Would Murdoch want to be new Greek finmin?

So about Greece… I’m sorry, but it’s one of those days. Finance minister Rapanos resigned yesterday due to health issues and prime minister Samaras announced that he will not be able to fly for two months due to his eye problem. What the… Rapanos may be replaced by Yiannis Stournaras, professor of economics at the University of Athens and one of those who hasn’t fled the country yet. Both the details and results of his health check are yet to be disclosed.

Newscorp is looking into splitting the company into separate entertainment and publishing divisions. What does this mean? Well, the legitimacy of the WSJ’s report on the story is up for discussion, as the journal is of course part of Newscorp. But Murdoch could stay in control of both parts, only mitigating the storm around the British newspaper units that were involved in the phone-hacking scandals, and not actually solving the problem that a demerger should presumably address (namely Murdoch owning everything). More importantly, a split would make it harder for the publishing division to find investors, despite its prime newspaper assets, because its growing at a much slower pace than the entertainment branch. Not really surprising, you’re comparing the WSJ and the Times to 20th Century Fox here… come on.

A new proposition from Brussels authored by the presidents of the Commission, Central Bank, Eurogroup and Council (mostly to set the stage for the summit later this week): In Dan Davies words [blatantly stolen from Twitter, yay for 140 characters]:

1. Pan-European single banking regulator – ie completely irrelevant to crisis, pure and simple power grab.

2. European deposit insurance & resolution schemes, backed by ESM – ie repurposing of existing fund, not in treaty. Nothing from ECB

3. “pooling of decision making on budgets” ie power grab

4. “issuance of common debt could be explored” – ie, jumping someone else’s train of ERF and Eurobills. No original work

5. “A full fiscal union” and what’s the most urgent issue about that? yup “it would need a central budget“.

6. “Towards an integrated economic policy framework” – equal parts sameold “stability and convergence” guff and power grab.

7. “Oh yeah, democratic legitimacy”. Insultingly brief 2 paragraph section, which just points you at Protocol 1 of TFEU.

(or read article)

In other European news, Cyprus has officially requested a bailout, the terms of which have not been finalized, but it’s like to be €8-10bn, and France is set to raise the minimum wage by 2% come July 1.

The woman in the news today is not Angela Merkel for a change, but Facebook’s Sheryl Sandberg, who is now director of the company’s board, which so far had only been comprised of men. Well done Sheryl, girl power and all that.

At last, a chart and a reason why we shouldn’t be looking forward to September: according to a study by Luc Laeven and Fabian Valencia of the IMF, which relies on 147 cases over 41 years, September is the month of banking crises. read article

So long.

Filed under: news brief, bailout, blaming Brussels, Cyprus, ECB, equality, ESM, EU, Facebook, France, Greek election 2012, IMF, infographic, minimum wage, Newscorp, Rupert Murdoch, Sheryl Sandberg, Wall Street Journal

Man-flu drives markets

Spain formally requested financial aid to bail out its banking sector. The exact amount, however, remains unknown. All we know is that it needs to be enough (somewhere around €100bn) and signed, sealed, delivered before July 9. Great premises for planning. Moody’s doesn’t care and is expected to downgrade all of Spain’s financial sector within the day.

This week has another EU summit in stock, discussing the usual but possibly leading to a change regarding the use of bailout fund money. Now that Greece finally has a government, the discussions could gain in substance, but oh no, wait a minute! Both the new prime minister and the new minister of finance won’t be able to attend. As Reuters put it:

But Prime Minister Antonis Samaras underwent eye surgery on Saturday and Vassilis Rapanos is in hospital after suffering from nausea before he could be sworn in as finance minister.

I’m loving this. But seriously… What is this, man-flu? The summit is only on Thursday and Friday though, so maybe Greece has manned up by then.

Luckily, someone got it all figured out, with or without Greek relevance attendance: enter George Soros.

My favorite headline of the weekend came out of Brazil, reading “Darth Vader Appears in Brazil Mayor’s Race“. read article

Otherwise, something mildly interesting is happening in the aviation industry. The Irish government is looking to sell its 25% stake in Air Lingus, leading RyanAir and Turkish Airlines to handing in their bids. RyanAir already holds a majority stake in the airline, but is likely to be stopped by European competition authorities, while Turkish couldn’t ever exceed 49% because of EU law. It is expected that a handful of other airlines, such as Abu Dhabi’s Etihad, will bid as well.

Meanwhile, the London Olympics have already left their historic mark: the games, commencing on July 27, are going to be the most over-budget games since the mid-90s. The initial budget started around £3bn; by now it’s at £9.3bn, mostly because of increasing security expenses and lack of interest from private investors. Overall, the Olympics are likely to cost more than twice the initial estimate. Well failed. Beijing, on the other hand, was only 4% over budget in 2008… and they even changed the weather!!

So long.

Filed under: news brief, Antonis Samaras, aviation, bailout, budget, EU, eurozone, Greece, Greek election 2012, London, ryanair, Spain, Star Wars, UK

Across the board, things could be better

…and when I say ‘board’, I really mean ‘world’.

The eurozone finance ministers are meeting in Luxembourg today, including the new Greek minister Vassilios Rapanos. So who is this man who will reduce Greece’ deficit and have the country return to growth and glory (I’m just messing with you)? Good old Vassilios used to be a political terrorist, who was sentenced in military court in the 70s, then hung out with other economists in jail, and continued to be chief economic advisor to the minister of finance and a member of the EU monetary committee planning for the introduction of the euro. The man literally said “Jail was my university“. I wonder if his knuckles read T-H-U-G L-I-F-E… read article

The US Fed has prolonged its economic stimulus program dubbed ‘Operation Twist‘, which was meant to end this month, until the end of the year. The thought behind it is, besides high unemployment and sluggish growth, to shield the US economy from the European explosion. By changing the composition of bonds held by the Fed that were acquired during the last rounds of quantitative easing, i.e. by exchanging short-term bonds for long-term bonds, which may [or may not, this is up for discussion] lower interest rates across the board and stimulates lending. read article

In terms of indicators, both Germany and China aren’t doing well with PMI and production output down respectively, and Spain sold 5-year bonds at the highest cost in 15 years  [indicating that things are shit]. And what does that mean? Exactly, it doesn’t matter where you look today, you won’t find great news anywhere [unless you’re a royal, see below]

Meanwhile, the Queen seems to be the only one left making money… Due to rising property costs, her real estate portfolio has appreciated 4% YOY, totalling £8bn. read article

Otherwise, the usual back and forth continues. The ECB says it will discuss eurobonds, Merkel says she definitely won’t (with her hand over her ears: “LA LA LA, I can’t hear you!), les French say it may take years to implement them. Nothing new on that front, but the conflict seems less hateful today. read article

Recommended reading: BBC political editor Nick Robinson interviews David Cameron in Mexico during the G20 meetings. On the menu: Europe’s past, Mexico City’s skyline and sympathy for Angela Merkel. read article

So long.

Filed under: news brief, China, David Cameron, debt, ECB, EU, eurobonds, eurozone, France, Germany, Greece, Greek election 2012, high-yield bonds, indicator, PMI, quantitative easing, Queen Elizabeth II, Spain, the three moronic musketeers, UK

New Greek government promises to last at least 48 hours

Much like back in March, when Greece was continuously close to reaching a deal with its creditors, Antonis Samaras is allegedly close to reaching a coalition agreement. Today is day 3 of coalition talks and the deadline is tonight.

The not much anticipated renegotiations between Greece and EU regarding the terms and conditions of the previous bailouts is likely to kick off on Thursday in Luxembourg. That is provided there is a Greek finance minister. At this point it looks like it is going to be Vassilis Rapanos, currently chairman of Greece’s largest commercial bank. But the amount of rumors of government officials supporting and rejecting (the rejection mostly coming from Germany) the possibility of a renegotiation make it pretty difficult to see through the haze. I guess we’ll have to wait until tomorrow.

AHA! Hang on, Greece has a new government with Antonis Samaras as Prime Minister from tonight on! From ZeroHedge:

Venizelos sazs key issue will be to form a “bailout renegotiation team.” So new government will be very short.

Any kind of progress comes in handy, as the Greek economy is pretty much disappearing altogether. The Athens Chamber of Commerce expects the country’s economy to shrink by 7.8% in 2012. ‘Ouch’ doesn’t really cover it anymore.

The FT is bringing us the heartbreaking story of Medical Service Limited, a Greek healthcare equipment manufacturer who had to stop paying its employees last week. And even though an order for a new heart monitor came in, the company couldn’t find the money it would have to prepay to its German suppliers, because Greek banks have slashed all opportunity on credit.

Close enough to Greece, my favorite quote of the day comes from Cyprus, where a bank bailout is waiting to happen. read article

“I calculated that there’s 278 hours left until June 30,” the date by which Cyprus Popular Bank has to be recapitalized, Cypriot Finance Minister Vassos Shiarly said on Tuesday. “We’re counting the hours.”

It’s promising that he could do the math.

Also, the EU proposed setting up its own credit rating agency handling sovereign ratings. The European Creditworthiness Authority would provide rating much like S&P, Fitch and the like, except it would be incredibly pro-Europe, i.e. pro-money-to-those-who-can’t-really-repay-it. Ironically, the point of the ECA would be to make rating more objective. Right. This too could be part of dancing around the eurobonds issue. read article

Otherwise, both the UK and the US are waiting for another round of quantitative easing, with the former being a little bit more of a [almost] done deal. read article

Related: Jared Bernstein is giving an emotional defence of Keynesianism in Rolling Stone. read article

So long.

Filed under: news brief, Antonis Samaras, bailout, Cyprus, EU, Germany, Greece, Greek election 2012, high-yield bonds, Keynes, quantitative easing, rating, UK, US

Remember when the Greek elections didn’t achieve anything?

(note: the headline regards the eurocrisis and not Greece by itself)

It’s funny how the lead up to some event is drenched in anticipation from virtually the entire world, but when it occurs the reaction is so unimpressive. In other words, Antonis Samaras can build a coalition on all he wants, all eyes are back on Spain [and Italy] and they were already yesterday.

So let’s go back to Spain. Yesterday, its bond yields exploded and stayed above 7%, and today, its short term borrowing costs (12-18 months) hit the highest levels since 1997. But that’s not all. The bad loans on the books of the country’s banks have reached the highest level in 10 years as well – 10 years ago, when the euro was introduced to make everything better…

ING said Spain would need another €250bn to get anywhere with its bank refinancing – €250bn the EFSF isn’t set out for. So then it goes back to the legal issue that is the ESM, which is not actually active yet and has different voting requirements from the EFSF. Here the ZeroHedge summary.

The bottom line seems to be this: while concerns used to focus on the willingness, or lack thereof, of European leaders to commit to strategy to battle the crisis, i.e. setting up the ESM, pushing eurobonds, injecting money here there and everywhere, it now (finally) shifted to a question of how much is actually possible. The answer is more or less unanimous: Spain can’t be paid for in the same way that Greece was. And we don’t even have to talk about Italy. So what are we going to do about it? Wrestle Angela Merkel down and force her to agree to eurobonds, i.e. piss off the one person who is paying for the whole charade (note: this is a simplification of actual circumstances)? Having said that, I’m pretty sure that Merkel knows exactly that she will have to give in to all the pressure unless she wants to foot a never-ending bill (see below).

In Greece, Pasok leader Evangelos Venizelos has allegedly expressed his support of NewDem leader Antonis Samaras, who is still in the process of pasting a coalition government together. And since Syriza said they’re out, Samaras just pitched another left-wing party, the Democratic Left, making the proposed government a center-center-left coalition. An agreement is meant to be reached today, and as we know Greeks are very precise and efficient people, so I’m taking this at face value (so far, the Democratic Left has not decided what to do). read article

In Mexico, the G20, first and foremost David Cameron, is pointing fingers at the bodiless mess that is European collective action. In Gideon Rachman’s words:

David Cameron is taking a break from irritating the Germans. Instead, he has decided to piss off the French.

It is going to be an entertaining week if this continues. The agreement that emerged from Monday’s meeting was to work on a “more integrated financial architecture” in Europe. I imagine Angela Merkel didn’t enjoy her stay.

Meanwhile, there are rumors that both Greece and Ireland will be granted a two-year extension of bailout terms, meaning forced austerity measures. Make a wild guess who’s not amused about that.

So long.

Filed under: news brief, Angela Merkel, Antonis Samaras, blaming Brussels, David Cameron, debt, EFSF, ESM, EU, eurobonds, eurozone, France, G20, Germany, Greece, Greek election 2012, high-yield bonds, infographic, Ireland, the three moronic musketeers, UK

Greek elections – lather, rinse, repeat

So much has happened over the weekend.

First up: Greece – obviously.

Center-right New Democracy secured the most votes, putting Antonis Samaras in the diver’s seat, who is currently (like, right now) busy trying to form a coalition. Leftist Syriza came in second, followed by center-left Pasok. Last night, Samaras said it was a victory for all of Europe and that Greece would honor its commitments to the EU. I suppose we’ll leave the latter up for discussion, there might be some definitional disagreements…

Now, if New Democracy forms a coalition with Pasok, that would give them 162 seats in the 300-seat parliament. BUT. Word got out that Pasok refuses to agree to a coalition unless Syriza is a part of it as well. That would lead us to a center-right-center-left-radical-left (by deduction: center-left) government. Both New Democracy and Pasok have been dubbed ‘pro-bailout’ parties, while Syriza got the opposite predicate. Greece’ track record with coalition governments is not the best and until recently, most of Lucas Papademos’ job was to mediate between Pasok and New Democracy. This won’t be easy. Mostly, because their main topic of discussion will be the possible renegotiation of terms of the European bailout package [the actual possibility of which is a whole different topic], which were agreed on in March when Greece was on the brink of default the last time. read article or Open Europe’s summary (or open any newspaper)

Oh, wait a minute, breaking news: Syriza will NOT join the coalition! This might have killed everything that looked promising (see above) and may or may not mean that there needs to be a third round of elections. Lather, rinse, repeat, but let’s not jump ahead…

Having said that, it doesn’t really look like yesterday’s result have diminished the fears or hopes of Greece leaving the euro, it just postponed the pain of actually planning it.

But while we’re at it, think about THIS: Germany vs Greece in the quarterfinal of the European championship – the most politically-loaded football match in history. Will the Greek team wear German shirts? If Greece wins, does that mean that Germany wins as well? Or, if Greece wins, does Germany get the points as collateral and a general ‘thank you’ and moves on? So many questions…

In France, Hollande’s party won the parliamentary majority, which is giving him more support at home (they already have a majority in the senate) to fight the fiscal policy-fight with [mainly] Germany. Also, big news, Hollande said to hold back on pushing eurobonds, if European politicians agree to his proposal for a growth pact worth €120bn. This would include project bonds (i.e. fake eurobonds), structural funds to stimulate growth and the introduction of a financial transaction tax (Hello, Mr. Cameron!). Much like the QE-without-QE in the UK last week, this looks like eurobonds-without-eurobonds to me.

And then there is Mexico. The G20 are meeting to discuss the eurozone outside the box that is the continent. Much to the displeasure of, for example, Brazil, which wants more power to be allocated to BRICs&Co in exchange for financial support of cleaning up Europe.

Besides all that, Spain continues to do badly in all sorts of ways (bond yields, refinancing of banking system, amount of bad loans on books) but there is no way that I can make this post any longer.

So long.

Filed under: news brief, debt, EU, eurobonds, eurozone, France, Greece, Greek election 2012, high-yield bonds, Spain

Central banks and money and guns

Just in: the chairman of Cyprus Popular, the country’s second largest banking group says Cyprus needs $6bn in financial aid.

In the UK, George Osborne decide to inject £100bn into the economy. Note: this is not QE, but a support program for the British economy. At the heart of it: an incentive to improve loan conditions, which could fund up to £80bn new loans they say. read article

The news come just as the UK’s trade deficit rose by £1.4bn from April to May, mostly because of decreasing exports to the European continent (-6.8%). read article

Meanwhile, central banks all over the place are waiting in the wings for some coordinated easing action, which may or may not be accelerated by the potentially disastrous outcome of Sunday’s Greek elections [Headline of the day: Central banks reach for their guns over Greek vote].

On that note, here’s Alphaville’s FAQs for Sunday’s elections. read article

But MarketBeat reminds us:

The bottom line is the crisis won’t come to a screeching halt after Sunday’s elections, no matter who wins.

WHAT?! But I got all excited…

Moody’s cut the rating of all big Dutch banks and issued a warning on Greece. And here I was thinking that ‘Greece’ had finally become its own rating class below which there is nothing… read article

Elinor Ostrom, the first and only woman to ever win the Nobel Prize in Economics died on Tuesday afternoon from cancer. She was 78 years old. She received the Nobel Prize that she shared with Oliver Williamson in 2009 for her work on economic decision making outside markets. Project Syndicate published one of her last research articles on Tuesday afternoon. read article

From the Harvard Business Review: Ireland vs Spain, not in terms of soccer but economic similarities read article

Weekend reading:

An article that is all the hype on nerdy opinion pages and economics blogs: Are You With the Dumb Money or the Smart Money?

Otherwise, there will be the obvious fun thing to watch. No, not soccer, I mean the Greek elections. Unless you’re Mexican, in which case you’re probably set to engage in some early G20 protests for Monday’s meeting, which promises to be something like an enlarged eurozone summit.

Have a good weekend!

Filed under: news brief, central banks, Cyprus, EU, eurozone, G20, George Osborne, Greek election 2012, Ireland, quantitative easing, rating, Spain, The Netherlands, trade, UK

For and against the banking union

There won’t be a news brief on Wednesday and Thursday, June 13 & 14, 2012.

While WSJ MarketBeat says all eyes turn to Greece after the Spanish failout, Alphaville says Italy is the center of attention now. The case for the former is the little anticipation of the mess that will undoubtedly result from Sunday’s elections; the case for the latter is Italy’s rising bond yields (and Austria’s finance minister saying Italy needs a bailout).

Or maybe, the attention will be shifting to Cyprus, which may be the fifth European country to receive a bailout. Coincidentally, Cyprus is up for the rotating EU presidency in July. A little bit awkward… read article

Jose Manuel Barroso, president of the European Commission (who looks like he is rapping on the article picture), is pushing for the banking union, the Bundesbank remains steadily against it unless the fiscal pact is fully enforced. Barroso says the banking union would be that one necessary bold move that the world has been waiting for. The Bundesbank, on the other hand, says that if you agree to carry the burden of a liability that is not strictly speaking your responsibility, you deserve to have a say in how said liability is managed. So really this is about security. The Bundesbank is aware that the peripheral problem children would benefit from a banking union without the fiscal pact. Of course they would. It’s like free money. But what is Germany getting out of it? Not paying for all the bailouts more or less by itself maybe, but at least that leaves the element of control. read article

Here’s a more convincing case for the banking union. Here’s a more convincing case that nothing will come of it.

And then there is the capital controls thing… Apparently, someone who couldn’t keep his mouth shut, told the press that the EU is working on plans for capital controls, limited cash withdrawal and a temporary suspension of the Schengen agreement, should Greece decide to leave the euro (hello, Bretton Woods). Yet, so the sources, nobody in Brussels actually believes that it will come to this. Sorry, no, that doesn’t make me feel better. read article

So long.

Filed under: news brief, bailout, banking union, blaming Brussels, Bretton Woods, Bundesbank, Cyprus, EU, eurozone, fiscal pact, Germany, Greece, Greek election 2012, Italy, Jose Manuel Barroso, Spain

Rajoy: We got more funds because we’re good at things

So let me kick this off by saying that I’m not really a soccer kind of person. I mean, I call it ‘soccer’. But over the weekend, as I was watching the game of the century, aka Ireland vs Croatia, I was pretty amused by the amount ofeconomic commentary mixed in with the football talk. Apparently, group C has been renamed the ‘group of debt‘. Personally, I think there should be additional points for fiscal responsibility. Oh wait, Germany just won.

At least Spain is having a good start into the week, having secured buckets full of money on Sunday. Oh happy day. It is important to note that this is the point where nobody will pay attention to the difference between ‘bailout’ and ‘assistance’ anymore. [Up to] €100bn are going to be pumped into Spain’s FROB (Fund for Orderly Bank Restructuring), conveniently €60bn more than the IMF’s necessary estimate. If that [and all the other European aid] is accounted for in Spain’s balance sheet, it raises the countries debt to GDP ratio from the reported 68.5% to 146.6%. Whoa. Spain will now face controls by the EU, which also invited the IMF to stick their nose into the country’s financials, but it avoided the sort of policy requirements forced upon Ireland, Portugal and Greece. It remainsunclear which European fund the money will come from. It’s possible that it will come from both the ESM and the EFSF, because that would be the compromise requiring the most amount of work, which seems like the EU’s style.

Obviously, bailing out the banking sector is one thing, but the fears about Spain’s sovereign debt levels remain. Rajoy framed the whole thing as a victory for Spanish budget management that had prevented a full European bailout of the government, the impossibility of which was not addressed in his statement any further…  read article

The FT’s macroeconomic commentator Gavyn Davies approves and calls the bailout a necessary step forward, before he points out all of the structural issues that won’t get solved by it. read article

And then, after everything had calmed down a tad in the morning, Spanish yields exploded again, so here we go,bailout failout.

Greek election countdown, round 2: T-6

And as Greek politicians seems to be just as uncertain of the outcome of these elections as everyone else,Evangelos Venizelos decided to ignore the vote count and just start early on the compromising and coalition building. In a letter to all parties that could potentially secure any votes next weekend, he tries to advocate a unity government. read article

In yesterday’s Sunday Telegraph, George Osborne commented on the European mess, the idea of a banking union and its impact on the UK. He opens saying “We are approaching a moment of truth for the eurozone,” which sure sounds epic, but I think we’re just approaching a moment of decision making under pressure in the eurozone. But his message is clear nonetheless, economic uncertainty belongs on the continent, which the UK is not and won’t ever be part of. Euroskeptics are having a field day. read article

So long.

Filed under: news brief, bailout, blaming Brussels, budget, debt, ECB, EFSF, EU, George Osborne, Germany, Greece, Greek election 2012, high-yield bonds, Spain, the three moronic musketeers, UK

Greek polls point toward more bailout and less exit

There won’t be a news brief tomorrow, Tuesday, May 29, 2012.

Over the weekend, the IMF’s Christine Lagarde said she felt more strongly about children in sub-Saharan than Greeks affected by the crisis. Candid, Christine, candid… [Apparently she has proclaimed her sympathy for the struggling Greeks on her Facebook page by now.]

But speaking of which, the political outlook for Greece has changed a bit and the conservative party New Democracy has surpassed Syriza in the polls by almost 6%. Assuming this was the outcome of next month’s elections, it would mean compliance with the EU-induced austerity measures and more bailout money from Brussels, i.e. no exit! For all I know, it might be the other way around tomorrow. read article

Lloyd’s of London didn’t get the memo or doesn’t want to hear about it and keeps preparing for all exit scenarios of the rainbow. read article

Former caretaker prime minister Lucas Papademos said that Greece would be completely bankrupt within the next month, unless the new elections lead to a workable government. Bankrupt, you ask, haven’t they been out of money for ages now? Yes, of course, but it has gotten to the point where wages won’t be paid anymore from one day to the other. The FT reports that many Greeks postponed their tax payments in fear of an exit from the eurozone and Greek banks have seen cash withdrawals of €3bn over the past three weeks. There is still money lying around that could be used in the short-term; unfortunately, all of it needs to be approved by foreign entities who don’t like to have their guidelines messed with. The next repayment to the ECB and other central banks is due in August. read article

Did you know that Spain is the largest producer of olive oil in the world (70% of global output)? Neither did I; honestly, when I think of olive oil, I think of Italy. Sorry. Well, a new crisis has arisen: according to a German consulting firm, the crisis has caused Southern Europeans to consume less olive oil. Paired with oversupply, the price for olive oilslumped to a 10 year low, which is forcing the EU to step in to reduce the surplus and keep the Spanish industry from imploding. read artilce

On Bloomberg View, a discussion of the roots of the political crisis that Europe is undergoing and why it won’t bring back the “ghosts of Europe’s authoritarian and racist past.” read article

In the background, Mariano Rajoy is giving a press conference regarding something involving a bailout and Bankia… Dunno.

So long.

Filed under: news brief, bank run, bankruptcy, Christine Lagarde, debt, ECB, EU, eurozone, Greece, Greek election 2012, IMF, olive oil, Spain