percent for the Euro Area), respectively. Global growth is now projected at 2.5 and 3.1 percent for 2012 and 2013, respectively.
Slower growth is already visible in weakening global trade and commodity prices. Global exports of goods and services expanded an estimated 6.6 percent in 2011 (down from 12.4 percent in 2010), and are projected to rise by only 4.7 percent in 2012. Meanwhile, global prices of energy, metals and minerals, and agricultural products are down 10, 25 and 19 percent respectively since peaks in early 2011. Declining commodity prices have contributed to an easing of headline inflation in most developing countries. Although international food prices eased in recent months, down 14 percent from their peak in February 2011, food security for the poorest, including in the Horn of Africa, remains a central concern.
“Developing countries need to evaluate their vulnerabilities and prepare for further shocks, while there is still time,” said Justin Yifu Lin, the World Bank’s Chief Economist and Senior Vice President for Development Economics.
Copper for delivery in three months at the LME on Monday rose to $8,082 a tonne, up 6.9 per cent in January so far after suffering a 22 per cent plunge over the course of 2011, reports the FT. Inventories of copper at LME-registered warehouses stood at 354,575 tonnes on Monday http://ftalphaville.ft.com/thecut/2012/01/17/836021/copper-price-jumps-as-lme-stocks-set-to-fall/
China’s economy expanded 8.9 per cent in the fourth quarter of last year, extending a slowdown that began at the start of 2011 and is expected to continue into 2012, reports the FT. “In terms of the domestic and international situation, http://ftalphaville.ft.com/thecut/2012/01/17/835721/markets-welcome-chinas-8-9-gdp-growth/
A quarterly report released by the Bank of Japan on Monday revealed that the outlook for the economic conditions in seven of the country’s nine regions has dimmed, the WSJ reports. While the central bank doesn’t think the regions risk a downward trend, http://ftalphaville.ft.com/thecut/2012/01/16/835521/bank-of-japan-sees-recovery-slowing/
Saudi Arabia is aiming to keep oil prices at about $100 a barrel, a third above its previous public target, the FT reports. Ali Naimi, the Saudi oil minister, on Monday for the first time said the world’s largest oil producer aimed to keep oil prices at the triple-digit level, http://ftalphaville.ft.com/thecut/2012/01/17/835771/saudi-arabia-raises-oil-target-price-to-100/
Morgan Stanley plans plans to cap cash payouts at $125,000, the WSJ says, citing people familiar with the matter. Some top executives will receive nothing now, deferring their 2011 payouts until the end of this year. http://ftalphaville.ft.com/thecut/2012/01/17/835821/morgan-stanley-bonuses-capped/
George Osborne will sign a deal on Monday with Hong Kong aimed at helping turn the City into an offshore trading centre for the renminbi, the FT says, in what the UK chancellor sees as a vote of confidence in London. http://ftalphaville.ft.com/thecut/2012/01/16/833491/renminbi-deal-aims-to-boost-city-trade/
Greece’s international creditors are considering an appeal to the French and German leaders to break a deadlock in negotiations over the size of the losses to be taken by banks and other bondholders as part of a €100bn deal seen as crucial to bringing the country’s debt under control, http://ftalphaville.ft.com/thecut/2012/01/16/833371/greeces-creditors-say-time-is-running-out-fast/
France’s President Nicolas Sarkozy called for “courage” and “sang-froid” in combating the financial crisis, without mentioning the loss of the country’s triple A credit rating after it was downgraded by Standard & Poor’s ratings agency on Friday. With three months to go until the presidential elections, Mr Sarkozy, who has yet to declare his candidacy, sought to keep his head above the political fray at the weekend, as the country’s downgrade became a campaign football among the political parties. http://www.ft.com/intl/cms/s/0/e960c4de-3f9a-11e1-ad6a-00144feab49a.html#axzz1jb84aooc
Nigeria’s president Goodluck Jonathan and labour unions failed in overnight talks to reach a compromise over the removal of fuel subsidies that has raised fears of a shutdown of Nigeria’s oil industry,http://ftalphaville.ft.com/thecut/2012/01/16/833911/nigerian-strike-talks-break-down/
Guest Post by Steen Jakobsen of Saxo Bank on the S&P Downgrade.
S&P’s report is the most honest, politically incorrect report on the Eurozone debt crisis I have seen in a long, long time. It could increase the focus on how the policymakers continue to throw liquidity at a solvency issue and also underline how focus on austerity can leave us all worse off, as we can not save ourselves to prosperity.
In practical terms this means the European Financial Stability Facility is 90 percent dead – its leverage is now so small it makes no sense, hence the European Stability Mechanism will be moved further forward on the agenda in the March EU Summit, but it will also mean huge pressure on Germany to pay more, and to increase the EUR 500 bn. limit in place for the combined EFSF/ESM.
This will not go down well in German domestic politics and it will create an even bigger gap in the Franco-German alliance.
The downgrade of France changes the relationship from one of equals to one of older sister to younger brother. The dynamics could mean Sarkozy has to fight harder in the upcoming French election. I could easily imagine Marie Le Pen gaining momentum in the next few months on a strong anti-EU and anti-Sarkozy platform.
EUR/USD should open lower on the uncertainty and everything being equal (the favourite economist speak): it will put upward pressure on yields in Spain and Italy.
The main effect though could be more honest dialogue about the real reasons for the crisis in Europe and hence leave us better off as talk finally centres on reality rather than hope. Effectively S&P did what it was supposed to do: It ignored the “Powerpoint presentations” from the EU and looked only at the accounts. The accounts speaks clearly for temselves – no progress, no real plans and only savings making the board meetings.